ASB Securities Morning Brief for Tuesday, 28 June 2016
Tuesday, 28 June 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares bounced today as Asian markets traded strongly in the afternoon, with companies offering stable dividends attracting interest from investors wary about potential cuts to the official cash rate. Auckland International Airport, Chorus and Genesis Energy gained. The S&P/NZX 50 Index rose 19.14 points, or 0.3 percent, to 6,686.92. Within the index, 22 stocks rose, 21 fell and seven were unchanged. Turnover was $126.7 million... Read more

The New Zealand dollar extended its gains against the pound, reaching a new 2 1/2-year high as financial markets caught up with a full weekend of debate over the ramifications of the Brexit, including the risk that other European Union nations could consider leaving the regional economic bloc. The kiwi rose to 52.78 British pence as at 5pm in Wellington, and earlier touched 52.98 pence, surpassing Friday's peak to reach the highest level since October 2013, from 52.11 pence on Friday in New York. The local currency slipped to 70.63 US cents from 71.30 cents at the end of last week... Read more

New Zealanders grew more pessimistic in the June quarter as they grew increasingly worried about job security as a swelling population increases competition for work and continues to keep a lid on wages. The Westpac-McDermott Miller Employment Confidence Index fell 3.3 points to 101.5 in the June quarter, giving up gains in the previous quarter and running below its five-year average. A reading above 100 indicates optimists outnumber pessimists. The present conditions index fell 2.1 points to 97.6 while the employment expectations index dropped 4.1 points to 104.2... Read more

NZ posts trade surplus in May as exports of logs, fruit jump... Read more

Falling pound could give Kiwi online shoppers more clout. Kiwi shoppers may find they can bag a bargain on British websites in the coming weeks compared to New Zealand retailers. thanks to Brexit. Britain's shock decision to exit the European Union has pushed down the pound against the New Zealand dollar more than 8 per cent or 4 pence. While it's a small difference, experts say it could make already cheap British goods more alluring.... Read more

The most immediate fallout for New Zealand from the UK's vote to leave the European Union is that the Reserve Bank is now much more likely to cut the official cash rate (OCR) in August and an OCR below 2% is on the cards. Financial markets are now pricing in a 68% chance the Reserve Bank will cut the OCR to 2% in August... Read more

The Reserve Bank has introduced a new data table (C32) which presents statistics on new and existing residential mortgage lending by payment type – interest-only, and principal-and-interest loans. Interest-only loans are defined as having no scheduled repayments. This includes revolving credit loans which have a fixed limit. Principal-and-interest loans are defined as having scheduled repayments and include revolving credit loans which have a scheduled reducing limit... Read more

New Zealand investors are being urged not to panic about the potential impact of Brexit on their portfolios. Since the result was announced on Friday, New Zealand time, there has been turmoil on international markets - equities have taken a hit, Britain's currency fell 10% against the US dollar and 7% against the New Zealand. Against the US dollar, it traded at levels not seen since 1985... Read more

Key hoses down talk of Kiwi-Aussie joint approach to post-Brexit negotiations... Read more

As the Auckland housing market forges ahead like an unstoppable freight train, it is becoming harder and harder for investors to achieve consistently good yields from their rental properties. Stephen Dickens takes a look at south Auckland and finds a region that while growing rapidly, still offers potential opportunities for investors.... Read more

New Zealand's sheepmeat exports and tourists from the UK may be the hardest hit from the Brexit. The European Union is the biggest market for New Zealand sheepmeat, taking $1.4 billion of product last year and almost half of that 228,000 tonnes of quota is taken by the UK. Total red meat exports to the EU amount to $2 billion, making it the single most valuable market... Read more

New Zealand farmer confidence bounced in the second quarter to the first net positive reading in more than a year, with a significant upswing across all sectors as rising dairy prices fuelled positivity... Read more

Dairy farmers need to ask themselves what a smart level of debt is given the risk profile for the next decade is likely to be different than the last, says Federated Farmers Dairy chairman Andrew Hoggard. Compared to other countries New Zealand has a very high debt level on its dairy farms, Hoggard said at the dairy industry group’s annual meeting... Read more

KPMG’s Ian Proudfoot says significant change is coming to New Zealand’s primary sector and "farmers that ignore it do it at their peril". Mr Proudfoot was speaking this morning at Federated Farmers’ National Conference Meat and Fibre AGM. The world was on the cusp of a fourth industrial revolution and this would mean thinking more globally... Read more

Silver Fern Farms will miss the June 30 deadline to satisfy conditions of the sale of a controlling stake in the country's largest meat processor to China's Shanghai Maling Aquarius but insists the deal hasn't been derailed. The Dunedin-based meat company has also postponed a special meeting scheduled for July 11 for a second vote on the sale, which was requested by a group of dissident shareholders. It didn't give a new date for the meeting, saying it needed more time to supply information requested by the Overseas Investment Office... Read more

Silver Fern Farms dampens down speculation that investor has walked away... Read more

Hirepool Group, the country's biggest equipment rental firm, has attracted private equity firms interested after testing the market for a buyer last month, Australian media has reported. Australian private equity firms Crescent Capital and Anchorage Capital are among potential buyers for the Auckland-based company, the Australian newspaper reported today... Read more

Trade Me founder and serial tech investor Sam Morgan will step down from the board of Xero at the accounting software developer's annual meeting next month. Morgan has backed Xero since 2007, buying shares at $1 apiece in the initial public offering and holding an independent directorship prior to listing. Morgan, who chairs the people and remuneration committee and is a member of the nominations committee, won't seek re-election at the July 20 meeting when he retires by rotation, the notice of annual meeting said... Read more

Smiths City Builds Board Strength As Profits Increase... Read more

NZME shares unpopular early on after listing. The NZX has clarified NZME's listing price of $1 was "solely related to NZX system requirements and is not indicative of any underlying valuation, or expected trading valuation, of NZME."... Read more

Vital Healthcare Property Trust says its holding company's acquisition of 19.9 percent of an ASX-listed health trust is unrelated to its recent rights offer announcement, and the two trusts will be run independently. NorthWest Healthcare Properties (NWH), a Canadian trust listed on the Toronto stock exchange, owns about 24.4 percent of Vital Healthcare Management, which manages the Vital trust... Read more

A record net profit has not been enough to save staff at Port Taranaki from being made redundant. Chief executive Guy Roper said following a thorough four month consultation process involving management, staff and the Rail and Maritime Transport Union there had been a reduction of 11 jobs at the port... Read more

New insurer Travel Insurance NZ covers terrorism. Up until now not a single insurer in the New Zealand market covered acts of terrorism for travellers headed abroad. However, with the launch of Travel Insurance NZ (or TINZ), travellers can now purchase cover with terrorism cover benefits, a landmark event in an increasingly unstable travel climate... Read more

Insurer reactions 'too slow'. An insurance software provider says New Zealand insurers take too long to get new products and pricing to market, and it is costing them money.... Read more

Trade buyers are showing good interest in Pacific island products showcased at Fine Food New Zealand trade expo that kicked off on Sunday. PT&I NZ has partnered with New Zealand distributors, The Produce Company in a new approach that could potentially see more quality Pacific products on shop shelves in future... Read more

David Whyte has been appointed an independent director and chairman of the Camelot Group, which has strong ties to Grosvenor. Whyte has been involved with the financial services industry for more than four decades in three different countries and brings a wealth of knowledge and experience to the team. As an independent adviser in the UK, Whyte ran his own insurance and financial services advisory company for 10 years during the North-Sea Oil industry boom... Read more

New Zealand is not a tax haven, says the man who reviewed the country's foreign trust regime in the wake of the Panama Papers document dump.... Read more

New Zealand's foreign trust disclosure rules are inadequate and probably allow illegal activities to go undetected, says a government inquiry by former PwC chairman John Shewan that recommends a significant increase in disclosure and a register of trusts. The government appointed Shewan for the inquiry after some 11.5 million documents were leaked from Panamanian law firm Mossack Fonseca related to foreign trusts including many that referred to New Zealand. Such trusts were used by criminals and terrorists to channel illegal funds and avoid tax, according to an international group of investigative journalists who have had access to the papers... Read more

Most of the recommendations in a hard-hitting inquiry into New Zealand's tax-exempt foreign trusts will be adopted by the Government, Prime Minister John Key has confirmed. The inquiry by former PwC chairman John Shewan - which was prompted by the Panama Papers - concluded that the disclosure rules for New Zealand's foreign trusts were "not fit for purpose" and "light-handed"... Read more

American billionaire Bill Foley, with extensive New Zealand interests, paid US$500 million ($707.26 million) for a giant ice hockey deal in the US. Foley has just won the franchise rights to bring the National Hockey League to Las Vegas, for the first time, in the 2017-18 season... Read more

An Otago medical centre manager who stole more than $730,000 from his employers spent the loot on travel, cars, booze, casinos – and a $23,000 birthday party for himself and his twin. Richard Gregory Beven, 41, has admitted stealing the money while he was general manager of Wanaka Lakes Health Centre from 2011 to 2015... Read more

Opinion - Mark Lister: Bumpy ride in store but no sign of economic Armageddon. I knew it would be close, but I didn't see that coming. I wasn't nearly as wrong-footed as financial markets, though. The violent swings we saw on Friday were a reflection of a monumental error of judgment by the collective wisdom of "the market"... Read more

Opinion - Chris Lewis: New scheme will provide better skilled farmer workforce... Read more





Australian Headlines

Australian Market Report: The Australian sharemarket has pared some of its losses from Friday’s ‘Brexit’-inspired plunge, although banks and UK-exposed stocks continued to feel some pain. At the 4.15pm (AEST) official market close, the benchmark S&P/ASX200 index was 24 points, or 0.47 per cent, higher to 5137.2, while the broader All Ordinaries index had lifted 23.4 points, or 0.45 per cent, to 5216.2.... Read more

The Australian dollar has recovered some ground after Friday's volatile session, as the dust settles from the unexpected Brexit vote. At 0800 AEST on Monday, the local unit was trading at 74.32 US cents, up from 73.61 cents on Friday.... Read more

Australia's peak business body says uncertainty and market volatility from the shock Brexit vote is likely to continue for months. Australian companies and investors have played down the impact of Britain's vote to leave the European Union but fears of the financial consequences of Brexit remain as uncertainty grips world markets... Read more

Retail prices have stayed low for a long time. So suspiciously low that the Reserve Bank of Australia (RBA) started to wonder if something had gone wrong. It did a big investigation which it published last week. The reason they found? Mostly Aldi... Read more

The housing market warmed up further last week, despite the onset of winter. The two major markets recorded solid gains over the week ending Sunday, according to the weekly report from CoreLogic. Prices in Sydney were up by 0.7 per cent, while prices in Melbourne rose by 0.6 per cent... Read more

Australia to team up with New Zealand on Brexit fallout. Australia ordered an urgent review Monday into the consequences of Britain leaving the EU and said it would team up with New Zealand to negotiate new trade and immigration deals. The trans-Tasman neighbours have been rattled by the British public's decision to leave the European bloc, with Australian Prime Minister Malcolm Turnbull calling it "a very big shift"... Read more

Brexit: Central banks ready 'extensive contingency plans' amid fears of further global fallout... Read more

White Rock Minerals has secured a financing package from Cartesian Royalty Holdings to develop its Mt Carrington project to full commercial production... Read more

Beleaguered mining services company McAleese faces a fresh threat to its $112 million debt rescue package, as one of its major shareholders pushes for a spill of the haulage company’s board. McAleese, which provides trucking services to Pilbara iron ore miner Atlas Iron, said today a shareholder group led by McAleese director Gilberto Maggiolo, and privately-owned Havenfresh Pty Ltd, had lodged a spill motion to dislodge the rest of the company’s board, including founder Mark Rowsthorn, Wayne Kent, Donald Telford, Kerry Gleeson and Warren Saxelby. McAleese shares closed down 0.1¢ to 2¢ this afternoon.... Read more

Woodside announced this morning its $2.57 billion joint venture Greater Enfield project with Mitsui E&P Australia has been approved for development. The project, about 60km off Exmouth but within Commonwealth waters, will develop the Laverda Canyon, Norton over Laverda and Cimatti oil fields with first oil expected in mid-2019... Read more

BHP Billiton will focus on copper and oil as it boosts exploration spending in the coming financial year despite cutting its total capital expenditure. The resources giant said on Monday it will spend $US900 million ($A1.2 billion), or 18 per cent of its capital budget, on exploration projects in the 2016/17 financial year. At 1155 AEST, BHP shares were up 54 cents, or 3.1 per cent, at $18.08 each.... Read more

Asciano settles Tzaneros dispute... Read more

Consolidated Tin Mines Ltd is continuing mining and processing of base metals at the Mt Garnet mine in North Queensland. The company has requested a trading halt to review its working capital needs... Read more

Manas Resources will purchase the Victoria gold project in Tanzania from Cienega for US$4 million (A$5.4 million). Manas understands some of the VGP licenses are subject to JV agreements or pre-existing royalty arrangements although it would appear that the most prospective areas are available on a 100% basis... Read more

Torian Resources Ltd is focused on four advanced projects in the Goldfields Regions of Western Australia Torian is now heading to market with a capital raising, with the ASX granting a trading halt to prepare... Read more

The extent of the mining downturn has been highlighted by figures showing the WA sector has lost an average of 165 jobs every week for more than 2.5 years. In March there were 83,835 mining sector jobs, excluding onshore petroleum, which was 21,165 fewer full-time positions than during the boom time of August 2013, according to the Department of Mines and Petroleum... Read more

QBE shares have fallen more than six per cent after the insurer said it could move business out of the UK if passporting rules are changed in the wake of the country's vote to leave the EU... Read more

Goldsearch moves to buy Zoono. Goldsearch will buy all the shares, assets and business undertakings of Zoono Group, a pharmaceutical company specialising unique long lasting antimicrobial technology... Read more

Xped Ltd has been granted a trading halt by the ASX, pending the release of information regarding an executive appointment and change in management... Read more

Spray-on skin technology provider Avita Medical has won a contract extension aimed at helping a US biomedical research organisation prepare for treating burns from a nuclear explosion. The Biomedical Advanced Research and Development Authority - part of the US health department's disaster response network - is supporting Avita Medical's plans to get its regenerative medicine technology approved and launched in the US... Read more

PharmAust Ltd will begin a Phase II clinical trial for the treatment of canine cancer at the University of Cambridge, Department of Veterinary Sciences in the UK. The trial will test the efficiacy of ZOLVIX, or monepantel which is an oral broad spectrum anthelmintic for the treatment of gastrointestinal roundworms in sheep... Read more

Communications satellite firm Sky and Space Global says 200 of its nanosatellites will be launched into space by Sir Richard Branson's Virgin Galactic in 2018. Virgin Galactic is better known as a developer of space tourism, but is also developing the capability to launch small satellites. Shares in Sky and Space Global were 0.2 cents lower at 2.1 cents at 1215 AEST.... Read more

NZME Ltd has commenced trading on the ASX, up to a $0.90 high after its Australian owners APN News and Media Ltd completed the demerger of its Kiwi business. NZME, publisher of The New Zealand Herald, has now been spun off as an independent New Zealand business. It also owns radio and digital brands including Newstalk ZB, The Hits, Radio Sport and GrabOne... Read more

Tatts Group has sold its interest in Talarius, its United Kingdom based slots business, to Novomatic UK.... Read more

Shares in fintech company Peppermint Innovation gained ground today on news it is well placed to take advantage of the global mobile payments market which is expected to reach US$1.3 trillion over the next five years. Shares in Peppermint were trading 8% higher at 1.4c in afternoon trading.... Read more

Internet provider iiNet has primed its first two sites for trials of NBN's hybrid fibre-coaxial cable to see if it is up to standard prior to rolling out a commercial offering. The NBN HFC trial by iiNet is small, comprising just eight homes in Redcliffe, Queensland, and 12 in Ocean Reef, Western Australia. The cable networks in those areas were owned by Optus and Telstra respectively before NBN purchased them... Read more

Ocean Reef will be the first WA suburb to be connected to the HFC element of the NBN, with TPG-owned iiNet announcing a 12-home trial. It was announced this morning the Perth internet company, which was sold to TPG for $1.6 billion last year, would test the technology in the northern suburb prior to rolling it out commercially to ensure it was up to standard... Read more

Clive Palmer has chalked up a win in the WA Supreme Court in his long running battle with estranged business partner CITIC, with the Court of Appeal ordering a re-hearing of Mr Palmer’s claim his privately-owned resource company should be immediately paid $US48 million as part of an ongoing royalty dispute... Read more

Opinion - Ian Verrander: Brexit will deliver a few home truths. The Brexit disaster that was inflicted on an unsuspecting world last week will undermine the prospects for an already weak global economy and have a particularly harsh impact on Australia, writes Ian Verrender. How good were the good old day... Read more

Opinion - Ross Gittens: One thing we've learnt from this election campaign: whoever's interests our business lobby groups represent, it's not Australian shareholders. That's clear from their vociferous defence of Malcolm Turnbull's hugely costly promise to cut the company tax rate from 30 to 25 per cent, even though our system of dividend imputation means local shareholders have little to gain from the cut... Read more





International Headlines

U.S. Market Report: U.S. stocks followed global markets further into the red on Monday as the Brexit fallout continues to ripple around the world. The Dow slumped 250 points and touched three-month lows. That's on top of Friday's plunge that wiped out 610 points from the index. This makes the post-Brexit turmoil the worst two-day period for U.S. stocks since the August 2015 freakout... Read more

North/South Americas Market Report: North and South American markets are sharply lower today with shares in U.S. off the most. The S&P 500 is down 1.88% while Brazil's Bovespa is off 1.83% and Mexico's IPC is lower by 1.58%... Read more

European Market Report: European markets finished sharply lower today with shares in Germany leading the region. The DAX is down 3.02% while France's CAC 40 is off 2.97% and London's FTSE 100 is lower by 2.55%... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 2.39% and the Shanghai Composite rose 1.45%. The Hang Seng lost 0.21%... Read more

Gold prices remained buoyant in London on Monday, prompted by market turmoil following the UK’s unexpected vote to leave the European Union at the close of last week. Spot gold was up 0.8 per cent at $US1,326.16 a troy ounce in morning European trade, after hitting a near two-year high in the previous session at $US1,358.80 an ounce.... Read more

Are central banks 'powerless' to handle Brexit fallout? Central banks had become the all-powerful panacea for the global economy's problems in recent years. But this time, it appears they might not have an answer -- or an audience -- following Brexit and its fallout... Read more

Senior Obama administration officials sought to calm jittery markets on Monday, insisting there was no financial crisis brewing after Britain's vote to leave the European Union and urging officials on both sides to take a "responsible" approach to the looming separation. U.S. Treasury Secretary Jack Lew said last week's Brexit vote created another challenge for the U.S. economy, but the effect on financial markets has been "an orderly impact so far."... Read more

Havana ATMs accepting U.S. bank's MasterCard: central bank... Read more

Prime Minister David Cameron rejected calls for a do-over vote on leaving the European Union and assigned a team of officials to prepare for withdrawal following the referendum last week that stunned the world and triggered financial-market turmoil... Read more

The UK has lost its top AAA credit rating from ratings agency S&P following the country's vote to leave the EU. S&P said the the referendum result could lead to "a deterioration of the UK's economic performance, including its large financial services sector"... Read more

British banks are struggling to keep calm and carry on. Their shares have collapsed since Britain's vote to leave the European Union on Thursday. Lloyds Bank stock has lost 30% in value since the referendum. RBS is down 31%.... Read more

EU Referendum: Five changes to your finances following the vote. An immediate impact on some - but not all - elements of our finances has been felt following the UK's vote to leave the EU. Some of the changes may well only be temporary but experts say that they should be taken into consideration when making money choices... Read more

Germany, France and Italy said the European Union won’t hold talks with the U.K. on its future relationship with the EU until the government in London formally asks to leave the bloc. “We agree that there won’t be any informal -- or formal -- talks about Britain’s exit before the European Council has received the exit application,” German Chancellor Angela Merkel said Monday at a news conference with French President Francois Hollande and Italian Prime Minister Matteo Renzi in Berlin... Read more

British pound could hit history-making dollar parity by end of 2016... Read more

A French financial prosecutor requested Swiss bank UBS go on trial for covering up clients' tax fraud as well as illegal prospecting, a judicial source told Reuters. The source said the prosecutor had also requested UBS France, the bank's French arm, go on trial for complicity... Read more

Nestle SA named Ulf Mark Schneider as successor to Chief Executive Officer Paul Bulcke, a surprise move that hands the reins of the world’s biggest food company to an outsider for the first time in nearly a century... Read more

Spanish government bonds jumped, pushing the yield down by the most in two years, after Acting Prime Minister Mariano Rajoy defied opinion polls to consolidate his position in the country’s general election after Brexit rocked the world’s financial markets last week... Read more

China-U.K. 'golden era' at risk from Brexit. China has plenty of economic problems to deal with right now: slowing growth, worrying debt levels and difficulties overhauling bloated old industries. It doesn't really need another, but British voters have given it one anyway by voting to leave the European Union.... Read more

China Signals Coal-Capacity Cut Equal to 7.5% of Output in 2015... Read more

HSBC Holdings Plc and Nomura Holdings Inc. extended declines in Asian trading Monday on concern that Britain’s vote to leave the European Union may force banks with a large presence in the U.K. to undergo costly relocations. Nomura tumbled 6.3 percent at the close in Tokyo after losing 11 percent Friday, the biggest two-day slump since the aftermath of the nation’s March 2011 tsunami. ... Read more

Morgan Stanley Says India Among Asia’s Least Exposed to Brexit. India’s economy will be among the least impacted in Asia by the U.K.’s vote to exit the European Union given its relatively low exposure to trade, according to Morgan Stanley... Read more

Analysis - Matt Egan: Brexit crash wiped out a record $2.1 trillion. Now what? A record $2.1 trillion was wiped out from global markets on Friday. That means more money vaporized as a result of the Brexit crash than any single market day ever, according to S&P Dow Jones Indices... Read more

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