Australian Stock Market Report – Midday 12/16/13

Mid Session Report
(12:30 AEDT)

Sellers had a breather on Friday. Although they have returned refreshed an invigorated on Monday. The Market sank by 39 points in early trade, a harbinger of the volatility that could be in store ahead of the Fed's FOMC mid week.

The low of the session saw the market at 5059. One of the factors that will be central to market sentiment this week will be the trade around the 5000 mark in terms of the ASX 200. Market support has been ephemeral to say the least in recent months. Committed participation on the part of buyers around this key level will be vital for maintaining investor confidence.

Cooper Basin-focused Senex Energy has proposed a mostly scrip-based takeover offer for oil and gas stock AWE (AWE). The aim is create a $1.5 billion mid-cap player with growth assets in Australia and Indonesia supported by strong cash flows from more mature fields. AWE responded saying the offer was not in the best interests of its shareholders, who would have received only 47 per cent of the merged group´s equity, in the process significantly undervaluing AWE shares without an appropriate premium for control

Wesfarmers (WES) has announced the sale of the Australian and New Zealand underwriting operations of its insurance business. Insurance Australia Group (IAG) is the buyer with an estimated price tag of about $1.85 billion. The transaction excludes the insurance division´s broking operations in Australia, New Zealand and the UK, and the Australian and New Zealand premium funding businesses. Wesfarmers sees a pre-tax profit of about $700 million to $750 million from the transaction. The sale is subject to regulatory approval, which is expected to take several months.

Aurizon (AZJ) has announced an impairment of $130 million to $150 million. The group formerly known as QR National will cut its locomotive fleet by 28 per cent to fewer than 600, and cut its wagon fleet by 12 per cent to almost 16,300. The cuts are aimed reducing maintenance and fuel costs. A $47 million impairment will be taken on recent changes to several projects. AZJ is sanguine about the future of projects in Queensland´s Galilee Basin where it has agreed to develop a rail project for the GVK-Hancock joint venture.

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