Local Shares Rose Slightly as Lower Australian Dollar Led Investors to Sell Banks

Local shares rose slightly in mixed trading yesterday as a lower Australian dollar led investors to sell banks and other high-yield plays in order to buy shares of companies that stand to benefit from a sustained fall in the exchange rate.

The benchmark S&P/ASX 200 closed up 0.2 per cent at 5206.1, its highest closing level since June 2008. The index, which hit a five-year high of 5242.5 in early trading, netted a 1.5 per cent rise for the week -- its third-straight weekly gain.

Share-trading value worth $5.2 billion beat the 20-day moving average of $4bn.

Despite a 0.4 per cent fall in the S&P 500 yesterday, the domestic market rose after the Australian dollar fell more than 1 per cent to $US1.0047, its lowest level since June last year.

"It's partly a function of the interest rate cut this week," said RBS Morgans investment adviser Christopher Macdonald. "Investors are now thinking we are going to get a lower Australian dollar over the next year."

Among commodity exporters, BHP Billiton, Rio Tinto and OZ Minerals rose despite a 0.7 per cent fall in the price of London Metals Exchange copper.

Karoon Gas soared 25 per cent after raising the estimate of its Bilby-1 oil discovery off the coast of Brazil, increasing the chances of a commercial development.

News Corporation, QBE Insurance, Brambles, Amcor, Ansell and Resmed -- which receive the bulk of their earnings from offshore -- rose 1.6-3.1 per cent.

In its quarterly statement on monetary policy, the Reserve Bank lowered its inflation forecast for the end of the year to 2.25 per cent, from a previous forecast of 2.5 per cent.

High-yield stocks sagged, with Telstra losing 0.4 per cent, National Australia Bank off 0.6 per cent and Westpac down 1.2 per cent. Westpac is due to trade ex-dividend on Monday, while NAB will go ex-dividend May 30. ANZ Bank fell 1.5 per cent after going ex-dividend on Thursday.

Investor sentiment towards Australian banks appeared to turn negative in light of disappointing net income and weak loan growth, combined with a falling dollar, Market Mint editor Michael McCarthy said.

"Adding to the worry is clear evidence this week of a rotation under way," he said. "Better US and Australian job numbers are supporting a stronger view of growth. Combined with a surge in China trade data, the result is obvious support for mining stocks."