Australian stocks: Banks beat miners to pull stocks to record

MELBOURNE - Australian stocks finished at a record high close on Friday, as the top banks offset sharp falls among miners after China suddenly raised interest rates, aiming to cool the economy that has pumped global metals prices.

The benchmark S&P/ASX 200 ended 2.5 points, or 0.07 per cent, higher at 3,778.6. The market gained 1.9 per cent for the week.

Australia's top five banks, which together make up nearly one-fourth of the index, stopped the market falling.

"It just shows the level of funds that are committed to the market and want to stay committed to the market. On a day like today, they just rotate out of resources and into the banking sector," said Shaw Stockbroking dealer Jamie Spiteri.

Australia and New Zealand Banking Group, Westpac Banking Corp. and St. George Bank all touched record highs. ANZ finished 2 per cent higher at A$20.40, with Westpac up 1.2, and St George up 0.3 per cent at A$23.35.

The banks have been helped by the pending exit of media giant News Corp. from the benchmark index, which has forced index-related funds into other heavyweight stocks. News Corp. ended down 1 per cent at A$10.77.

Mining giant BHP Billiton slid 3.4 per cent to A$13.85, while Rio Tinto fell 2.7 per cent to A$36.60, both faring slightly better than their London-traded stocks. Zinc miner Zinifex sank 4.1 per cent.

Takeover target WMC Resources, the day's most active stock, followed suit, ending off 3.2 per cent at A$6.75. However after soaring 36 per cent on Thursday on its rejection of a $5.5 billion bid from Switzerland-based Xstrata, the copper and nickel miner stayed well above the offer of A$6.35 a share.
Colonial First State Fund Managers' investment research head Hans Kunnen said investors had overreacted to China's rate hike.

"Yes, China is sending signals that it wants to slow demand, and that takes the edge off commodity speculation. But serious miners with long-term contracts are up to their eyeballs in activity," he said.

National Foods, looking to make New Zealand's Fonterra lift its A$1.62 billion ($1.2 billion) offer for the dairy group, rose 1.6 per cent to A$5.68 after saying its profit would grow 14 per cent this year. Its shares have climbed 22 per cent since Fonterra made its A$5.45 a share offer on Thursday.

Against Fonterra's bid, National Foods said it would be better off pursuing takeover talks with canned foods group SPC Ardmona, which ended up 6.2 per cent at A$1.72.

Engineering group Henry Walker Eltin plunged 31 per cent to 72 cents after slashing its profit outlook and dumping its chief, sparking talk that the A$157 million group was vulnerable to predators. "Outsider insiders such as Leighton or Downer would be the only parties well enough informed about the likely state of its core activity in mining contracting to take the risk, in our view, although financial players may also feel emboldened," Credit Suisse First Boston said in a note.