Services sector improves, Babcock & Brown to launch capital raising, Shares open flat: Economy Roundup

Activity in the Australian services sector has contracted at its slowest pace in a quarter during September, according to the latest Australian Industry Group/Commonwealth Bank Performance of Service Index.

The latest index climbed 1.3 points to 49.3 points in September, just below the 50-point level that separates growth and contraction. The survey found there was a rising demand for retail and wholesale trade goods.

“The improvement is patchy and largely focused around sectors positively affected by the Government’s stimulus measures and low interest rates,” AIG chief executive Heather Ridout said in a statement.

“These include retail trade, personal and recreational services and property and business services, which have been the key drivers in the sector in the past two months.”

The survey, which questioned about 200 companies, also found that new hiring has nearly balanced layoffs, with the measure of employment index up 1.3 points to 49.9.

“The latest outcome is gratifying and is consistent with other recent economic data confirming that the local economy dodged the recession bullet and is now in the early phase of a modest recovery in economic activity,” said CBA senior economist John Peters.

Shares open flat after Wall Street disappointment

The Australian sharemarket opened flat today after a disappointing week on Wall Street, while no major gains are expected today as Sydney closes due to a public holiday.

The benchmark S&P/ASX200 index was up 10 points or 0.22% to 4611.7 at 12.05 AEST. The Australian dollar also lost ground on weak equities markets to US86c.

ANZ shares lost 1.6% to $23.24, while Commonwealth Bank shares fell 0.3% to $49.84. Westpac lost 1.3% to $24.78, while NAB also lost 1.6% to $29.38.

Meanwhile, the country’s largest telecommunications company, Telstra, may put any deal regarding the separation of its wholesale and retail businesses to a shareholder vote, according to reports in The Australian Financial Review.

The Rudd Government has introduced legislation that will see the company separate its network either voluntary or forcible in order to create a more level playing field for the introduction of the National Broadband Network.

Babcock & Brown Infrastructure to launch capital raising

Also reported by The Financial Review, Babcock & Brown Infrastructure is preparing to launch an $850 million capital raising as part of a recapitalisation program.

The company is expected to use the institutional market for $600 million, and put forward a $250 million share purchase plan for existing shareholders.

BBI is also preparing to sign an agreement with Canadian investor Brookfield Asset Management, which is preparing to provide $600 million into the company for its stake.

Elsewhere, legal proceedings between Thiess John Holland and road operator ConnectEast have adjourned for both parties to continue settlement negotiations.

TGH sued ConnectEast Group in relation to the value of its stake in ConnectEast, and the expected value of a bonus for completing the EastLink tollway early. The Victorian Supreme Court has adjourned the case with both parties’ consent.

Meanwhile, the Australian Securities Exchange is preparing to investigate regulations regarding capital raising after concerns were raised that the current rules favour institutional investors over retail investors, according to The Age.

Chairman David Gonski said company boards must keep retail shareholders’ interests in mind when embarking on capital raisings.

”Boards must realise the importance of retail shareholders… it seems to us at the moment that it is the right way to go to ensure there is adequate protection for the retail shareholders,” Gonski said.