By Stephen Cauchi
The local sharemarket shed nearly all of the previous session's gains on Tuesday, with falls across the board, but Medibank retail investors were able to book a modest profit on the health insurer's first day as a listed company.
Wall Street inched forward to another record overnight, but the local bourse headed down from the opening bell, as enthusiasm waned over China's surprise rate cut. The All Ordinaries closed down 0.52 per cent to 5320.90, while the ASX200 ended down 0.50 per cent to 5334.80.
But the talk of the stockmarket was Medibank Private, Australia's biggest initial public offering since Telstra. Its shares started trading at noon, initially listing at $2.22 - an 11 per cent gain for the 440,000 retail investors who paid $2 a share. Institutional investors paid $2.15 a share.
By the end of the day they had closed at $2.14, with 587 million shares worth $1.3 billion traded.
"The shining light today was Medibank – it was a huge success," Morgans senior dealer Luke McElwaine said. "The average retail investor is the winner, with the stock up (about) 10 per cent. It seems to have been priced pretty well, given it hasn't opened out of the blocks to an exorbitant level."
It was a different story in the rest of the market, with resources stocks leading the way down again.
"We saw a big reaction on Monday to all the stimulatory measures announced on Friday by China and Europe, but once again the market has moved back into a malaise," Macquarie's division director Martin Lakos said. "The materials/energy sector, which was the big performer on Monday, was the worst performer today. The rest of the market was OK, just biding its time."
News that Chinese iron ore futures tumbled more than 3 per cent on Tuesday to their lowest on record weighed on the miners, with BHP crashing 2.43 per cent to $32.10, while Fortescue tumbled 5.7 per cent to $2.81.
Fellow mining giant Rio Tinto fell 1.73 per cent to $57.41 amid chatter on the Rio takeover talk mill. Hedge funds including GLG Partners, DE Shaw and Pentwater Capital Management were told this month by a prominent London mining banker to prepare for an all-but-inevitable takeover of Rio Tinto by Anglo-Swiss mining giant Glencore.
Shares in infrastructure and environmental services company Cardno dipped a further 1.14 per cent to $3.48, after falling 27 per cent in the past two trading days and 32.4 per cent in the past week. Rumours of a takeover have heightened after the heavy falls, prompted by a shock profit downgrade on Friday. The downgrade comes despite Cardno buying its largest ever acquisition – oil and gas sector engineering services firm PPI – in March.
Gaming machine maker Aristocrat Leisure closed up 2.12 per cent to $6.73 after it posted a statutory full-year loss of $16.4 million, compared to a $107.2 million profit a year ago, because of a writedown in the value of its Japan Pachislot business and the sale of Aristocrat Lotteries.
In other earnings results, foreign exchange services group OzForex soared 8.85 per cent to $2.46, after lifting its first-half net profit by 26 per cent to $11.98 million.
Shares in the big four banks were mixed, with the imminent release of the Murray Inquiry weighing on investors' minds. National Australia Bank closed down 0.68 per cent to $32.15, Westpac dipped 0.09 per cent to $32.60, and Commonwealth Bank slipped 0.31 per cent to $80.17, while ANZ finished 0.72 per cent higher at $32.10.
Global credit rating agency Fitch Ratings said the big four banks could be forced to increase their capital buffers by up to $53 billion if the Financial System Inquiry took aggressive measures to shore up the banking system. The capital shortfall is almost double the combined $29 billion of profits of the big four banks.
Global insurer QBE shares edged up 0.28 per cent to $10.95 after news the company raised $US700 million through the issue of 30 year "Tier II" capital securities.
The raising formed part of QBE's capital plan and will be used to pay down senior debt, a company statement said.
Shares in retailer Harvey Norman stayed flat at $3.71, after the company tapped investors for $120.7 million in a capital raising.
The electrical and furniture retailer has launched a fully underwritten renounceable share offer, with shareholders able to subscribe for one fully paid ordinary share for every 22 shares held.
Shares in the retailer slumped by nearly 5 per cent when details of the capital raising were announced in morning trade ahead of the company's annual meeting, but recovered later.