The Australian stock market suffered its 9th straight loss today and is now perilously close to having dropped 25% from its peak. By 11am the All Ords was down 93 points at 5182 – a drop of 24.6% from its record close of 6,873 on November 1 last year.

Australia is being hit harder than most nations because of our huge $610 billion foreign debt and $70 billion-plus current account deficit. There isn’t any specific big news today, so let’s quickly go around the grounds of the debt crisis:

  • City Pacific: any remaining credibility for CEO Phil Sullivan disappeared after he promised The AFR a “solid announcement” and predicted
    “we will trade tomorrow subject to the ASX”. Still suspended, no trade, no announcement, no hope.
  • Asciano: CEO and major shareholder Mark Rowsthorn’s finances are fine but the company could be in strife given its $4.5 billion debt. However, Rowsthorn’s $2.1 million on-market purchase last week sent the stock up 15% yesterday but it’s marginally lower today.
  • Challenger: why isn’t James Packer of any of the directors supporting the stock? Solicitor Chris Murphy swears he wasn’t margin called into taking a huge loss by dumping 15 million shares for $25.5 million at just $1.70 a pop yesterday. Stock up another 25c to $2.16 in morning trade after removal of overhang.
  • Australian Pharmaceutical Industries: down 4c to $1.62 as market smells blood over Chris Murphy’s 10.56% stake which is now well under water. Murphy manages some Russell Crowe cash, so could be some tension in that particular Sydney set.
  • Babcock & Brown: despite all the bluff and bluster about paying down corporate margin loans, it is time that Phil Green and his fellow directors revealed their own margin call position. Stock down 36c to $13.44. However, Babcock & Brown Infrastructure bounced 10% today despite $7.5 billion debt load.
  • Macquarie Group: Nicholas Moore and friends must also come clean on personal borrowing loads. Deputy MD Richard Sheppard spent $380,000 topping up his holdings in Macquarie Airports, Macquarie Office and Macquarie Countrywide last week, but why aren’t the millionaires of the Millionaires Factory supporting the head stock? No capacity for a buy back at these levels, boys? Stock down 4.3% to $43,93. Margin calls, perhaps?
  • Primary Healthcare: Chris Murphy says he wasn’t margin called at Challenger and Ed Bateman says he has no margin loans after writing out a cheque for $120 million to take up his share of the recent $1.4 billion Primary entitlement offer. Underwriting for $275 million retail component of that offer now $50 million underwater but stock recovers marginally today after director Michael Christie revealed last night he had spent $2 million buying another 357,000 shares.

Check out this list of known and possible margin calls on the Mayne Report.

Peter Fray

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