SYDNEY (Reuters) - Australian shares climbed to 5-1/2 year highs on Wednesday morning as department store operator David Jones rocketed on a S$2.5 billion takeover bid, triggering a buying frenzy in the retail sector.
A rebound on Wall Street overnight had already given the market the early impetus, and an uptick in gold prices drove bullion miners up.
The spotlight was on David Jones, which went on trading halt on news it had agreed to a takeover offer from Woolworths Holdings that valued the company at around A$2.15 billion (S$2.5 billion).
The shares had soared 25 per cent to the takeover bid price of A$4.00, and was up 22.9 per cent at A$3.92 at the time of the trading halt.
The corporate activity stirred the retail sector. Rival department store operator Myer Holdings jumped 5.7 per cent, and Harvey Norman limbed 4.1 per cent. JB Hi-Fi gained 2.8 per cent.
"They are very, very heavily shorted," said Shawn Hickman, managing director at Market Matters in Sydney, referring to the retail stocks. He said the takeover bid for David Jones is acting as a catalyst for a strong rally in the sector.
The S&P/ASX 200 index added 55 points to 5,465.6 by 0206 GMT, surpassing the March 10 peak of 5,462.3. The benchmark has recovered from a low of 5,288.5 touched on March 20 as China took modest steps to stimulate a slowing economy, and as investors piled into cheaper stocks.
Improved consumer confidence data on Wednesday further underpinned trading.
The 'Big Four' banks recouped some of their recent losses.
Westpac Banking Corp added 1 per cent, while Commonwealth Bank of Australia was up 0.8 per cent.
Miners also posted modest gains as Shanghai steel rebar futures hit one-month peaks amid optimism Chinese demand will remain firm after a sustained drop in stockpiles since the start of March. BHP Billiton rose 1 per cent, and Lynas Corp bounced 3.6 per cent.