ASB Securities Morning Brief for Thursday, 20 October 2016
Thursday, 20 October 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares were flat as Tegel Group Holdings and Z Energy advanced on positive updates, while SkyCity Entertainment Group dropped. The S&P/NZX50 index rose 3.4 points, or 0.05 percent, to 6,976.53. Within the index, 24 stocks rose, 20 fell and six were unchanged. Turnover was $155 million... Read more

The New Zealand dollar rose above 72 US cents for the first time in two weeks as stronger-than-expected inflation figures at home and in the UK stoked speculation the era of ultra-low price increases may be ending. The local currency rose to 72.12 US cents as at 5pm in Wellington, from 71.85 cents late yesterday. The trade-weighted index edged up to 77.29 from 77.10... Read more

Tech sector cracks $1 billion in growth. Record growth in New Zealand's technology industry is set to continue... Read more

The number of online job advertisements grew by 0.5 per cent in September 2016 and by 12.5 per cent over the year to September, according to the latest Ministry of Business, Innovation and Employment (MBIE) Jobs Online report... Read more

Numbers of New Zealanders available for work are being incorrectly reported, says BusinessNZ. The Salvation Army today claimed young unemployed New Zealanders are not getting employment opportunities because of unfair competition from migrant workers... Read more

The bright-line rule introduced by the Inland Revenue Department (IRD) last year to curb house speculation is exposing some genuine home buyers to a significant tax liability, say experts familiar with the issue. And despite being warned by tax experts during submissions before the new rule was introduced of the potential risk to genuine home buyers, the IRD declined to amend them and says it has no plans to do so... Read more

Customers complain to Ombudsman about banks' break fees. Low interest rates are driving people to try to break fixed-term mortgages to get a better deal. But some are being stung by fees they did not expect in the process. The Banking Ombudsman scheme, which deals with complaints about the country's banks, has released its latest annual report... Read more

Poorer households in New Zealand are subsidising higher-income households to the tune of $59 million a year through credit card reward schemes, an issues paper from the Ministry of Business, Innovation and Employment says. The paper estimates that the total cost of merchants increasing their prices to fund rewards for credit card users is $187 million dollars a year. The total additional cost to the economy of the current system is put at $45 million dollars per annum... Read more

It will not be possible for a "pretty stretched" construction industry to meet the demand for Auckland housing without changing its approach, a new report has found. But people need to think about what type of homes they want to live in as well, and quickly catch up to big city thinking. A PWC report released Wednesday said the construction industry had become a "major contributor" to the country's economy, worth about as much as the entire Waikato region.... Read more

Super Fund's new climate strategy. The $30 billion NZ Super Fund will become more resilient to climate change investment risk under a new strategy announced by the Guardians of New Zealand Superannuation... Read more

Dairy forecasts upgraded on auction lift. Two big banks have upgraded their farmgate milk price forecasts after a modest gain in product prices at the latest GlobalDairyTrade auction. As the peak of the season fast approaches, a wetter-than-normal spring has affected production - particularly in the dairy heartland of the Waikato - which helped drive prices up at yesterday's auction by 1.4 per cent overall and by 2.9 per cent for whole milk powder... Read more

Wait continues for FAA detail. Advisers will get more detail of what will be expected of them under the new Financial Advisers Act, by the end of the year... Read more

Emissions Trading Scheme 'not the silver bullet' for agriculture emissions, says commissioner. Pulling agriculture into the Emissions Trading Scheme (ETS) shouldn't be the only way farming is steered against climate change, the Parliamentary Commissioner for the Environment said today... Read more

Use new native forests to offset dairy emissions, says PCE. Allowing marginal hill country to revert to permanent native bush and the fast-tracked development of a vaccine to massively reduce methane emissions created by the digestive systems of cows and sheep emerge as two key recommendations from a new report by the Parliamentary Commissioner for the Environment... Read more

NZ farmers need to carry the can for their greenhouse gases - Environment Commissioner ... Read more

New Zealand King Salmon shares rose 3.6 percent in their NZX debut after the fish farming company raised more than $70 million to fund its growth and allow existing shareholders to reduce their holdings... Read more

GreenXperts Limited, in association with sister company Green Tick Certification Limited, has launched a $NZD10 million Certified Carbon Credit Fund. Expressions of Interest are sought from New Zealand Unit (NZU) holders who have NZU that will qualify for certification as genuinely carbon negative NZU... Read more

Z issues bonds. Z Energy is making an offer of unsubordinated, secured, fixed rate bonds across two series.... Read more

Z Energy said it has identified $10-15 million of additional savings from the integration of the Caltex and Z businesses, while the sale of an Auckland retail site for $23 million will be used to repay debt. The Wellington-based service station operator gave the updates as part of a presentation it hosted for institutional investors. The additional synergy benefits bring the total to be achieved in the 2018 year to between $40-45 million, it said... Read more

Genesis Energy, New Zealand's largest electricity retailer, said lower oil prices, increased carbon costs and its "below market" contract with the struggling Tiwai Point aluminium smelter will weigh on earnings this year. Earnings before interest, tax, depreciation, amortisation and fair value adjustments are expected to fall to between $305 million and $325 million in the year ending June 30, 2017, from $335.3 million the previous year, the Auckland-based company said in a presentation for delivery at its annual meeting of shareholders today. Genesis Energy shares advanced 0.5 percent to $1.99, and have gained 6.2 percent this year.... Read more

Redemption of quoted bonds and New Trustpower offer... Read more

Tegel shareholders say they're concerned about the potential impact of escrow shares on the market and a drop in the poultry company’s share price which is trading 6 cents below the $1.55 price it sold at in its May initial public offering... Read more

The board and management of TeamTalk, the telecommunications network company, have said it's undervalued and a new strategy will unlock "significant value for shareholders", though a resumption of dividends is some way off. In August, TeamTalk hired investment bank Cameron Partners for a strategic review, just after appointing a new chief executive, former Alcatel-Lucent NZ boss Andrew Miller, who started in early September... Read more

Ebos Group said it had a positive start to 2017, based on its first-quarter performance, which improved even in the face of a kiwi dollar that reached an 18-month high against its Australian counterpart last month... Read more

My Food Bag has revealed it has a new investor in private equity firm Waterman Capital and is working toward an IPO within the next three years. The company also says it will be ceasing operations in Australia, to concentrate on the New Zealand market... Read more

Intueri Education Group has been granted an extension to respond to audits of its Australian subsidiaries Online Courses Australia and Conwal & Associates by the Australian Skills Quality Authority. It will now have to respond by Nov 6. The previous deadline was Oct. 21. Shares rose 15.4 percent to 7.5 cents. They've fallen 89.5 percent since the start of the year. ... Read more

Rescue package offers lifeline for Mercer. One of Christchurch's oldest firms, Mercer Group, was thrown a $7 million lifeline this week. The NZX-listed steel fabricating firm will remain a "penny dreadful" for some time with the shares trading at 1.6c a share following recent losses of $6.7m for the 2016 year. ... Read more

AWF Madison Group, the country's largest contract labour company, has bought IT recruitment group Absolute IT for $15.3 million. Absolute IT had revenue of about $65 million in the year to March 2016, AWF said. The purchase price comprises an initial payment of $11.1 million and an earnout of $4.2 million tied to Absolute IT's earnings in the year to November 2017... Read more

Commerce Commission chairman Mark Berry has said he expects the outcome of their ruling on the NZME/Fairfax Media merger proposal to be of international interest. Dr Berry was speaking at the launch of the commission's five-year strategy at Wellington on Tuesday afternoon... Read more

Four people alleged to have carried out $60 million in mortgage fraud are fighting in court to have their names kept secret. The Serious Fraud Office (SFO) laid more than 100 charges under the Secret Commissions Act following an investigation into more than 70 allegedly deceptively obtained home loans. The loans ranged in value from $270,000 to $3.4m for properties in Hamilton and Auckland... Read more

Opinion - Andrew P Street: Why are Generation X left out of the stupid boomer vs millennials blame fest?... Read more

Opinion - Pattrick Smellie: Indian trade: chasing a tiger by the tail. Prime Minister John Key boards a plane next week for his first official visit to India in five years. The 2011 visit was accompanied by high hopes that New Zealand might forge a free trade agreement (FTA) with this fast-growing, English-speaking, cricket-loving democracy of more than a billion people... Read more

Opinion - Chris Keall: Good news for Sky, Spark – no, really – in Netflix’ steamroller result... Read more

Opinion - Fran O'Sullivan: Oz needs the English influence. New Zealand needs Australia to come off its losing streak. Revolving door prime ministerships and a deflated business community have caused the 'lucky country' to lose confidence. This is one of the reasons why our leading politicians are held in high esteem in Australia... Read more

Australian Headlines

Australian Market Report: The Australian sharemarket firmed again after soft US inflation data soothed rate-rise fears, but forecast matching Chinese GDP growth had no impact on investors increasingly dubious over its accuracy. Following a quite session, the S&P/ASX 200 index closed up 24.6 points, or 0.46 per cent, at 5435.4 as industrials and consumer stocks outperformed.... Read more

The Australian dollar has edged higher against the greenback as China's latest economic growth figures provided no surprises. The local unit was trading at 76.76 US cents at 1700 AEDT on Wednesday, up from 76.66 US cents on Tuesday.... Read more

Australia's economic outlook has improved for the second month in a row and by its fastest rate in almost three years... Read more

The prospects for a lift in economic growth next year have improved, which is just as well because advertised job vacancies have just hit a 12-month low. The economy is heading for growth above its recent pace, according to the Westpac-Melbourne Institute Leading Index for August... Read more

Mortgage arrears break records in two states and NT. Mortgage arrears nationally have risen to three-year highs - with Western Australia, Tasmania and the NT at record levels - despite interest rates falling to historic lows. The figures from ratings agency Moody's put the national rate of delinquent mortgages - those at least 30 days behind on repayments - at 1.5 per cent, up 0.16 per cent over the past year to May 31.... Read more

Cranes reach new heights with record numbers across Australia... Read more

Property set to become ‘worst investment’. If you were hoping to join the property investment boom, you may be too late to the party. The latest expert to warn of a downturn in the property market was economist Chris Richardson of Deloitte Access Economics, who said property was set to become the “worst investment” over coming decades.... Read more

Former Howard government treasurer Peter Costello has warned that Australia's financial position is "not strong" and that returns from the Future Fund he chairs will be weaker. Speaking to The Business presenter Ticky Fullerton at a Walkley Foundation function, Mr Costello defended his record as treasurer, and issued a warning to his latest successor Scott Morrison... Read more

Job insecurity new normal for WA after mining boom, report finds... Read more

Empire strikes back at board bid. Three dissident shareholders of Empire Oil and Gas have put themselves up for election to the company’s board at next month’s annual meeting. The Empire board has recommended shareholders vote against the election as directors of former acting chief executive Kent Quinlan, Peter Griffiths and John Brough... Read more

Origin Energy still expects an increase in full year earnings and lower debt as it ramps up LNG production and oil prices improve. Australia's largest gas and power retailer said it is on track for an increase of between 45 and 60 per cent in underlying earnings in the 2016/17 financial year, and to have reduced its net debt to below $9 billion. Origin shares dropped five cents to $5.62.... Read more

Corazon Mining Ltd has been granted a trading halt by the ASX this morning... Read more

BHP Billiton has reaffirmed its full-year production guidance across all its segments, other than copper, as it sees early signs of a recovery in the commodities markets... Read more

Deep Yellow Ltd is focused on uranium in Namibia, and the company is heading to market with a capital raising.... Read more

Rox sells 49pc stake in NT zinc project to Teck. Canada’s Teck has exercised its pre-emptive right to match an offer to buy 49 per cent of Rox Resources’ hotly-contested Reward zinc project in the Northern Territory. Rox shares were up 0.1 cent, or 5.88 per cent, to 1.8 cents at the close.... Read more

Shares in Carnarvon Petroleum surged after the company reported better than expected results from flow testing at its Roc-2 well off the Pilbara coast, 160km north of Port Hedland. Shares in Carnarvon were up three cents, or 30 per cent, to 13 cents at the close after touching an earlier intraday high of 15 cents.... Read more

Genesis Energy continued to grow its LPG customer connections while gas connections held flat and electricity customer numbers remained under pressure... Read more

The uptick in the mining sector has global investors on the hunt for junior Australian miners and explorers with attractive prospects. Members of the Toronto Stock Exchange (TSX) and the Venture Exchange (TSXV), which represents most of the North American mining investment community, have been on a roadshow in boardrooms across Australia... Read more

Casinos operator Crown Resorts should have expected Chinese authorities may take drastic action such as the detention of 18 of its employees, says an expert in Asian business law. "They should have seen it coming," said Alice de Jonge, senior lecturer in Asian business law at Monash Business School in Melbourne... Read more

The Aldi-fication of Australia is continuing as Coles trials a new, tough, low price booze seller. The first store opened in Melbourne’s eastern suburbs this week. It is called Liquor Market and it takes more than a few cues from the discount retail model perfected by Aldi... Read more

The Reject Shop has warned soft sales growth could lead to a weaker half year performance for the discount retailer. Chief executive Ross Sudano said a combination of patchy consumer sentiment and poor execution of stock flow have hurt the retailer's sales. Shares in The Reject Shop dropped 65 cents, or 6.9 per cent, to $8.80.... Read more

Tabcorp and Tatts are merging into a single $11.3 billion gaming giant they say will be able to take on overseas competitors, both at home and abroad. The cash and scrip deal includes Tabcorp paying a 20 per cent premium for each Tatts share and a $500 million share buyback once the merger is completed in the middle of 2017. After coming out of a trading halt, Tatts shares soared 59 cents, or 16.4 per cent, to $4.18 by 1543 AEDT. Tabcorp shares were up 16 cents, or 3.3 per cent, at $5.05.... Read more

Australia's third largest mobile phone operator Vodafone will expand its business to include fixed broadband, saying the time is right to jump on the national broadband network. The company plans to launch fixed broadband before the end of 2017... Read more

Telstra makes Perth-Singapore sea cable play. Telstra is pushing hard to take the lead in the long-running race to build a new Perth-to-Singapore submarine internet cable, hinting it is ready to hit the accelerator on the project. Darrin Webb, Telstra’s head of international operations and services, toldWestBusiness the $200 million project, which is a joint venture between Telstra, Brisbane-based SubPartners and Optus’ parent company Singtel, complemented its expansive Asian footprint... Read more

The price of Weet-Bix soared to $50 a box in China after Sanitarium paid to have the soggy cereal featured on a Beijing TV drama. But the company is turning its back on the brand to relaunch the cereal as Nutri-Brex in an attempt to separate its product from Weetabix, a rival from the UK that is 60 per cent owned by the Chinese government.... Read more

Daigou sellers fear being pushed out of the market by big Australian brands. They've made their fortunes reselling Aussie products to keen customers in China, but now that brands have cottoned on to the success of the daigou — the online traders making millions by recommending and shipping their products to China — companies are keen to push them out of the process... Read more

Commonwealth Games Minister Stirling Hinchcliffe has asked for a briefing on the latest appointment controversy to hit the Gold Coast’s 2018 Games. A report in The Australian yesterday revealed six of seven new press operations postings went to international applicants rather than locals and two of the new appointments have partners also working for the Games’ organising committee, GOLDOC... Read more

Up to 500 WA tradies affected by Collier Homes collapse... Read more

Penalties too weak to discourage bankers' bad behaviour, ASIC boss Greg Medcraft says. Penalties for bad behaviour among bankers are not strong enough to deter individuals from ripping off customers, the chairman of the Australian Securities and Investments Commission (ASIC) says... Read more

Opinion/Analysis - Elizabeth Knight: Questions the Crown board can't answer about the Packer 18. On Thursday morning the board of Crown Resorts will be in the firing line. The shareholders, who will assemble before them at the company's annual meeting in Perth, will be looking for answers having watched more than 10 per cent wiped off the value of their shares this week... Read more

International Headlines

Australian Market Report: Wall Street was on track for its second straight day of gains on Wednesday as oil prices boosted energy stocks and financials got a lift after Morgan Stanley rounded off a strong quarter for big U.S. banks... Read more

North/South Americas Market Report: North and South American markets are mixed today. The IPC is up 0.59% while the S&P 500 gains 0.39%. The Bovespa is off 0.47%... Read more

European Market Report: European markets finished higher today with shares in London leading the region. The FTSE 100 is up 0.31% while France's CAC 40 is up 0.25% and Germany's DAX is up 0.13%... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 0.21% and the Shanghai Composite rose 0.03%. The Hang Seng lost 0.38%... Read more

The price of oil jumped almost 3% on Wednesday to the highest level in more than a year after a report showed a surprising drop in U.S. stockpiles of crude. Crude futures were up $1.30, trading at more than $52 per barrel. That's the highest level since July 2015... Read more

IMF Sees Saudi Break-Even Oil Price Drop Less Than Forecast... Read more

Investor Cash Levels Jump Toward Levels Not Seen Since 9/11. Bank of America's survey of fund managers also highlights rising inflation expectations. Fears of a bond-market crash, a breakdown in globalization, a new crisis in the euro area?... Read more

Obamacare enrollment projected to grow 9% in 2017. Obamacare enrollment is expected to grow 9% to an average of 11.4 million in 2017, administration officials said Wednesday... Read more

Short seller Muddy Waters renews claims of St. Jude Medical cyber vulnerabilities. St. Jude blasts Muddy Waters for ‘irresponsible release of information that is intended for financial gain’... Read more

Yahoo boosted by profits rise as Verizon reviews hacking impact... Read more

Hacked emails show how Coca-Cola fights the soda tax at local and global levels. Rival beverage companies and iconic soft drinks brands Coca-Cola Co. and PepsiCo Inc. would seem to be playing good cop/bad cop this week. Leaked internal Coca-Cola emails released by anonymous hacker website D.C. Leaks show the company’s apparent effort to fight local soda tax proposals and shape media coverage on the issue. Days later, PepsiCo announced a goal for reducing added sugar, salt and saturated fat in a majority of its products by 2025.... Read more

How Apple Scaled Back Its Titanic Plan to Take on Detroit... Read more

Leonardo DiCaprio has offered to help US authorities in their corruption probe into Malaysia's state fund 1MDB. Both the Hollywood actor's charity foundation and his movie The Wolf of Wall Street have allegedly received money siphoned off the Malaysian fund... Read more

The Securities and Exchange Commission on Tuesday held auditor Ernst & Young, and two of its partners accountable for missing for more than four years what it said was a “major accounting fraud.” The SEC said that if EY and its partners had followed auditing standards they would have likely uncovered the fraudulent scheme at Weatherford International WFT, +6.60% as early as 2007... Read more

Americans Work 25% More Than Europeans, Study Finds. European workers labor about an hour less a day than their U.S. counterparts, new data suggest.... Read more

Lower iPhone sales have hit profits at smartphone component maker Laird, sending shares tumbling close to 50%. The FTSE 250 company, whose biggest customers include Apple, said it had suffered muted demand for its products in the three months to 30 September... Read more

UK employment rate at record high despite vote to leave European Union. Number in work rose to almost 32 million in last quarter, but rise in unemployment shows cracks appearing in labour market. Britain’s buoyant jobs market brushed off the Brexit vote in August to maintain its record employment rate of 74.5%, the same as the previous quarter, to take the total number of people with a job to just below 32 million... Read more

German Chancellor Angela Merkel’s government is battening down the hatches for the coming Brexit talks, instructing officials to avoid any back-door contacts that could hand the U.K. an advantage. Merkel’s chancellery is receiving U.K. diplomats but politely refusing to grant the U.K. any favors in advance of the official negotiations, according to two people familiar with the matter... Read more

HSBC winds down private banking operation in Monaco. Move completes effort to reduce services to wealthy after tax scandals at Swiss arm and dealings with Panamanian law firm... Read more

Russia’s Widening Wealth Divide Poses Risks to Central Bank. The Bank of Russia is discovering yet another downside to how little is left of the country’s middle class.... Read more

China's economy grew at an annual rate of 6.7% in the three months to September, government data showed, a sign that growth is stabilising. The figure was the same rate as the previous two quarters, and was in line with forecasts... Read more

China's economy holds steady -- but for how long? Is China's growth too steady to be true? The world's second largest economy has now posted exactly the same pace of growth for three quarters in a row. Analysts warn that such consistency isn't sustainable and fails to give a full picture of what's really going on... Read more

China will get a new Starbucks every day for 5 years... Read more

Singapore’s $24 Billion Wipeout Eats Into Its Shipyard Base. Customers have dwindled by the week at Indian Masala Hut, a curry stall in Singapore’s shipyard heartland. Manager K. Muralidoss blames the slump in oil rig-building that led to the elimination of thousands of jobs, many held by workers from India and Bangladesh... Read more

Lotte leadership indicted for embezzlement and tax evasion. South Korean prosecutors have indicted key members of the founding family of the Lotte conglomerate with embezzlement and tax evasion. In total, 22 current and former officials have been indicted, including 93-year-old founder Shin Kyuk-Ho and current chairman Shin Dong-bin... Read more

Opinion - Chuck Jaffe: Investors betting on a Fed rate hike will be disappointed — again... Read more

Opinion - Phillip Van Doorn: Wall Street’s 15 favorite energy stocks as oil prices rebound. Oil prices have surged 16% in a month, leading to speculation there might be a sustained rally for the most widely traded commodity... Read more

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