Australian Shares Midday: Flat Despite Election Uncertainty

Despite myriad factors working against it--an undecided Australian election, negative leads from Wall Street and weaker commodities prices--the Australian share market was flat midday Monday as traders saw the potential for a proposed resources tax to be buried under a new government.

Right now, it's unclear whether the Australian Labor Party or main opposition Liberal-National coalition will take the helm, with both parties lobbying independent members of parliament to form government. But traders are bidding up mining giants BHP Billiton and Rio Tinto, up 0.9% and 1%, respectively, given the fate of Labor's proposed mining tax is increasingly uncertain.

At 0330 GMT, the benchmark S&P/ASX 200 index was down 2.5 points at 4428.4 points.

"The independents who are non-Greens, are largely conservative," Jeremy Hook, private client adviser at TMS Capital said. "The reality is, I can't see Bob Katter or Tony Windsor or Rob Oakeshott supporting a mining tax," he added, naming independents the Labor and Liberal parties are lobbying in an attempt to form government.

Hook said BHP and Rio's gains are impressive considering weaker commodities prices.

"The weekend's (election) events probably put resources in a favorable position regarding future negotiations" in regard to the resources tax, said Jamie Spiteri, head of trading at Shaw Stockbroking. "While some of those initial points are of usual impact to our market--overseas trends, commodities prices--they are in the mix, they're not necessarily dominating."

Spiteri says a mining tax is still likely, but that the miners are more likely to have an easier time negotiating with the new government.

Another sector that could benefit from the coalition forming government is the private healthcare space, Hook said, given the Greens wanted to scrap a private health insurance rebate. If the rebate stays in place, that will benefit private hospitals.

Hospital operators Ramsay Health Care and Healthscope, which is in the process of being taken private, were flat.

As for telecom companies, a coalition government could mean changes to Labor's A$43 billion National Broadband Network plan. Hook said the changes to that plan depend on what concessions are reached with the independents but that "regional areas will be well served by the outcome agreed upon".

It's unclear what that means for Telstra Corp., which had preliminarily agreed to participate in the NBN after a protracted back-and-forth with the government. Telstra hit a record low of A$2.78 early. It's down 16 cents at A$2.80, having gone ex-entitlement to a 14 cent dividend.

In other news, Westpac said third-quarter cash profit rose 27% on the year but warned loan growth is likely to slow in the coming year. The banks were mixed after the report with Westpac down 2.3%, ANZ Bank up 1%, National Australia Bank down 1.5% and Commonwealth Bank up 0.2%.

In other sectors, the world's largest drilling services provider Boart Longyear posted a first half net profit for the period ended June 30 of US$32.7 million, turning around a US$5.4 million loss in the same period last year, helped by strong growth in both its drilling services and products businesses. Its shares are down 4.4% after Chief Executive Craig Kipp told analysts that customers are still reluctant to commit long term.

Rubber products maker Ansell reported a 1.6% drop in full-year net profits but beat analysts' expectations. The shares are up 2.9%.

Caltex Australia gained 2% after it reported an expected 50% fall in first half net profit that was at the top end of the company's guidance range. Also, Chief Executive Julian Segal said "we're pretty much at the bottom of the supply and demand imbalance" for fuel that has hit refining margins in the Asia Pacific region.

-By Cynthia Koons; Dow Jones Newswires; +61-2-8272-4691; cynthia.koons@dowjones.com

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