Australia shares up 1.1 pct; banks lead

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Sydney: Australian shares rose 1.1 per cent on Monday as investors chased high dividend yielding banking stocks, while retailers gained on expectations of strong post-Christmas sales.

But trade was light with many investors away on year-end holidays, exaggerating price moves, making it difficult to judge the medium- to long-term trend in the market, fund managers said.

"People are talking about the market rallying from here, but I don't think you can say anything by what's going on today. It's just low volume stuff," said Steven Robinson, a fund manager with Alleron Investment Management.

The benchmark S&P/ASX 200 index added 38.9 points to 3,621.1 points, based on the latest available data, as the market reopened after a two-session Christmas break.

The index is down about 43 per cent in 2008 and is headed for its worst yearly drop since its formation in March 2000.

New Zealand's benchmark NZX 50 index rose 0.4 per cent to 2,677.64.

Australian banks, which trade on attractive dividend yield, were in demand.

National Australia Bank of Australia, the nation's top lender, added 3.8 per cent to A$20.87 and Commonwealth Bank of Australia, the third-biggest, gained 3.8 per cent to A$28.18.

NAB trades a dividend yield of 9.7 per cent while CBA at 9.8 per cent, based on their last paid dividends.

Retailers rose on hopes of strong post-Christmas sales.

Harvey Norman Holdings added 2.5 per cent to A$2.50, JB Hi-Fi firmed 2.0 per cent to A$9.31 and department store chain David Jones rose 2.0 per cent to A$3.01.

"Christmas has probably been OK for them. But there is lot of discounting going on which puts a fair bit of pressure on their margins. The bigger issue is how can they keep traffic moving," said Sean Fenton, a fund manager with Tribeca Investment Partners.