The Sydney Morning Herald from Sydney, New South Wales, Australia • 32

BUSINESS 31 WEDNESDAY JUNE 9 1999 wwwsmhcomau MARKET ACTION hares rise in Jkss tradin light AH Ordinaries June 8 Closed at 296680 Uo 2270 points index 2970 12965 2955 2945 hisiory test how NAB Income Securities would have performed 10 am short-term interest rates and inflation 4 pm PERCENT PERCENT 110 225 National Incom iri A National Income 8ecwWei- 100 II ArV JV I 175 Yesterday's moves -RISES FALLS STEADY 475 404 322 29670 310 JUNE SP1 NAB FOR SECURITY National Australia Bank's $2 billion Income Securities issue which opened late last month may be a timely option for investors worried about interest rates and a flagging stockmarket But while the securities will be listed on the Australian Stock Exchange investors shouldn't expect a stag profit of any note This will be a straight yield play with returns recalculated and paid in arrears every quarter Investors in the NAB securities will get the bank bill rate (just below 5 per cent at present) plus 125 per cent They will be guaranteed an annual interest rate of at least 6 per cent until mid-May next year The issue's joint lead managers JB Were and Salomon Smith Barney argued in their roadshow that the investment was perfect for this point in the investment cycle with equity prices having hit record highs in recent months and interest rates arguably at their lowest As the charts show the securities should act as a hedge against both rising inflation and interest rates Of the $2 billion issue $15 billion has been committed to brokers' firm and institutions with the balance open to the public and existing retail shareholders Rather than attracting money that otherwise would be in the sharemarket NAB expects most subscribers to pull money out of cash management trusts or term deposit bank accounts both of which are showing average interest rates ofless than 4 per cent The securities are "non-cumulative" which means if NAB has to skip an interest payment it will be forgone But this would be a drastic event since if this happened NAB would not be pay- 52292 378 INDUSTRIALS By MARK TODD The sharemarket rose following another hefty advance on Wall Street but volumes were fight once again as interest-rate worries continued to weigh on investor sentiment The AH Ordinaries index gained 227 points yesterday to 29668 after the Dow Jones gained 109 points to close at 10094 volume was light in both markets "The fact that Wall Street has had a good couple of days has helped our market up but essentially the story driving us for the last few weeks concerns about US interest rates is the overwhelming dynamic' said Mr Peter Munckton equities strategist at BT Alex Brown There's been nothing in our market in an overall context to give us any direction For the remainder of this month we will remain a market driven by news from the US" Mr Munckton said Investors are worried about the impact that a lift in US interest rates may have on Wall Street and in turn on the valuation of local shares brokers said The market is also battling rising bond yields with the benchmark 10-year government bond yield easing slightly yesterday to 616 per cent but still holding well clear of the 60 per cent leveL However the June Share Price index futures contract provided some welcome support gaining 31 points to end at 2967 and erasing its discount to the physical market Brokers expect activity to remain subdued in the sharemarket before the issue of inflation data in the US later this week and Elsewhere Coca-Cola Amatil jumped 35c to $685 as investors welcomed San Miguel's statement earlier in the week that it would hold on to its 22 per cent stake in the company at least for the near term Newcrest Mining stood out for a 20c fall in its shares to $251 after notices from fund managers announcing they had sold down their interests in the goldminer "Maybe other people are getting out assuming that the funds will continue selling' Mr Cox said Lihir Gold ended flat at $106 despite announcing a new deal that will shave about $US6 million ($91 million) a year from its mining costs while Normandy Mining lost 1c to $105 Banks were mixed as National Australia Bank dragged on the market losing 36c to $2624 after a surge in the previous session CBA fell 4c to $2522 while ANZ rose 11c to $1097 and Westpac 13c to $1022 News Corp rose again up 20c to $1375 on the strength of the new Star Wars film Reinsurance Australia Corp enjoyed a turnaround in sentiment after a prolonged period of weakness gaining 195c to $1175 on higher than usual turnover "It has been sold down quite aggressively of late and the rise is mainly due to the fact that an end to the selling is imminent' said Mr Jeremy Cox a dealer at Mercantile Mutual Mr Cox downplayed speculation about corporate activity saying the rumours only surfaced after the surge in the share price Among telecom companies Telstra gained 22c to $785 Optus lc to $302 and AAPT dropped 10c to $470 -03 5877 MINING Oct 95 Oct 97 Oct 99 Mar 80 Mar 86 Oct 91 Oct 93 SMHOMMIC 9699 Mar 92 Mar 98 BOUNCE: SMOMONSMITHBMINEV JB WERE ft SON volume value 3752 $994k3m Popular stocks 22 785 TELSTRA 30 1670 BHP 2522 COM BANK 520 WOOLWORTHS 449 QANTAS -22 1648 AMP and updating them on the company's strategy and prospects since he took up the role at the beginning of May QUIET SUCCESS While their monthly performance numbers didn't look fantastic in the latest InTech survey Mercantile Mutual Merrill Lynch Mercury and Credit Suisse Asset Management were laughing all the way to the bank in ApriL The pooled super funds of the three managers received the largest inflows over April against the backdrop of falling bond and stockmarkets Mercantile Mutual attracted of 2 million shares at $104 after handling a line of 1 million shares at $1 CSFB handled the placement in ReAC at $345 a share raising $60 million A total of 44 million shares in ReAC changed hands Analysts reckon that at present levels ReAC is very cheap when compared with its net asset value of $240 a share Yesterday's bounce is the first good news for its share price but few are willing to argue that the worst may be behind it ReAC denied that anything material had occurred to cause the resurgence of interest in the stock But managing director Mr Nick Steffey has been "out and about" talking to shareholders ing dividends to ordinary shareholders either After five years NAB may redeem or buy back the securities or effect a capital reduction but there is no maturity date on the securities and they dont convert into ordinary shares REAC GOES FOR RUN Reinsurance Australia shares shot up 20 per cent gaining 195c to close at $117 yesterday in active trading benefiting from revived interest in the issue after it was pushed to a record low last week of 99c Credit Suisse First Boston was the most active broker in the issue on the day crossing a line the largest inflow of $74 million despite finishing only 1 1th over the month The MercMut fund now manages $26 billion Its performance in recent months has been even worse with MercMut placed only 2 1st out of 34 funds for a three-month period Credit Suisse also added $50 million to its coffers over April despite its performance ranking slipping to 18th out of 34 in ApriL The Credit Suisse fund is sitting in third place for the financial year to date however Merrill Lynch Mercury Asset Management attracted $44 million of new money to its pooled super fund as it slipped to last place over the month next The figures should give a clearer picture of the direction of US interest rates Large miners provided a highlight of the day with MLM 4c stronger at 91c Pasminco up 7c to $167 and BHP up 30c to $1670 although WMCs recent run came to an end its shares dropping 27c to $586 CorpExpress well on road back to health BT Funds tries to buy loyalty of key staff US index gives dollar a hitch By LACHLAN JOHNSTON Office products supplier Corporate Express has consolidated its recovery predicting yesterday its earnings would double with long-term debt eliminated by the end of July Managing director Mr Ted Nark also hinted that Corporate Express would pay a dividend at the end of the financial year or make new acquisitions During a relatively smooth annual meeting yesterday Mr Nark said the company expected revenue growth of 15 per cent in the six months to July while the operating profit would more than double last year's interim result of $23 million The sharemarket responded favourably and Corporate Express shares jumped 6c to $230 Mr Nark said the elimination of all long-term debt by mid-year would allow Corporate Express to manage its capital better possibly leading to new acquisitions or a dividend payout but not both "We're going to take this year to see what is the best use of our resources" Mr Nark said "But we won't just hold cash in the company "We havent formed a view on what we will do we haven't been in the position to pay a dividend before" The company has not paid a dividend as a listed company It -floated on the stockmarket under the name Macquarie Office at 55c per share A quick succession of acquisi tions saw the company slip into losses and the share price fell as low as 45c early last year- Last year's $6 million net profit was the first profit in three years The return to profitability also ensured that Mr Nark and fellow director Mr Neil Guest won shareholder approval for generous executive share and option packages yesterday Mr Nark will receive 200000 ordinary shares at 85c and 355000 options to vest progressively over the next two years Mr Nark said growth had been equally driven by new customers and by existing customers increasing their orders With the office supplies market growing at about 2 to 3 per cent per year most of the growth had come from Corporate Express's taking market share from competitors Rising cash flow would enable the company to repay the last $123 million of long-term debt from the balance sheet opening the door for new "bolt-on" acquisitions The Australian dollar edged higher yesterday and hovered around the US66c mark largely because of a continued improvement in commodity prices "There's interest on both sides of the range' according to Mr Paul Macarounas senior manager of foreign exchange at NM Rothschild Sons "At the moment there seems to be good selling interest just above US66c but mere's been good support around 6570" The currency finished trading at US6603C up from Monday's close of US6564C and after moving between US6605C and US6572c yesterday MEG founders go out the door By ANNA FENECH BT Funds Management has implemented a retention strategy for 100 key staff according to letters it sent to 8000 financial advisers and their clients yesterday The assurances follow the failure of BTs new owner Deutsche Bank to find a buyer for BT Australia Deutsche took formal control of BT Australia last Friday as part of a global merger with Bankers Trust Westpac the final bidder for BT Australia withdrew last week citing opposition from BT management Other bidders included National Australia Bank the Commonwealth Bank Lend Lease Corp and US company Principal Financial Services Group According to BT Funds Management's guide for financial advisers details of retention packages "are confidential but include guaranteed bonuses and key staff retention packages" The packages are believed to involve about 100 people including the head of funds management Mr Ian Martin chief investment officer Mr Andre Mprony and heads and deputies of each investment asset class In an attached letter to financial advisers Mr Steve Newnham executive vice-president BT Funds Management reassured advisers that "as high-level discussions with Deutsche continue and with BT Funds Management operating as a stand-alone business unit we assure you and your clients that we remain focused on and committed to our active investment process" The fund manager defended its investment performance by listing its main retail funds and showing the performance over Momings-tar Average Fund Manager returns for the six months to ApriL "Some of our funds did experience weaker performance in the volatile market conditions which prevailed in the middle part of 1998" executive vice-president Mr Terry Power said to investors Some weakness is reflected in the latest ASSIRT figures They show BT Funds Management's market share by total assets under management slipping from 1058 per cent in March 1998 to 1051 per cent in March 1999 Metal Storm priority offer for Charter investors By JANE SCHULZE in Melbourne The founding partners of cinema advertising company Media Entertainment Group Mr Gary Stynes and Mr Andrew Buxton have suddenly departed the company they started six years ago but denied any rift with fellow directors The company in which Mr Kerry Packer's Consolidated Press Holdings has 104 per cent with an option to increase its holding to 40 per cent by July said yesterday the two would worth $72 million" said its chief executive Mr Kevin Dart "Our asset backing will go from 15c a share to $125 a share when Metal Storm lists" Charter Pacific's share price rose 13c yesterday to $116 with 13 million shares changing hands Metal Storm is targeting the global $11 billion defence industry and $US500 million ($758 million) US civil firearms market for its electronic rapid-fire weapons technology capable Money saus 6603 040 Twi 588 01 OVERNIGHT CASH 478 -020 90-DAY BANK BILLS 492 -003 10-YEAR BONDS 616 -004 remain in caretaker roles until a Charter Pacific shareholders will receive a priority allocation of shares under a $12 million public offer by the company's best-known investment play weapons technology concern Metal Storm Metal Storm is offering four million shares at $3 each valuing it around $252 million ahead of a planned listing on the Australian Stock Exchange on July 9 Metal Storm has set aside up to half of the offer underwritten by Dicksons Ltd for investors in Charter Pacific with a registered address in Australia After listing Metal Storm will be 47 per cent-owned by its chief executive Mr Mike O'Dwyer and 28 per cent by Charter Pacific which first invested in the company five years ago Both Mr O'Dwyer and Charter Pacific must keep their holdings in escrow for two years The float "takes Charter Pacific from having an asset on our books valued at $75 million to one that's was MrBuxton left and Mr Stynes Photograph by daniel O'BRIEN new chief executive appointed DYMOCKS 3 jbneg JHominernlb 1999 LITERARY LUNCHEON SERIES of firing more than one million rounds a minute About $6 million of the funds raised through the offer will go towards research and development and a further $15 million to establish an "operational beachhead" in the US The priority offer closes on June 21 the public offer on June 28 MaritTodd the meeting as "turbulent" and others as calm" The chairman Mr Peter Bennett would not specify the reason for the departures but said "the juxtaposition of those two points the loss and the resignations in the statement speaks for itself" He said it was "fair to say" the resignations were voluntary Mr Stynes the managing director and Mr Buxton an executive The company also said it was likely to report a full-year loss of $46 million up from the million predicted in February due to the cost of expanding MEG's overseas cinema advertising business There have also been contrasting reports about yesterday's board meeting at which Mr Stynes and Mr Buxton tendered their resignations with some describing director said they were "delighted" "It was amicable at board level and the prospects for the company are outstanding from this point onwards" Mr Buxton said He said he and Mr Stynes each remained two of the company's top five shareholders so "I wouldn't say we are severing all ties" The company's shares closed 3c higher yesterday at 53c EDWARD de BONO Date wVJrxsJsy WJucw 1944 Pkxc The Hilton Hmd 259 Pitt Street Sydney Time OBt Member $4500 Nun-Memhvn $5000 In his latest book EdwanJ de Bono has turned his renowned lateral thinking pawns to focus on Australias current political system with particular emphasis on the monarchy versus republic debate Dutined to liven up conversations around our nation EdwanJ reveals why he would like to be king of Australia His enlightened discussion will nut only entertain but will challenge all traditional concepts of political power nMNOALREVlEW QBlstrtf Mr Macarounas said recent gains in the Commodity Research Bureau index were supporting the Australian currency "In terms of the fundamentals the CRB has seen a very good bounce in the last four nights" he said "Ifs gone from sub-190 to last night's close around 193" The CRB closed in New York on Monday at 19313 up 092 It is an index of 17 US futures markets and although not weighted to Australia's exports traders view as an indicator for the Australian dollar because the currency is sensitive to commodity price movements Mr Macarounas said any pressure on the Australian dollar over coming days would be to push it higher Meanwhile the Australian bond market eked out small gains yesterday in light trading There were few leads from US trading overnight and a lack of incentive in the local market "Our market is a little stronger because the Aussie has bounced and the market is some heart from that" Mr Tony Bail-don director at Credit Suisse First Boston said The benchmark bond the Commonwealth Government September 2009 bond closed at 616 per cent down 0j04 points while the March 2002 bond finished at 561 per cent 007 points lower AAP by Orado Ericsson and BMC Software YCS I would like to attend the Herald Dymocks Literary Luncheon for EDWARD DE BONO on 30 June 1999 Number of members $45tkket Number of nun-members $50ticket My chequemoney order for is enclosed (plm make cheque payable to Literary Luncheon Series) QE Please charge to my Bankcanl Visa OuD Mastercard for exP Date- rTTn mm nmn mm Signature: Membership No: McLaughlins Financial Services is the 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