With most global indices rising, Australian shares too joined the rush to finish in the green, taking cues from the fact that this will result in a demand surge.
Australian stocks rose 0.9 percent on Tuesday to touch an 18-month high, shrugging off an interest rate rise as the prospects of stronger global demand and merger activity lifted resources shares.
Share prices barely budged after the central bank hiked its official cash rate to 4.25 percent, even though the decision had been seen as line ball.
Analysts said if the prospect of higher rates lowered the investment appeal of real estate, then equities could stand to gain from increased investor appetite.
The Reserve Bank will try to take the heat out of the residential market and they will go in increments. The benefit therefore will be equities — a lot of cash has been built up over the last 12 to 18 months, said Bell Potter Securities private client adviser Stuart Smith.
The benchmark S&P/ASX 200 index advanced 45.96 points to 4,953.7, after touching a high of 4,956.6, its highest intraday level since September 2008.
The index rose 0.7 percent last Thursday ahead of the four-day Easter break.
New Zealand’s benchmark NZX 50 index closed up almost 1 percent to 3,308.9.
Solid economic data from the U.S. on Friday and Monday restored faith in the global recovery and lifted the Australian market from the outset.
Merger activity kept interest high in the resources sector, with three big takeovers on the boil — Newcrest Mining’s $8.5 billion bid for Lihir Gold, Peabody Energy’s $3 billion bid for Macarthur Coal, and Royal Dutch Shell and PetroChina’s $3.1 billion bid for Arrow Energy.
Shares in takeover target Lihir Gold fell 5.9 percent to A$3.80, trading 7 percent below the value of Newcrest Mining’s takeover offer, while Newcrest shares rose 3.3 percent to A$34.88.
An investor said the moves largely reflected investors’ view that Newcrest was more likely to be taken over now than Lihir.
People have decided Newcrest is the real target, said Tom Elliott, managing director of hedge fund MM&E Capital.
But we think it’s unlikely any of the big U.S. majors could bid for Newcrest. It would have to be a very big cash bid, which would be very dilutive for them, he said.
Dealers also said analyst reports valuing Lihir as high as A$4.30 to A$4.50 had also reduced enthusiasm for the deal.
Shares in takeover target Macarthur Coal resumed trading just before the close, and ended up 1.6 pct at A$15.10, extending their premium above Peabody Energy’s sweetened offer of A$3.56 billion or A$14 a share.
Gains in the banking sector were modest as investors weighed the hike in official interest rates. Top mortgage lender Commonwealth Bank was up 0.8 percent at A$57.24.
Top miner BHP Billiton gained 1.6 percent to A$44.63 and rival Rio Tinto added 1.3 percent to A$80.64.
Australia’s competition watchdog extended the deadline for reviewing a proposed $116 billion iron ore joint venture by BHP and Rio for a second time, to May 27, according to its web site.