China package boosts shares

Australian shares ended the day higher after a massive stimulus plan unveiled by China helped stoke demand for mining stocks. Banks, though, fell after the National Australia Bank said it would sell shares to bolster its capital.

At the close, the benchmark S&P/ASX 200 index was up 1.4%, or 56.5 points, at 4107.8, after earlier rising 2.7%.

Resources companies benefited from a $870 billion Chinese economic stimulus package, while finance ministers of the world's leading economies in the G20 group promised to take all necessary measures to get markets back to normal.

Austock Group strategist Michael Heffernan said the Chinese stimulus was what "put a rocket under the resource stocks today ... that probably outweighs the statement from Rio that they will be lowering their production by 10%.'' He added that Australian stocks could rise again on Tuesday, with a positive day on Wall Street looking likely.

''It is about one-fifth of their GDP, so we're seeing a lot of these mid-tier miners are going to benefit because it will add about 2% to (China's) GDP,'' IG Markets institutional sales trader Chris Weston said.

With China accounting for 27% of global economic growth last year, the package should certainly help in averting a global recession, IG Markets research analyst Ben Potter said in a note to clients.

BHP Billiton jumped $1.98, or 7%, to $29.89, while Rio Tinto rose 7.9%, or $5.73, to $78.00.

Rio said today it was planning to cut its 2008 iron ore shipments from Australia by 10% due to weakening demand from China. BHP Billiton said it had no plans to reduce its iron ore output.

Fortescue Metals, which is also cutting back output, missed out on the rally. Its shares sank 15 cents, ro 5.8%, to $2.45.

Banks retreat

The major banks headed lower, however, after NAB announced a capital raising that may tip as much as $3 billion into its reserves.

The share sale, at $20, compared with a Friday close of $22.15, implying a discount of about 10%. NAB remained in a trading halt today, and will resume trading on Wednesday.

Rival Commonwealth Bank shares dropped $2.07, or 5.2%, to $38.00.

ANZ slipped 39 cents, or 2.4%, to $15.90, while Westpac gave up $1.09, or 5.2%, to $19.91. It's takeover targe, St George, fell 64 cents, to $27.61.

Investment firm Babcock & Brown lost a quarter of its value, or 24 cents, to close at 76 cents The group said it had sold its rights to manage fund Babcock & Brown Capital, in a bid to narrow the focus of the group.

Macquarie Group eased 33 cents, or 1.1%, to $29.81.

Energy stoked

News of China's stimulus package was putting in a ''fundamental floor'' to energy stocks, Mr Weston said.

Energy stocks also made healthy gains, with Santos advancing 53 cents, or 3.8%, to $14.34, Woodside Petroleum up $1.41, or 3.5%, to $41.21.

''We're expecting the stimulus package to feed through from the first quarter of next year and growth to start hitting home,'' he said.

In other news, fund manager Perpetual rose $1.34 to $37.54 after it said it had re-opened applications for its income and mortgage funds at the request of clients.

Perpetual has re-opened applications for its Monthly Income Fund, Wholesale Monthly Income Fund and Private Investor Mortgage Fund, which have combined assets of $1.7 billion under management.

Meanwhile, Orica, the world's top maker of commercial explosives, closed up 6.1%, or $1.06 at $18.46 after saying it sees no evidence of a pull-back in mining demand in its sales. It also posted a 15% jump in full-year net profit, beating market expectations.

BusinessDay, with Reuters, AAP