ASB Securities Morning Brief for Tuesday, 25 August 2015
Tuesday, 25 August 2015

New Zealand Headlines

New Zealand Market Report: New Zealand shares dropped the most in four years in a global sell off after weak Chinese manufacturing data added to concern about the world's second-largest economy and sapped risk appetite. Xero plunged to its lowest level in two years while a weak earnings result saw Chorus hammered. The S&P/NZX 50 Index declined 143.87 points, or 2.5 percent, to 5607.32, its lowest level since January. Within the index, every stock bar Spark New Zealand dropped. Turnover was above average at $190 million... Read more

The New Zealand dollar dropped back below 66 US cents as stocks across Asia followed Wall Street and Europe lower after weaker-than-expected Chinese manufacturing data last week reignited concern the world's second-biggest economy is slowing. The kiwi fell to 65.88 US cents at 5pm in Wellington from 66.53 cents at 8am and 66.82 cents on Friday in New York. The trade-weighted index declined to 71.07 from 71.25... Read more

The New Zealand economic outlook isn't as bad as "hysteria" from some commentators suggests, with these people perhaps seeking attention, ASB economists say. In their weekly economic report ASB's economists, led by chief economist Nick Tuffley, say although the Gross Domestic Product (GDP) growth outlook has deteriorated this year and could be worse than they are expecting, things aren't as bad as some commentators are touting... Read more

The outlook for dairy prices remains dire in the near term and will force the Reserve Bank to further cut interest rates this year, said economists at an Auckland conference, who collectively had a doom and gloom outlook for the New Zealand economy. Deutsche Bank chief economist Darren Gibbs said at the Standard & Poors economists breakfast that the only positive in the near term for dairy prices was the risk of a drought this summer, due to El Nino weather patterns... Read more

Easter trading rules to be handed to local councils... Read more

Liberalising the Easter trading legislation will benefit the tourism industry and local economies, the Tourism Industry Association New Zealand (TIA) says.... Read more

Prime Minister John Key has warned property buyers in Auckland not to expect capital gains forever, saying interest rates could rise some time in the future and they could be in for a "nasty surprise," just as stock market investors have experienced today... Read more

Growing investor demand for Auckland property has exacerbated the price pressures arising from the underlying supply shortage, the Reserve Bank says. Reserve Bank Deputy Governor Grant Spencer said CoreLogic data showed that investors accounted for 41% of all Auckland market sales in June 2015. This was an increase of 8% since late 2013... Read more

A sharp rise in the numbers of smaller residential investors relying on credit has been increasing the risk to the Auckland housing market, according to the Reserve Bank. And the RBNZ has also highlighted the big surge in migration as a contributor to Auckland's rising house prices, calculating that perhaps as many as a third of Auckland house purchases in the past year could have been to those recently arrived in the country... Read more

New commercial building consents rise strongly in Auckland led by industrial properties; consents decline in Christchurch, Wellington subdued... Read more

The international dairy trade has become the most volatile of all commodities markets. The GlobalDairyTrade auction price for whole milk powder went from US$5000 ($7583) a tonne in February last year to less than half that at US$2229 in December. It then rallied to US$3272 a tonne in February, only to slump to US$1590 on August 5... Read more

Fonterra's new $230 million high-efficiency milk powder plant at its Pahiatua site has processed its first milk. Whole milk powder from the new plant will soon head to customers in more than 20 markets worldwide including South America, the Middle East and Southeast Asia... Read more

Fonterra wants more say in milk acceptance. Fonterra says it should be allowed more discretion about what milk to accept from farmers and should not have to make milk available to large dairy processors, other than domestic market food producer Goodman Fielder... Read more

SkyCity Entertainment Group, the country's only listed casino operator, plans to sell as much as $125 million of bonds, using the proceeds to repay bank debt. The Auckland-based company will sell $100 million of seven-year redeemable, fixed-rate bonds, and will take oversubscriptions of up to $25 million, it said in a statement... Read more

AMP is making progress in diversifying its business following changes to life insurance tax with 25% of its most recent profit coming from wealth management. AMP reported operating earnings of $64.6 million for the six months to June 30. This is an increase of 9% from the same period last year... Read more

ASX listed telecommunications firm M2 Group attributed just a fifth of the A$253 million it paid for local fixed line and broadband services provider CallPlus to identifiable net assets, with the bulk going towards goodwill. The Melbourne based company completed the acquisition, including the Slingshot, Orcon, Flip and 2Talk brands, on June 30, assigning A$200.2 million to goodwill which it said would arise from "expected synergies"... Read more

China syndrome threatens NZ Steel jobs... Read more

Australian steel products group Bluescope is to review its steelmaking operations in both Australia and New Zealand, saying it needs "game-changing" savings in operating costs or it may stop making making hot rolled coil and billets and import it instead... Read more

Fidelity Life boss Milton Jennings says it is unlikely it will go ahead with reopening an annuity product to a wholesale client group.... Read more

Chorus shares fell to a six and a half month low after the telecommunications network operator reported a 39 percent decline in annual profit as the lower regulated price for its copper based services generated weaker revenue. Weaker earnings are anticipated in the 2016 financial year... Read more

Nib New Zealand, the local arm of the Australian private health insurer nib, has turned around more than a decade of policy-holder decline, growing customers by 5.9 percent to 83,775 in the 2015 financial year.... Read more

Hanmer Springs Thermal Pools is seeking partners for a bold $15 million high end spa investment to boost the alpine village's ability to draw in visitors from far and wide. The Hurunui District Council, which owns the thermal attraction - the Hanmer Springs - is supporting a new plan to turn part of the former Queen May Hospital's heritage Chisholm Ward building into a luxury day spa. The council will lease the building to the spa operator... Read more

The Commerce Commission is to reconvene its conference on Cavalier Wool Holding Limited’s application for authorisation to acquire New Zealand Wool Services International's wool scouring business.... Read more

A review of Auckland Council's sport and recreation assets not only involves 13 golf clubs valued at $200 million-plus, but also all the council's many bowling clubs. Christine Fletcher, chairwoman of the parks, recreation and sport committee, revealed that bowling clubs and golf clubs were under review... Read more

Agency seeks to force land sale for City Rail Link. Auckland Transport is taking legal action to force owners of Eden Terrace properties to sell up for the $2.5 billion City Rail Link. Public notices were published in the Herald this month showing compulsory acquisition action is planned by the council-controlled authority at 34 and 36-38 Nikau St... Read more

There has been a change at the helm of the Financial Advisers Act review. The Ministry of Business Innovation and Employment has confirmed Iain Southall is no longer leading the review.... Read more

Xero's share price slumped below $15 for the first time in two years today, probably as a result of general weakness in global equity markets. The software stock has plunged 6.4% today down to $14.05, the first time it has been below $15 since May 2013. It reached a peak of $44.79 in March last year... Read more

The Environment Court is considering an appeal by one of Marlborough's largest mussel producers to extend its greenshell mussel farm in the Pelorus Sound. Havelock-based Clearwater Mussels is appealing against a decision by a Marlborough District Council-appointed commissioner who rejected the renewal of its coastal permit and extension of its farm at Campbell Point from 4.37 hectares to 15.25ha... Read more

A New Zealand firm with links to a Irish company accused of being a sub-prime mortgage lender funded by tax fraud has appealed its removal from New Zealand's Financial Services Provider Register (FSPR). Vivier and Company Ltd, which is led by former Auckland political operative Luigi Wewege, argued in the High Court in Wellington on Monday that the Financial Markets Authority (FMA) decision to remove Vivier from the FSPR in July was unfair and should be over-turned because it was based on an Interest article that unfairly influenced the decision... Read more

FMA expects flood of appeals of FSP deregistration, as Wewege's firm becomes test case. The Financial Markets Authority is expecting a wave of appeals after deregistering 100 companies from the Financial Service Providers register, as the regulator awaits a High Court ruling on Vivier & Co's appeal, the first one to go through the courts... Read more

Charges over Fullers ferry collision with wharf... Read more

Cut-price booze promoted in a supermarket flyer has resulted in a three-day booze ban for a Dunedin supermarket. Central Dunedin Countdown will be alcohol free from 7am Monday, September 6 to 7am Thursday, September 10, following a decision by the Alcohol Regulatory and Licensing Authority... Read more

Kiwi investors in Colombian gold venture lose millions... Read more

South Otago farmer Angus Maclean Penrice fined for sheep deaths... Read more

Opinion - Geordie Hooft: The ins and outs of the proposed tax on property sales... Read more

Opinion - Bill Rosenberg: Government has created a farce with its work and safety legislation. The farce created by the Government's hamfisted changes to the Health and Safety Reform Bill is a tragedy. The Pike River tragedy created a chance in a generation when seemingly everyone agreed that New Zealand's appalling workplace safety record must change... Read more

Opinion - Larry Williams: Auckland's runaway house market. The Reserve Bank is again highlighting Auckland's runaway house market... Read more

Australian Headlines

Australian Market Report: The Australian sharemarket has plummeted today amid a global sell-off sparked by fears of deflation and standstill economic growth, with Chinese market turmoil adding to the woes. Stocks fell for a third straight session, following on from Friday’s 3 per cent plunge in US equities and shadowing today’s more than 8 per cent falls in Chinese shares. At the official 4.15pm (AEST) close, the benchmark S&P/ASX200 had fallen 213.3 points, or 4.09 per cent, to 5001.3, while the broader All Ordinaries had dipped 4.03 per cent, or 210.6 points, to 5014.2.... Read more

The Australian dollar has sunk as low as US70.44c in overnight trade as panic set in across the globe. In something of a 'flash crash' the local currency dived US2c in the space of 10 minutes, before rebounding back near levels seen at the end of local trade on Monday... Read more

Aussie gold eyes A$1600 an ounce in spot market... Read more

Joe Hockey accused of 'defer and distract' strategy after speech on income tax cuts... Read more

Queensland government calls for renewable energy supply. Ergon has gone to the market for 150 megawatts of renewable energy as the State Government claims it has started a “large scale renewable energy agenda’’. The Government has plans for 50 per cent of Queensland’s energy to be renewable by 2030, but this is its first step into the market through Ergon and it claimed it would not be happening if Ergon had been sold... Read more

The vast majority of WA farmers are set to cash in on good prices and recent rain after improving their productivity over the past five years. A major survey of farm confidence released yesterday shows 99 per cent of grain growers rate their operations as viable with many preparing to reinvest heavily to boost production... Read more

Fortescue Metals Group has defended a decision to spend more than $60 million on dividends while it has $US7.2 billion of net debt, saying it is important for the company to demonstrate confidence in the iron ore price amid a commodities rout... Read more

BHP tipped to announce big profit fall... Read more

UGL books $236m loss. A massive provision related to budget blowouts at Inpex’s Ichthys LNG project and other writedowns have seen contractor UGL suffer a $236 million annual loss... Read more

Triton Minerals appoints Paula Ferreira as director... Read more

WA's newest blue-chip stock, South32, has set itself a three-year target to achieve the elimination of $US350 million in annual costs as the diversified miner tries to deal with the metals price downturn. Reporting its first financial result since being spun off by BHP Billiton in May, South32 also said it would aim to cut sustaining capital expenditure by 9 per cent this year to $US650 million... Read more

Aleator Energy has been granted an ASX trading halt in relation to a proposed material contract. The halt will last until the earlier of the announcement being made or the start of trade on Wednesday, 26th August 2015... Read more

China’s dockyards are about to start work building Fortescue Metals Group’s new bulk ore carriers, despite the company slashing capital spending for the coming financial year. Fortescue chief financial officer Stephen Pearce told reporters yesterday — design work on the 260,000 tonne vessels was nearly complete, and the first steel would be cut for their hulls within the next two months... Read more

FMG shares dive on 88pc profit plunge... Read more

BlueScope Steel has bounced back from last year's heavy loss to report a full-year profit of $136.3 million, however this may not be enough to save its steelworks at Port Kembla. The company's chairman Graham Kraehe described the turnaround from last year's $83 million loss as the company's "best performance since the impact of the GFC on the steel sector in 2009."... Read more

Echo Entertainment has come under pressure from investors who say the theoretical model that predicts how lucky the casino is when it comes to paying out high-roller gamblers is inflating the company's future profit outlook. While a casino's actual VIP earnings vary depending on luck, gaming operators such as Echo guide investors to a theoretical win rate, which gives an idea of what the casino should have won, and will win, over a long period... Read more

dorsaVi Limited has been granted an ASX trading halt in relation to a proposed capital raising. The halt will last until the earlier of the announcement being made or the start of trade on Wednesday, 26th August 2015... Read more

Aguia Resources last traded at $0.17 before the company called a trading halt, which is about five-times higher than the mid three cent range at the start of 2015. Aguia is focussed on Brazilian fertilizer, with the country totally reliant on imports... Read more

Aussies set for lower mobile call, SMS rates. Mobile customers are expected to benefit from lower call and SMS rates after Australia's competition regulator decided to halve the cost telcos can charge each other to receive calls on their network. The ACCC today released its final decision on the regulated price for the mobile termination access service (MTAS)... Read more

Stokes Limited has entered into a binding agreement to acquire a revenue-generating audio visual and telecommunications product business for $330,000 and stock.... Read more

Transurban tipped to buy troubled AirportLink... Read more

Myer nabs Coles online boss as new chief digital officer... Read more

NBN's construction costs will blow out past the $41 billion price tag previously forecast for the infrastructure project, the company revealed today. NBN today said its budget will likely increase by up to $15 billion, from the planned $41 billion to between $46 billion to $56 billion, likely sitting at around $49 billion... Read more

Communications Minister Malcolm Turnbull has said a government-owned startup was the wrong model for the NBN after its latest corporate plan showed the network will exhaust government equity funding by 2017. According to the three-year plan, the NBN will now have a peak funding requirement of between $46 billion and $56 billion by 2018, compared to the previous $41 billion... Read more

London wants to pinch best Aussie fintech start-ups... Read more

Clive Palmer’s private resource companies have extended the Federal MP’s war with China’s CITIC, launching new legal actions for more than $400 million in damages over a long-running Pilbara royalty dispute. The two new lawsuits were revealed in CITIC’s half-year financial results, released in Hong Kong yesterday... Read more

Opinion - Elizabeth Knight: ASX: Investors should hold their nerve... Read more

Opinion - Ian Verrander: Markets should take note: The China tide has turned... Read more

Opinion - Malcolm Pascoe: ASX: Don't follow the herd but watch out for opportunities... Read more

International Headlines

U.S. Market Report: U.S. stock indices were more than 2-percent lower in afternoon trade on Monday but were off the day's worst levels after a dramatic turnaround in shares of Apple helped boost sentiment. The Dow Jones industrial average .DJI briefly slumped more than 1,000 points, its biggest point-drop ever. But by 2:20 pm, the Dow had recovered somewhat to trade down 362.12 points, or 2.2 percent at 16,097.63 as bargain hunters stepped in. The Dow has never lost more than 800 points in a day... Read more

North/South America 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 2.90% while Brazil's Bovespa is off 2.51% and Mexico's IPC is lower by 1.71%... Read more

European Market Report: European markets finished sharply lower today with shares in France leading the region. The CAC 40 is down 5.35% while Germany's DAX is off 4.70% and London's FTSE 100 is lower by 4.67%... Read more

Asian Market Report: Asian markets finished sharply lower today with shares in China leading the region. The Shanghai Composite is down 8.49% while Hong Kong's Hang Seng is off 5.17% and Japan's Nikkei 225 is lower by 4.61%... Read more

Bullish Oil Bets Sink to 5-Year Low as Futures Flirt With $40. It’s pretty lonely being an oil bull these days. Hedge funds reduced their net-long position in West Texas Intermediate crude to a five-year low last week, days before prices fell below $40 for the first time since 2009. Citigroup Inc. said it could get worse, with the U.S. benchmark slumping to $32 on a persisting supply glut... Read more

Base metals slid to multi-year lows in London on Monday, as a sharp decline in Chinese equities, and growing concerns about the country's economic health, triggered a broad-based commodities rout. The London Metal Exchange's three-month copper contract was down 2.3 per cent at $US4,936.50 a metric ton in midmorning European trade, having tumbled to its lowest level since 2009 earlier in trading at $US4,903 a ton. It fell below the key $US5,000 level for the fifth session in a row... Read more

U.S. inflation probably lower than reported, Fed study says... Read more

Bond Traders’ Knee-Jerk Reaction to Reeling Markets Is to Hide... Read more

Stock markets around the world recorded dramatic declines. It's ugly. But before you panic, let's put this in perspective. This is hardly the worst day ever for stocks. This pullback also comes after six years of stellar stock market gains. CNNMoney breaks down what's going on... and just how bad it is compared to past drops... Read more

Worst Junk-Bond Bet Wipes Out Junior Creditors of KKR's Samson... Read more

U.S. power producer Southern Co said it would buy AGL Resources Inc for about $8 billion in cash to build out its natural gas infrastructure and lower its dependence on power generation. The combined company will operate about 200,000 miles of electric lines and 80,000 miles of gas pipelines serving about 9 million customers, making Southern Co the No. 2 U.S. utility by customer count after Exelon Corp (EXC.N)... Read more

ECB’s Limits Highlighted by Index Signaling Return to Deflation... Read more

BlackRock Inc., the world’s largest money manager, said one bright spot from the global stock selloff is that it’s “restored value” to European equities. Leading indicators in the U.S. and Europe show their economies are still set to grow and will be supported by cheap oil and low interest rates, BlackRock’s global chief investment strategist, Russ Koesterich, who helps oversee $4.7 trillion, said in a report on Monday. He sees particular value in Germany, where seven days of losses have sent the DAX Index down 22 percent from its record in April... Read more

Bank of England under pressure following ex-hedge fund boss pay row. Treasury Select Committee chairman Andrew Tyrie has asked the central bank to re-examine its conduct rules following a spat over the hedge fund pay of the MPC's new member, Gertjan Vlieghe... Read more

The UK is to enjoy "decent quarterly GDP growth" the CBI has predicted as it upgrades its forecasts for this year and next. The business lobby group now expects growth of 2.6% this year and 2.8% next year, up from its June forecast of 2.4% and 2.5% respectively. Increased household spending and "robust" investment growth will drive the improved growth, the CBI believes... Read more

The boss of big six energy firm npower has left his post after German owner RWE took action following "unexpectedly negative" half-year results. Paul Massara has departed as chief executive "by mutual consent" after the company revealed earlier this month that profits had fallen by two-thirds... Read more

Government sells further stake in Lloyds Banking Group. Sale of shares takes taxpayer’s stake in bailed-out bank to less than 13%... Read more

According to a new report by Central Bank analysts, sanctions against Russia have not played a significant role in the decline of Russia's economy, with experts agreeing that low oil prices are principally to blame... Read more

The Russian rouble plunged to a new low on Monday as falling oil prices piled further pressure on the struggling currency. By afternoon in Moscow the Russian central bank had set its rate for August 25 at 70,74 roubles to the dollar, marking the Russian currency’s weakest point since 1998... Read more

Investors pull $1 trillion from emerging markets in a year. Investors can't get their cash out of emerging markets quickly enough. Money has been pouring out of developing economies at a faster pace, and for longer, than during global financial crisis of 2008 and 2009, according to data from NN Investment Partners, a bank based in the Netherlands... Read more

China plans to let its main state pension fund invest in the stock market for the first time, the country's official news agency, Xinhua, has reported. Under the new rules, the fund will be allowed to invest up to 30% of its net assets in domestically-listed shares. China's main pension fund holds 3.5tn yuan ($548bn; £349bn), Xinhua said... Read more

China's slowing economy: What's wrong?... Read more

China still has firepower to boost its economy. Don't hit the panic button over China's financial turmoil just yet -- the government still has a few tricks up its sleeve... Read more

Four Charts That Show How China-Led Selloff Is Affecting India... Read more

Raghuram Rajan’s Common Man Theory on Inflation. India’s inflation has eased in recent months but not as far as the man or woman on the street is concerned, and that poses a challenge, Raghuram Rajan, governor of the country’s central bank said Monday.... Read more

Analysis - Julie Verhage: Here's What Usually Happens to Markets After the S&P 500 Drops 5 Percent in a Week... Read more

Opinion - Heather Long: This is not the time to dump your stocks... Read more

Opinion - Larry Elliot: China stock market panic shows what happens when stimulants wear off. Unlike in 2007, this crash could be seen coming. China just provided trigger for sell-off in global financial markets bulked up on quantitative easing... Read more

Opinion/Analysis - Patrick Gillespie: Is the Fed trapped now? Rate hike remains elusive... Read more

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