The biggest news from the weekend is that the Aussie elections resulted in a hung parliament–the first in 70 years–as neither the Liberals nor Labor Party received the necessary 76 seats in the Lower House that would’ve given them the majority that was needed. The Liberals (Conservatives) are in front with 72 confirmed seats to the Labor’s 71, but both must seek a coalition. The GREEN PARTY controls one seat in the Lower House, making them a potential factor in any coalition, but if the Liberals can coax four independents they will be able to form a government.
The AUSSIE DOLLAR was called significantly lower in early market chatter but the selloff has not materialized and the AUSSIE DOLLAR is close to unchanged as we write. The mining stocks on the Australian All Ordinaries have moved higher and this is giving some traders the view that the special tax on natural mineral mining will be pushed aside. We think it is too early to call, but we agree that the large mining concerns stock prices are a good indicator of the political outcome.The Parliament is hung now but we think the Aussie politicians realize that the voters don’t want another election so there will be a compromise.
Anyways, the AUSSIE currency is holding up much better than originally thought and traders should pay attention. Also, there are rumors that the BHP-POTASH deal is under fire from a few different directions. The Canadian and Saskatchewan authorities are thought to be studying the deal closely as it has concerns about BHP’s desires to break up a Potash marketing cartel–CANPOTEX. There are also talks that a Chinese group may offer a higher price as they seek to get ahold of the world’s largest potash producer. Chinese companies–Chinalco–are still smarting from the embarrassment of being shunted aside by RIO–BHP last year in an iron-ore deal. There is bad blood between many of the large Chinese corporations and the global multinational mining groups. If the BHP-POTASH deal falls apart it will force some traders who shorted the Aussie dollar–because of the M&A deal–to have to cover their short positions.
Tags: Aussie Dollar, BHP, Canada, China, Green Party, hung parliament, Potash
August 23, 2010 at 11:09 am |
The likelihood of another election is probably high. Overall, Australia appears set for a period of political uncertainty. Even if one of the major parties is able to form a minority government, another election is likely to be held sooner rather than later.