ASB Securities Morning Brief for Wednesday, 22 June 2016
Wednesday, 22 June 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares dropped, defying global trends, as a lack of news and Brexit nervousness kept the market quiet. Tegel Group and Vital Healthcare Property Trust declined while A2 Milk rose. The S&P/NZX 50 Index fell 30.15 points, or 0.4 percent, to 6,839.39. Within the index, 24 stocks rose, 20 fell and six were unchanged. Turnover was $144 million... Read more

The New Zealand dollar traded in its tightest daily range against the greenback this year and fell against the pound as Britain's looming referendum on whether to leave the European Union cast a shadow over financial markets. The kiwi dollar traded at 71.12 US cents as at 5pm in Wellington, from 71.17 cents late yesterday, having moved in a range of just 23 points over the day. The local dollar fell to 48.51 British pence, from 48.77 pence yesterday... Read more

An industry report shows the tech sector contributes $16.2 billion of New Zealand's gross domestic product and employs 100,000 people. Released today, the first state of the nation report on the tech sector conducted by New Zealand Technology Industry Association (NZTech) said for every 4 per cent growth in the productivity of the tech sector, the entire New Zealand economy will lift by $2.7 billion and wages will increase by 1.4 per cent... Read more

Aucklanders can expect to be paying variable rates per kilometre to travel on the city's most congested roads under an emerging transport strategy being formulated by the government and the Auckland Council. The interim report of the Auckland Transport Alignment Plan says simply building more roads won't solve Auckland's long-term congestion, but that investing in new technologies, including shared vehicles, big data systems to manage traffic systems and variable charging for private vehicles have the potential to make a major difference over the next 30 years... Read more

Government warms up to Auckland road tolls... Read more

Fitch Ratings has kept state-owned Kiwibank on negative rating watch during its annual review of the lender's credit rating. A negative rating watch means the credit agency is more likely to downgrade the bank's credit rating in the future, which would make it more expensive for Kiwibank to borrow. Fitch is concerned the restructuring of Kiwibank, which would see owner NZ Post sell a 45% share to the New Zealand Superannuation Fund and the Accident Compensation Corp, will remove an NZ Post guarantee on the bank's liabilities... Read more

Make bank rescue plan fairer for savers, says former bank chairman. Depositors with money in banks would be the ones who would have to take a haircut if a bank needed to be saved from collapse. New Zealand's little-known system for saving a bank from financial collapse is called "Open Bank Resolution" (OBR), but it's unfair, says former BNZ chairman Kerry McDonald.... Read more

Economic Development Minister Steven Joyce has warned more needs to be done to promote New Zealand as a tech hub to investors in Asia because they mainly view the country as a food producer and film location. Speaking in Wellington at the launch of a report showcasing the value of the technology sector to the New Zealand economy, Joyce said more had to be done to tell the country's technology stories overseas... Read more

Treasury Secretary warns Aucklanders could struggle to pay their mortgages in the event of a downturn causing a knock on effect on banks and the wider economy. Treasury Secretary Gabriel Makhlouf has expressed his concerns about the high levels of housing debt that has grown out of Auckland's rampant housing market. "When New Zealand's housing debt is around $215.9 billion, a 26.6% increase in five years, nobody should be surprised the Treasury is concerned," he said in a speech to the Committee for Auckland Group Summit... Read more

Forget returns and fees, investors told. New Zealand fund managers should be competing for KiwiSaver members on the basis of advice, transparency and service – not fees or returns, one manager says. Treasury this month released a report by Andreas Heuser that showed neither fees nor returns were significant drawcards for KiwiSaver members – who were instead more swayed by bank marketing tactics... Read more

Financial Services Complaints cuts fees by 20 percent. Growth and efficiency has enabled FSCL to once again offer participants a significant annual fee reduction... Read more

Former finance firm completes full circle. Listed non-bank finance company GFNZ Group plans to revert to its old name of Geneva Finance and boost its share price.... Read more

NZ brokerage says farm insolvencies could 'explode'... Read more

New Zealand is spending up to $15 million in drought-ravaged Ethiopia with Microsoft founder Bill Gates' help. For five years the Ministry of Foreign Affairs and Trade will work with Gates, the world's richest person, and the Ethiopian government to developing dairy in the sub-Saharan African nation.... Read more

Tegel Group Holdings, the poultry group taken public by private equity firm Affinity Equity Partners in April, reported annual sales and profit that beat its prospectus forecasts and said it was on track to achieve its targets for the current year. Profit was $11.3 million in the year ended April 24, from $8.7 million a year earlier, the Auckland-based company said in a statement. Sales rose to $582 million from $563 million... Read more

Government to crack down on biosecurity facilities to stop pests... Read more

The release of 400ha to grow Gold3 kiwifuit under licence in 2016 will result in a hefty increase in marketing company Zespri International's corporate profit for the 2016/17 year. Zespri said its updated forecast is for a corporate profit of $70-$75 million, up from $25-$30 million forecast in April, and up from its 2015/6 net profit of $35.8 million.... Read more

T&G Global, the fruit marketer controlled by Germany's BayWa, is opening a new office in Thailand as it looks to further its global expansion after posting an 83 percent gain in profit last year. In notes from its annual meeting posted to the NZX, chief executive Alastair Hubert said T&G would shortly open a new office in Bangkok, adding to its Asian footprint with an office in Shanghai, China. The company's shares were unchanged at $2.75 and have gained 31 percent so far this year.... Read more

Former Federated Farmers president Bruce Wills has been appointed to the position of independent board director for Horticulture New Zealand.... Read more

Kathmandu has opened its new Christchurch headquarters this morning, with the company backing the quake-damaged city. Its first New Zealand store was launched in Christchurch in 1991 and Kathmandu spokesperson Fiona Sutherland said the company had a long history with the city... Read more

Wellington Airport has no 'Plan B' if $300m runway extension fails to fly ... Read more

Vital Healthcare Property Trust plans to raise $160 million to pay down debt, giving it headroom to pursue a pipeline of developments on both sides of the Tasman. The trust plans to sell shares at $2.08 apiece in a two-for-one pro rata renounceable rights offer, manager Vital Healthcare Management said in a statement... Read more

Campaign for class action against Wynyard launched. Two fund managers are seeking support for a class action by shareholders of software company Wynyard Group to recover losses since the share price has plunged following a disappointing annual result and a heavily discounted rights issue to raise cash... Read more

TAB confirms talks with Australia's Tabcorp. New Zealand's TAB is in talks with Australia's Tabcorp as it battles rising costs and overseas competitors. New Zealand Racing Board spokeswoman Kate Gourdie said the state-owned betting agency was in discussions with three organisations, including Tabcorp, about "automating" its fixed-odds betting business. The Racing Board runs the TAB which has a monopoly over sports betting... Read more

Fledgling electricity retailer Electric Kiwi is seeking disciplinary action against the country's largest power generator, Meridian Energy, following price spikes in the wholesale electricity market on June 16 that saw prices as high as $4000 per Megawatt hour. However, Flick Electric, a rival minnow retailer whose customers would have felt the main brunt of the price spike, is not taking any action and says it's "pretty comfortable" both with the way the wholesale electricity market worked that day and the tools it gives customers to manage such price spikes... Read more

The demerger of NZME from its parent, APN News & Media, risks giving rival publisher Fairfax Media the upper hand in the detailed talks still to come to create a merged media group from NZME and Fairfax's New Zealand assets, say investment advisers Credit Suisse. In a note to clients dated June 16, senior Credit Suisse analyst Arie Dekker says if the NZME demerger "is completed before negotiations are completed on transaction terms with Fairfax Media, then we wonder whether Fairfax Media may have a negotiation advantage."... Read more

A litigation funder that became first-ranking creditor to one of property developer Dave Henderson's failed companies was "trafficking" in litigation in the hope of extracting excessive profits from default interest rates on the debt, PriceWaterhouseCoopers told the Court of Appeal today. PwC, which was the auditor for Henderson's Property Ventures, and the company's directors are being sued by the company's liquidator, with the case scheduled for the first quarter of 2018. The accounting firm failed in the High Court to get the action quashed or to get the transfer of the debt to litigation funder SPF No 10 declared invalid... Read more

New Zealand's largest bank, ANZ, is investigating claims one of its branches issued counterfeit Chinese currency.... Read more

The Court of Appeal has found in favour of the Inland Revenue Department in the latest bout of a long-running tax battle with listed jewellery retailer Michael Hill International, rejecting a claim the tax department should be 'consistent' in its application of tax law. The judgment said Michael Hill's claim is based on the Commissioner of Inland Revenue having a duty under the Tax Administration Act to act "fairly, impartially, and consistently"."But that is not what the TAA says," the appeal court judges said... Read more

A Waikato woman has pleaded guilty to defrauding her employer of more than $750,000. The 45-year-old appeared in the Hamilton District Court on Tuesday. She is facing two charges - one of making false entries into a document - namely Banklink - used by the company for accounting purposes between April 2010 and October 2015. The other charge is one of theft in dealing with $750,775.54 of employer and client funds... Read more

Opinion - Liam Dann: Auckland NIMBYism hurting NZ - Treasury boss. In a speech addressing Auckland's booming housing market Treasury Secretary Gabriel Makhlouf has raised concerns that Auckland "NIMBYism" may be having a negative impact on "people elsewhere in the country". Speaking to the Committee for Auckland Advisory Group Summit, Makhlouf warns that Auckland house prices are a problem for all of New Zealand and are of very real concern to Treasury... Read more

Opinion - Ed Eadie: Advice matters. Fidelity Life Acting chief executive Ed Eadie provides his view on the value of financial advice; something that is in danger of being overlooked during the current debate on commission levels and churn... Read more

Opinion/Analysis - Tao Lin: Brexit: what's to come for NZ markets... Read more

Australian Headlines

Australian Market Report: The Australian sharemarket extended its rebound but finished off the day’s high as lingering “Brexit” uncertainty and the Reserve Bank’s upbeat growth outlook capped sentiment. The S&P/ASX 200 index opened in the red but quickly jumped to a 0.6 per cent gain. It dropped back into the red after the Reserve board meeting minutes trimmed odds for a rate cut next month and rallied to close up 17.6 points, or 0.34 per cent, at 5274.4.... Read more

The Australian dollar is targeting 75 US cents as global sentiment lifts in the lead up to the Brexit referendum on Thursday. At 0700 AEST on Tuesday, the local unit was trading at 74.57 US cents, up from 74.36 US cents on Monday.... Read more

The Reserve Bank hasn't given many hints about its next move on interest rates but a stronger Aussie dollar may force its hand. At its last meeting, on June 7, the RBA board held interest rates at a record low of 1.75 per cent on the back of a depreciating Australian dollar and stronger March quarter economic growth, driven by resource exports... Read more

Winners and losers in the NSW Budget... Read more

Australian capital city home prices have been dented by a first quarterly fall in three and a half years, and there's more on the way. Residential prices dropped 0.2 per cent in the March quarter, the first fall since the September quarter 2012... Read more

Sydney's thriving property market will help deliver a higher-than-expected surplus for NSW in the coming financial year. The NSW government has forecast a surplus of $3.7 billion for the 2016/17 financial year in Tuesday's state budget, improving on the $3.2 billion surplus predicted during its mid-year budget review in December... Read more

The local chapter of the Urban Development Institute of Australia has attacked as “outdated” the assumptions behind a study favouring infill over greenfields development to save WA taxpayers money.... Read more

Red Mountain Mining Ltd has been granted a trading halt by the ASX, pending details of capital raising activities... Read more

Echo Resources Ltd banks on toll treatment of Julius gold in WA. Echo Resources Ltd continues to reap the benefits of a near surface gold resource north of Kalgoorlie that could be mined and trucked to a plant near to its Julius Gold Project with mininal cash outlay and maximum cash flows... Read more

Rio Tinto iron ore boss Andrew Harding will leave the company as part of a sweeping executive restructure ahead of the ascension of Jean-Sébastien Jacques as the global mining giant’s chief executive next month... Read more

Fledgling gold miner Echo Resources has put a $2.9 million price tag on the development of a shallow open pit mining operation at its Julius project near Wiluna. A scoping study released to the ASX this morning estimated Julius — touted as one of the richest gold discoveries in the northern Goldfields for many years — will produce 68,740 ounces over an initial two-year mine life... Read more

Corazon finds high grades at Mt Gilmore... Read more

BHP Billiton chief executive Andrew Mackenzie has urged the United States to engage more with Asia and says China should be included in the Trans-Pacific Partnership. Mr Mackenzie told the Asia Society in New York that the social and economic forces at work across Asia were unstoppable... Read more

King River Copper Ltd has received a Research & Development tax rebate of $342,093. The funds will be used to support further exploration and working capital... Read more

Resolute Mining will recommence open pit mining in July 2016 at its Ravenswood gold mine in Queensland.... Read more

Streaming service Guvera is understood to be exploring a listing on the Newcastle-based National Stock Exchange, after the bigger rival ASX blocked its mooted $1.4 billion listing last week. Technology play Guvera is licking its wounds after the ASX said it would put a stop to the float, and its efforts to raise of between $50 million and $80m “based on material contained in Guvera’s application for admission.”... Read more

Australian-listed dairy company Bega Cheese has released an opening farmgate milk price for the 2016/2017 season of A$5 per kilogram of milk solids, claiming analysts are not expecting an improvement in dairy commodity returns until the first half of next year... Read more

Shares in ResApp Health have added as much as one-third in value to a record high in the wake of new data suggesting its smartphone diagnostic app is equally as successful in detecting respiratory problems in adults as children. Chief executive Tony Keating said the preliminary results from ResApp’s first clinical study of adults provided “an excellent indication” that the diagnostic algorithms developed for children “are equally accurate in adults”... Read more

Capral Ltd has lifted its 2016 EBITDA guidance to be between $19 million and $21 million, a significant advance relative to $5.1 million for the year ending 31 December 2015. It also would beat the most recent earnings guidance for the aluminium products supplier, which had advised in April that it expects a full year EBITDA of between $13 million and $15 million... Read more

The divergent fortunes of three Perth properties — one sold, one returning to the market and one now being offered “at a more realistic price” — shed light on the behind-the-scenes difficulties facing investors in the troubled $220 million Angas Securities debenture fund.... Read more

BGD Corporation Ltd has some interesting news on the horizon in the form of a possible acquisition. The ASX has granted the company a trading halt to prepare.... Read more

Civil and mining contractor Brierty’s losses on a rogue road project have blown out to $22 million. The additional $7 million pre-tax loss on a North West Coastal Highway contract has led Brierty to forecast an underlying net loss of $10 to $12 million... Read more

JCurve Solutions Ltd has reaffirmed its revenue guidance of $9.5 to $10.5 million for the year ending 30 June 2016 and is expected to close the year with $2 million cash for its software offerings for small businesses. Having this level of cash while remaining debt free places JCurve in a strong position to support ongoing growth... Read more

Will smallest store save Woolies? What Metro concept says about Australia... Read more

IGA supplier Metcash may struggle to sustain the food and grocery price cuts upon which it is relying to keep up with rival supermarkets. "We believe Metcash is structurally challenged and is facing significant headwinds, despite measures taken to level the playing field via price match," a report by UBS analysts said... Read more

A growing number of Australians are opposed to foreign ownership of Australian farmland, according to a poll by the Lowy Institute. The poll showed that 87 per cent of respondents were against the Federal Government allowing foreign companies to buy Australian agricultural land — six percentage points higher than a similar survey four years ago. The Lowy Institute also said the proportion of people in favour of overseas ownership has fallen from 18 per cent to 11 per cent... Read more

Hazer Group Ltd has appointed Dr Andrew Harris as a non-executive director effective immediately, and Dr Andrew Minett as the chairman of Hazer’s newly created Science Advisory Committee. The appointments provide Hazer with the in depth commercial and technical capability to asses with the further development of the Hazer Process... Read more

Take-up rates in the first NBN fibre-to-the-node (FTTN) areas are outstripping those seen in the early fibre-to-the-premises (FTTP) footprint, new figures reveal. The federal government quietly provided the first detailed look at NBN take-up rates in FTTN service areas via a set of documents published to the Department of Communications’ disclosure log earlier this month... Read more

The consumer watchdog is taking action against Heinz for claiming a product targeted at toddlers containing 60 per cent sugar was just as nutritious as natural fruit and vegetables. The Australian Competition and Consumer Commission alleges Heinz made false and misleading representations and engaged in conduct liable to mislead the public in relation to its Little Kidz Shredz products... Read more

International Headlines

U.S. Market Report: U.S. stocks climbed with global equities, the pound fluctuated near the highest level since January and gold sank the most in four weeks on growing speculation that the U.K. will vote to remain in the European Union... Read more

North/South Americas Market Report: North and South American markets are mixed today. The Bovespa is up 0.66% while the S&P 500 gains 0.43%. The IPC is off 0.22%... Read more

European Market Report: European markets finished higher today with shares in France leading the region. The CAC 40 is up 0.61% while Germany's DAX is up 0.54% and London's FTSE 100 is up 0.36%... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.28% and the Hang Seng rose 0.77%. The Shanghai Composite lost 0.35%... Read more

Gold futures dropped by more than $20 an ounce Tuesday, aiming for a third-straight session decline as some investors bet that the U.K. will vote to remain in the European Union. A U.K. referendum on whether Britain will exit the EU—known as Brexit—will be held Thursday, and recent polls have pointed to investors tilting toward remaining a member of Europe’s trade bloc, which has dulled haven demand for the precious metal... Read more

Oil futures end lower for first time in three sessions... Read more

Treasury prices were little-changed Tuesday as investors were reluctant to make big bets ahead of Thursdays closely watched vote in the U.K. on its continued membership in the European Union. Over the past several weeks, U.S. government bonds rallied whenever polls suggested the “leave” campaign were gaining an edge, leading investors to flock to assets perceived as safe in the event such a change destabilizes global markets... Read more

When the world’s largest retailer makes a move, other retailers pay attention. Wal-Mart Stores Inc.’s decision to enter into a strategic alliance with the second largest Chinese e-commerce retailer, Inc., may inspire others to seek out local partnerships to make inroads in this major market.... Read more

There are now half a billion active users on the photo-sharing app Instagram, the company has said. More than 300 million people use it at least once a day, it added. The service was bought by Facebook in 2012 for about $1bn (£677m), and has grown rapidly ever since... Read more

Oi Bankruptcy Sends Shockwaves Through Brazil’s Financial System... Read more

The head of the US Federal Reserve has said a UK vote to exit the European Union "could have significant economic repercussions". Janet Yellen told the Senate Banking Committee that a split would lead to uncertainty that could create market instability. She said the Fed would closely monitor the vote, which could impact global investor confidence... Read more

Legendary investor George Soros has issued a stark warning to Britain: If its voters choose to leave the European Union, powerful speculative forces could cause the pound to crash by more than 20%. "Too many believe that a vote to leave the EU will have no effect on their personal financial position," Soros wrote in The Guardian. "This is wishful thinking."... Read more

Brexit could cause £1bn drop in Jaguar Land Rover profit by 2020. Internal documents at pro-remain carmaker outline worst case estimate if UK returned to WTO rules for trade with EU, sources say... Read more

Could the U.K. tech boom survive Brexit? Tech companies love disruptive innovation. The European Union loves regulating them. Just ask Apple or Google. So you might think that the U.K.'s thriving startup scene would be lobbying hard for a vote to leave the EU in Thursday's referendum. The opposite is the case. British tech hates the idea of Brexit.... Read more

Indian Conglomerates Speak Out Against ‘Brexit’. India’s biggest companies, from the Tata Group to Aditya Birla Group, are closely watching to see whether the U.K. opts to stay in the European Union.... Read more

The price of everyday essentials such as food, drink and clothing would rise if the UK votes to leave the EU, former retail bosses have warned. The ex-chief executives, who previously ran Tesco, Sainsbury's, Asda, Morrisons, M&S and B&Q, said a drop in the pound coupled with supply chain disruption would cause prices to spike. The average household could be £580 a year worse off as a result, retail union USDAW has predicted. Vote Leave rejected the claims.... Read more

Unions have said they have "serious concerns" about the ongoing sale of the Tata Steel UK business. There are seven bidders for the businesses, involving more than 11,000 jobs and the Port Talbot steel works... Read more

Convenience store chain My Local is on the verge of collapse after filing a notice of intention to appoint administrators, putting 1,700 jobs at risk. Accountancy firm KPMG, which has been working with My Local’s management on considering options for the future of the 120-store chain, was lined up on Tuesday afternoon to handle an administration. It is currently not certain whether or not the administrators will be appointed... Read more

Boeing has announced that it has reached agreement to sell 100 aircraft to Iran Air in a deal that could be worth $25bn (£17bn) at list prices. The deal marks a big step in US-Iran economic relations after sanctions were lifted on Tehran last year. Boeing said it is working with regulators to get the necessary US government approvals... Read more

Hyperloop One wants to build high-speed transit in Moscow. Hyperloop One has a lofty goal: Develop a new Silk Road through Russia. The company announced on Tuesday that it has signed an agreement to explore adding "high capacity passenger systems" to Moscow's transit, which could make the commute "a fraction of what it is today."... Read more

The central banks of Indonesia and South Korea have been hit by cyber attacks on their public websites since activist hacking group Anonymous pledged last month to target banks across the world, senior officials say. In response to the attempted hacks, Bank Indonesia has blocked 149 regions that don't usually access its website, including several small African countries, deputy governor Ronald Waas told Reuters in an interview late on Monday... Read more

Japan Post Bank Co. held its first shareholders’ meeting since listing as part of a $12 billion initial public offering last year, coming face to face with investors whose shares have fallen 15 percent. Some 886 of the company’s 600,000 shareholders showed up to hear President Norito Ikeda ask for their support for his efforts to rebalance the bank’s investment portfolio and boost fee income as the Bank of Japan’s negative interest-rate policy threatens to erode profit... Read more

Who Are the Candidates to Succeed Raghuram Rajan at India’s Central Bank? Finance Minister Arun Jaitley said in a tweet on his verified account Saturday that a decision would 'be announced shortly.'... Read more

Analysis - Paul R La. Monica: Is it a mistake for Verizon to buy Yahoo?... Read more

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