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Australia shares at 9-mth high close on bank upturn

Published: 02 Aug 2009 23:05:17 PST

* Goldman Sachs JBWere upgrades boost banks

* Bank shares at nine-month highs

* Mining contractors surge (Adds fund manager, dealer comments)

MELBOURNE, Aug 3 - Australian stocks rose 0.5 percent on Monday to a nine-month closing high, boosted by banks following broker upgrades, with no signs of a retreat after the market logged its biggest monthly gain in nine years in July.

National Australia Bank Ltd <NAB.AX> and Australia and New Zealand Banking Group <ANZ.AX> led the way up, both rising 2.5 percent to A$24.95 and A$19.0 respectively, after Goldman Sachs JBWere raised its rating on the banks, saying bad debts would not be as poor as expected.

It upgraded NAB, ANZ and Westpac Banking Corp <WBC.AX> to buy from hold, while raising Commonwealth Bank of Australia <CBA.AX>, seen as the safest bank, to hold from neutral. Westpac rose 1.9 percent to A$22.10 and CBA gained 2 percent to A$43.65.

"The optimistic outlook is a reversal of all the entrenched doubt and pessimism that was attached to a lot of the previous banking forecasts," said Shaw Stockbroking dealer Jamie Spiteri.

A fund manager said the jump in bank share prices to levels not seen since late October was justifiable.

"Whether or not it's premature, it doesn't change the fact that they were oversold in the first place, and we probably have seen the worst of the news," said Mark Nathan, a portfolio manager at Fortis Investment Partners.

The benchmark S&P/ASX 200 index <.AXJO> rose 19.4 points to close at 4,263.4, its highest close since Nov. 5.

New Zealand's benchmark NZX 50 index <.NZ50> gained 31.6 points, or 1 percent, to finish at 3,047.8.

Top miner BHP Billiton <BHP.AX> rose 0.6 percent to A$38.07, while rival Rio Tinto <RIO.AX> fell 0.2 percent to A$60.29.

Hopes for a revival of mining activity boosted contractors like Macmahon Holdings <MAH.AX>, which surged 14 percent to A$0.515, and its former takeover target, Ausdrill Ltd <ASL.AX>, which jumped 8.4 percent to A$1.23.

Macmahon, 18.6 percent owned by Leighton Holdings <LEI.AX>, said it had no explanation for the share price rise.

"If everybody starts believing the commodities recovery story, it might have legs," said Douglas Loh, a portfolio manager with Acorn Capital, which owns shares in Macmahon, according to Reuters data. ($1=1.197 Australian Dollar)