ASB Securities Morning Brief for Wednesday, 04 May 2016
Wednesday, 04 May 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares rose after Australia & New Zealand Banking Group's decision to cut its dividend was taken as a sign of prudent management. Air New Zealand rose after saying it was well-placed to foot it in a competitive air travel market and Tegel Group Holdings rose in its NZX debut. The S&P/NZX 50 Index gained 51.2 points, or 0.8 percent, to 6,843.01. Within the index, 31 stocks rose, nine fell and nine were unchanged. Turnover was $138 million... Read more

The New Zealand dollar jumped to a two-month high against the Australian dollar after the Reserve Bank of Australia cut its cash rate citing weaker-than-expected inflation, widening the gap with local interest rates. The kiwi touched 92.94 Australian cents, the highest since Feb. 29, and traded at 92.23 cents as at 5pm in Wellington, from 91.42 cents immediately before the RBA statement and from 92 cents late yesterday. The currency dropped to 69.85 US cents, having earlier gained to as high as 70.53 cents, just below the 10-month high 70.54 cents reached in April, from 69.93 cents yesterday... Read more

New Zealand new vehicle sales in April rose to the highest level for the month in 34 years, led by record demand for commercial models. Registrations increased 7 percent to 9,939 in April from a year earlier, marking the strongest April since 1982, according to the Motor Industry Association. Commercial vehicle registrations rose 8.1 percent to 3,150, the highest ever recorded for the month of April, while passenger vehicle registrations gained 6.5 percent to 6,789, the strongest level for the month since 1989... Read more

Positive outlook for remainder of 2016.... Read more

The 'how' and 'why' of negative interest rates. The interest rate outlook has shifted from “lower for longer” to now “very low for very long”... Read more

Activity in the New Zealand housing market remains strong, with mortgage applications up 11.6 per cent year-on-year in the March 2016 quarter according to Veda, the leading provider of data analytics and credit information in New Zealand and a wholly-owned subsidiary of Equifax. The latest figures show a slowdown in the mortgage application growth rate from the September 2015 quarter, when growth was at 21.9 per cent; however, the data indicates heightened housing activity remains, a trend that seems likely to continue... Read more

New Zealanders are putting their retail spending on the house, new data suggests. Credit agency Veda has released new data that shows mortgage applications are up 11.6 per cent year-on-year. But the rate of application for personal loans and new credit cards has slowed... Read more

Forget demand – address supply. Focus on demand side measures is just tinkering and obscures the real, more complex, issue of supply, experts say. A pervading sense of panic, and impending doom, currently surrounds any discussion of the Auckland property market... Read more

Timaru house value rockets above pre-GFC peak, surpasses other districts... Read more

ANZ happy with broker remuneration model. ANZ New Zealand chief executive David Hisco talks about the bank's latest results, the role mortgage brokers play in the business and what he thinks of new competition and remuneration models for advisers... Read more

How much should advisers have known about tax on transfers? Authorised financial advisers who did not adequately advise people transferring their pensions to New Zealand of the possible tax implications may have been in breach of their Code of Conduct... Read more

Dairy prices fell at the GlobalDairyTrade auction on Tuesday night, after two rises in a row. Overall, prices dropped 1.4 per cent to US$2203, with butter and butter milk powder leading the slump. The price of whole milk powder (WMP), New Zealand's key export, rose 0.7 per cent to US$2176... Read more

Fonterra shareholders' wishes are being treated with "arrogance" by the proposal that its big board be reduced by just two seats to 11, say two former directors who spurred a governance review. Greg Gent and Colin Armer, in a submission to the committee overseeing Fonterra's governance and representation review, said 54 per cent of shareholders voted last year for a much smaller board than the proposal suggests... Read more

The Coromandel marine environment has been reopened to tenders after renewed interest in fish farming. No one wanted to venture into fish farming five years ago, said Coromandel Marine Farmers Association chairman Gilbert James. It's too expensive and there is no guarantee of success, he said. In 2011, the government amended the Waikato Regional Coastal Plan, setting aside two areas for fish farming but interest waned. ... Read more

ANZ New Zealand, the local unit of the Australian bank, reported an 11 percent decline in cash profit as growth in net interest income was offset by a charge against software. Cash profit, the preferred earnings measure for banks which strips out non-core items, fell to $751 million in the six months ended March 31, from $841 million a year earlier. Net interest income rose 5 percent to $1.49 billion but was offset by a 21 percent decline in other operating income to $402 million, which resulted in an overall 2 percent decline in operating income to about $1.9 billion... Read more

ANZ's chief executive says the bank has a cautious outlook on the Auckland housing market, and he personally would not speculate in it. David Hisco said issues with both supply and demand meant it was tough to be a first home buyer in the country's biggest city. Many of the new migrants arriving were well-placed to buy, with decent savings and good jobs... Read more

Shares in the newly listed food supplements maker Oceania Natural rose 7% in trading yesterday despite failing to meet company targets on revenue, distributor sales, and gross margin. The company is listed on the NZX's NXT platform, which means it is only required to publish key metrics. Oceania listed on March 31 with 25% of shares sold for 64c apiece in the first local listing of the year. Shares have since soared and are currently trading at $2.70... Read more

CBL Corporation expects its European unit will be "an outperformer" this year as new programmes the insurer started last year in France and Scandinavia get going. "Mexico, Scandinavia, Italy and France have been standouts for the group and we see strong growth in each of these markets in 2016 and out into the medium future," managing director Peter Harris told shareholders in Auckland at the company's first annual general meeting since listing on the NZX and ASX last year... Read more

Tegel Group Holdings, the poultry group taken public by private equity firm Affinity Equity Partners, first traded at $1.69, delivering an immediate 9 percent gain to investors who bought the stock in the initial public offering. The stock recently traded at $1.71, valuing the company at about $609 million, in the first IPO of 2016. New Zealand's biggest poultry business is being taken public by its second private equity owner after Affinity Equity Partners acquired Tegel in a leveraged buyout from Pacific Equity Partners and ANZ Capital in early 2011. PEP had, in turn, bought Tegal from HJ Heinz in 2005... Read more

Australian media reports suggesting New Zealand's third-placed mobile operator, Two Degrees, will seek to raise between $100 million and $150 million in a float on the ASX in the next few months have the implicit support of the company. While no decisions have been made, a 2degrees spokesman said in response to questions about the report in The Australian newspaper that "the background for us is it's a growth business and our board is always looking at ways to accelerate the business with new capital."... Read more

Analyst puzzled by suggestion 2degrees could float in Australia valued at $800m... Read more

Air NZ sees headwinds from competition, capacity in 2017 after strong 2016... Read more

My Food Bag Holdings, New Zealand's biggest home delivery meal kit service, is seeking new investment to expand its business. The Auckland-based company said it's seeking expressions of interest from equity investors and has appointed PricewaterhouseCoopers to manage approaches... Read more

The New Zealand branch of Viagra-making drug giant Pfizer shipped $22.5 million in "return of capital" payments to its Netherlands-based parent last year, at the same time it was paid hundreds of thousands of dollars by Inland Revenue in income tax refunds. The stark figures have sparked calls from the Green Party for the Government to follow the lead of Australia who are widely tipped to introduce at their budget tonight a "Google tax" aimed at clawing back billions in diverted profits... Read more

Concrete firm Firth Industries not asked to pay New Plymouth lease for 30 years. New Zealand's largest concrete company has not been paying a New Plymouth District Council land lease for 30 years, thanks to what appears to be a mistake by the authority. Firth Industries Limited, a subsidiary of Fletcher Concrete and Infrastructure Limited, is operating on council-owned land at Clemow Rd - despite its lease having expired in 1986. ... Read more

Former NZX chief Mark Weldon regarded the Clear Grain Exchange as an 'Agri-Bloomberg' and was uninterested in previous owner Ralec's view of its prospects, Ralec's counsel told the Wellington High Court in opening submissions. Facing claims from NZX counsel that Ralec had produced "wildly inaccurate" forecasts of future performance, Ralec's QC, Tim North, said the Australian grain exchange's former owners hadn't made false representations to NZX's board, which acquired the business in 2009... Read more

The former owners of the Australian Clear Grain Exchange made false representations about their relationships with Australian grain handlers, Wellington's High Court has heard. Ralec is facing stock market operator NZX in what's expected to be a nine-week trial over NZX's purchase of the Australian Clear Grain Exchange in 2009. NZX is suing for between $A20.7 million and $A37.6 million, and Ralec has countered with a suit totalling $A14 million plus bonuses.... Read more

An independent review will be held into the Overseas Investment Office, in the wake of advice it provided to ministers on the 2014 sale of the Onetai Station farm in Taranaki. Land Information Minister Louise Upston said she was "not happy" and had asked for the review. Peter Mersi, the chief executive of Land Information, said information was not passed on to ministers at the time the application to purchase the 1317 hectare farm was approved... Read more

The Financial Markets Authority (FMA) has issued a formal warning to Craigs Investment Partners for breaches of anti-money laundering rules. Under the AML/CFT Act reporting entities are required to conduct enhanced due diligence on clients where the level of risk involved is such that this higher standard of customer due diligence should apply. Craigs admits that it breached the AML/CFT Act in that it failed to conduct adequate enhanced due diligence and/or failed to terminate its business relationship with a client when it had been unable to complete the required level of customer due diligence on that client.... Read more

In a case taken by the Commerce Commission, the High Court has found that New Zealand Nutritionals (2004) Limited (NZ Nutritionals) made misleading “New Zealand made” claims about two dietary supplements. The decision makes it clear that a representation that a dietary supplement is “New Zealand made” may be misleading if the key ingredients do not come from New Zealand, even if they are packaged or turned into tablets here... Read more

Opinion - Barry Ritholtz: Forecasters keep trying to predict the future. They can't.... Read more

Opinion/Analysis - Allan Barber: Allan Barber asseses what's at stake for Silver Fern Farms over the Shrimpton/Gallagher 'requisition'... Read more

Opinion - Mark Lister: Strong Kiwi dollar reflection of a robust economy. The NZ dollar has been rising lately, despite the surprise interest rate cut in March and an expected slowdown in the dairy sector. While the currency is often described as "overvalued" by many commentators, there is every chance it stays higher than people expect, and possibly for much longer... Read more

Australian Headlines

Australian Market Report: The Australian share market has jumped nearly two per cent, boosted by investors looking for bargains among the big banks, and a cut to interest rates. At the close on Tuesday, the benchmark S&P/ASX200 index was up 110.8 points, or 2.11 per cent at 5,353.8 points, while the broader All Ordinaries index was up 103 points, or 1.94 per cent, at 5,415 points.... Read more

The Australian dollar has fallen sharply in the wake of the Reserve Bank’s decision to cut the official interest rate to a record low of 1.75 per cent. At 5.45pm (AEST) on Tuesday, the currency was trading at 76.27 US cents, down from 76.68 cents on Monday.... Read more

Australia's central bank cut interest rates by 25 basis points to a historic low of 1.75 percent on Tuesday, with the move triggered by lower-than-expected inflation, sending the currency lower. The Reserve Bank of Australia (RBA) had remained on hold for the past year, having already lowered borrowing costs in an effort to spur growth as the economy exits an unprecedented mining boom... Read more

Federal Budget 2016: your five-minute guide... Read more

Ratings agencies have delivered a mixed reaction to Treasurer Scott Morrison's first budget but the nation's triple-A credit rating is not in peril - yet. Moody's Investors Services, which in April cautioned that an absence of new revenue and unconstrained spending would be a credit negative for Australia, welcomed the projected return to a balanced budget by 2020/21 but expressed scepticism about the timeline... Read more

Goldman Asset Says One RBA Cut Not Enough as Aussie to Hold Up... Read more

Morrison builds, hopes jobs will come. If you build it they will come - that's thephilosophy behind Scott Morrison's jobs and growth plan. What he's building is a different tax system. And what he expects to come is jobs.... Read more

Treasurer Scott Morrison has endured a scathing critique of his first Federal Budget by Leigh Sales, who has described the Turnbull Government’s economic record as containing “deficits as far as the eye can see”. “How is it that three years ago the Coalition was outraged by Labor’s inability to achieve a surplus?” Sales asked Mr Morrison in his post-Budget interview on the ABC’s 7.30... Read more

Treasurer Scott Morrison has announced the biggest shake-up to Australia's superannuation system in a decade, targeting high-income earners while retaining concessions for the lowest paid... Read more

Budget 2016: Unions angry at '$4-per-hour' intern plan for young jobseekers. Scott Morrison's move to rethink Work for the Dole and pay Australian businesses to take on thousands of young interns has been slammed by unions but welcomed by Australia's peak social services body... Read more

An unexpected jump in building approval figures is more likely a pause in the housing slowdown rather than a turnaround. Approvals for the construction of new homes rose 3.7 per cent in March, thanks to a strong 6.7 per cent bounce in the volatile apartment and townhouse segment. The figure beat market expectations of a 2.0 per cent fall... Read more

Sayona Mining Ltd swoops on Canadian lithium assets. Sayona Mining Ltd’s share price has surged after signing a binding agreement with Glen Eagle Resources to acquire the Authier lithium deposit in Quebec, Canada for CAD$4 million (A$4.15 million)... Read more

Middle Island Resources Ltd is heading to market with a capital raising, and the ASX has granted the company a trading halt to prepare... Read more

Mining firm OZ Minerals is considering a substantial investment in the SA town of Whyalla, as the Arrium administrator makes clear he is happy with operations at the loss-making steelworks, the South Australian Government has revealed... Read more

Pacific Environment Ltd has finalised a placement to raise A$2.15 million at $0.09 each through a placement to new and existing institutional and high net-worth investors. The company could have raised even more as the raising was oversubscribed and it will issue 23,888,889 fully paid ordinary shares to those investors... Read more

Wesfarmers is losing one of its most senior executives, with the retirement of coal boss Stewart Butel. The group said today Mr Butel would step down as managing director of Wesfarmers Resources in July after 10 years... Read more

Australian Vanadium Ltd has appointed existing chief executive officer Vincent Algar as managing director of the company. The promotion of the highly regarded Algar to the board reflects a "re-setting" of the company's strategy toward a vertical integration business model with its large Gabanintha Vanadium deposit since being appointed CEO in November 2014... Read more

MacPhersons Resources Ltd appoints Jeff Williams as MD... Read more

Woolworths' slashing of grocery prices has failed to turn around the business. The supermarket giant says it dropped food prices by 2.4 per cent during the third quarter after pouring more than $400 million into lower prices over the past nine months. Shares in Woolworths were steady in response to the results, rising two cents, or 0.09 per cent, to $22.27 at the close of trade.... Read more

ANZ has cut its dividend for the first time since the global financial crisis after its first-half profit slumped by nearly a quarter. Cash profit for the six months to March 31 dropped 24.3 per cent to $2.782 billion - its lowest since 2010 - largely due to a $717 million hit from writedowns and restructuring charges it said are necessary in the face of a more challenging business environment... Read more

ANZ Bank takes $441m hit on software accounting tweak.... Read more

The federal government's final injection of public money into the national broadband network will run out at the end of the 2016-17 financial year, budget papers reveal. The government will spend $8.8 billion, its last payment under a $29.5 billion funding cap for the NBN, before the end of the next financial year... Read more

Wangle Technologies Ltd has been given regulatory clearance to publicly launch the Apple iOS and Android versions of its App in Australia and New Zealand after it was given approval from the Federal Government. Wangle's patented algorithms optimise data flow between devices, increasing the speed of the Internet which allows faster data transfer and reduces data overhead for customers, while enhancing security and privacy... Read more

Technology experts have cast doubt over Australian entrepreneur Craig Steven Wright's declaration that he is the inventor of Bitcoin. The 45-year-old's revelation has sparked debate around his claim to the identity of Satoshi Nakamoto, the mysterious figure who launched bitcoin in 2009... Read more

Cigarette makers are "furious" the federal government opted to hike taxes on tobacco. The tobacco excise will rise 12.5 per cent in each year to 2020 which is likely to lift the cost of a packet of cigarettes to $40 or more. Imperial Tobacco Australia has now accused Treasurer Scott Morrison of going back on his word after he smacked Labor for considering a similar plan... Read more

The federal budget has vastly boosted the government's firepower against multinational tax avoidance as it looks to ramp up revenues to fund tax cut promises. Canberra hopes to raise up to $4.35 billion over the next four years through measures that include a new taskforce led by the ATO, steep penalties for tax dodgers and tighter rules to close loopholes that multinational companies have been exploiting... Read more

A company selling "truly Australian made" uggs has been fined more than $10,000 after the consumer watchdog said it had reason to believe the sheepskin shoes came from China.... Read more

Analysis - Mal Farr: Why this is a clever Federal Budget. Don't look for winners and losers, Treasurer Scott Morrison told reporters just before he delivered the Budget in Parliament. The very notion someone might emerge from the Budget with less than they deserved was folly, he seemed to be saying... Read more

Opinion - Nick Sas: Feeding frenzy looms as Telstra loses blood... Read more

International Headlines

U.S. Market Report: Wall Street was sharply lower in afternoon trading on Tuesday, with all 10 major S&P sectors in the red, after weak economic data out of China and Europe rekindled fears of a slowing global economy. Activity at China's factories shrank for 14 straight months in April as demand stagnated, a private survey showed. Britain's manufacturing output last month also unexpectedly shrank to hit its lowest level in three years... Read more

North/South Americas Market Report: Markets closed lower across the region as at the most recent closing prices... Read more

European Market Report: European markets finished broadly lower today with shares in Germany leading the region. The DAX is down 1.94% while France's CAC 40 is off 1.59% and London's FTSE 100 is lower by 0.90%... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.85%, while the Nikkei 225 led the Hang Seng lower. They fell 3.11% and 1.85% respectively... Read more

The United States could see two further interest rate rises this year but uncertainties abound including the impact on the U.S. economy should Britain vote to leave the European Union, Atlanta Fed President Dennis Lockhart said on Tuesday. "Two rate hikes are certainly possible. We have enough (Fed policy) meetings remaining but it depends entirely on how the economy evolves," Lockhart told reporters in Amelia Island, Florida... Read more

Are sensitive U.S. economic reports being leaked? Traders that make big, profitable bets right before the release of market-moving economic data are either really smart... or cheating the system. A new academic study shows there is significant market reaction in the 30 minutes before the release of various U.S. macroeconomic reports, such as GDP, housing and ISM reports... Read more

It looks like Wall Street's love affair with Amazon has been re-Kindle-d. Shares of Amazon rose more than 3% Monday. That follows a nearly 10% pop on Friday after Amazon reported a better-than-expected profit... Read more

The New York Times Co's adjusted operating profit fell 13 percent in the first quarter as ad sales declined in its print and digital businesses and costs rose. Shares of the publisher, which is spending heavily to strengthen its advertising technology, fell 4.4 percent to $12.32 in afternoon trading on Tuesday... Read more

Halliburton Co said it would consider acquisitions to bolster its weaker businesses as the world's No.2 oilfield services company looks to move on after abandoning a deal to buy smaller rival Baker Hughes Inc. The deal would have helped Halliburton better compete with market-leader Schlumberger for the dwindling number of contracts from oil producers as crude prices stay stubbornly low... Read more

Former drug executive Martin Shkreli, who last year became a lightning rod for outrage over soaring prescription drug prices, may face additional U.S. charges of securities fraud, a federal prosecutor said on Tuesday. More charges related to Shkreli's involvement with biopharmaceutical company Retrophin Inc could be filed within a month, Assistant U.S. Attorney Winston Paes said at a hearing in federal court in Brooklyn, New York... Read more

Johnson & Johnson has suffered its second costly court defeat in less than three months over claims its talcum powder caused cancer. And many more cases are looming. A jury in St. Louis awarded $55 million in damages to Gloria Ristesund, who used Johnson & Johnson's talcum powder for more than 35 years before being diagnosed with ovarian cancer in 2011... Read more

Hedge Funds Under Attack as Steve Cohen Says Talent Is Thin... Read more

Billionaire investor Steven Cohen said that too many hedge funds placing the same types of bets contributed to sharp losses for his $11 billion Point72 Asset Management earlier this year. "One of my biggest worries is that there are so many players out there trying to do similar strategies," Cohen said Monday, speaking at the Milken Institute Global Conference in Los Angeles... Read more

Twitter just can't win on Wall Street. Shares of Twitter fell 2% Tuesday and hit a new all-time low of $13.90.... Read more

Mining company Glencore is considering selling its Vasilkovskoye gold mine in Kazakhstan, sources close to the deal said on Tuesday, confirming an earlier report in the Financial Times. The sources said the assets were worth more than $2 billion... Read more

Company founder and CEO Elon Musk may not mention Tesla Motors Inc's stock price when his electric car company gives its latest financial update on Wednesday, but it will be front and center for investors divided over its seemingly rich valuation. After a rally that ended in April, Tesla's market capitalization is currently about $31 billion - equivalent to $620,000 for every car it delivered last year, or $63,000 for every car it hopes to produce in 2020... Read more

Here's another milestone on Europe's long road to recovery. Unemployment in the eurozone should fall back below 10% next year for the first time since 2009, the European Commission said in its latest economic forecast. The number of people out of work in the 19 countries that use the euro has fallen by 2.9 million since April 2013, when unemployment peaked above 12%... Read more

HSBC's net profit was down 18 percent at $4.3 billion in the first quarter, the bank said Tuesday, affected by "extreme levels" of market volatility early in the year. "Our first quarter performance was resilient in tough market conditions that affected the entire banking sector," said group chief executive Stuart Gulliver... Read more

U.K. Gas Prices Slide Most in a Year as Warmer Weather Arrives... Read more

Business Secretary Sajid Javid has ordered the Insolvency Service to investigate the collapse of UK department store BHS. It comes a week after the former owner of BHS Sir Phillip Green was called before two Parliamentary committees. Sir Phillip sold BHS to Retail Acquisitions last year for £1... Read more

A senior Barclays Plc executive said he never saw or heard of any attempts to manipulate Libor at the British bank or any other firm when he was head of U.S. rates trading. Harry Harrison, now head of non-core assets at Barclays, told a London court Tuesday that any requests to change the benchmark rate would have been "very inappropriate" and he wasn’t aware of any attempts. He was responsible for dollar rates for a number of years starting in 2003... Read more

Spain Calls June Election as EU Questions Rajoy's Budget. King Felipe called an election re-run for June 26 in a bid to break the political stalemate in Spain, as the European Commission questioned caretaker Prime Minister Mariano Rajoy’s budget math. Spaniards will be heading back to the polls six months after electing the most divided parliament in the country’s history. The ballot comes during a critical week in European politics with the U.K. voting on whether to leave the European Union three days earlier and EU leaders gathering for a summit in Brussels on June 28... Read more

BP Drops $1 Billion Seafood Industry Spill Payments Fight... Read more

UK manufacturing activity contracted in April for the first time in three years, a survey has indicated, adding to fears over the economy's strength. The Markit/CIPS manufacturing Purchasing Managers' Index fell to 49.2 from 50.7 in March. A reading below 50 indicates falling output... Read more

Ferrari Raises 2016 Forecast as Sports Car Sales Help Profit... Read more

German automaker BMW on Tuesday reaffirmed its targets for the full year after clocking up record sales volumes and earnings in the first three months. "The BMW group remains confident in achieving its forecast targets for the current financial year," said chief executive Harald Krueger... Read more

A Brazilian judge on Tuesday overturned a suspension of Facebook Inc's WhatsApp messaging application that affected some 100 million users, after many people voiced frustration at the second such freeze in five months in the South American country. On Monday, a judge in the northeastern state of Sergipe had ordered Brazil's five main wireless operators to block access to WhatsApp for 72 hours. The reason for the order was not made public due to legal secrecy in an ongoing case before the state court... Read more

Chinese firms are on a record-breaking shopping spree, snapping up foreign firms like never before. They have already announced a whopping $108.5 billion in foreign deals so far this year, topping the $106 billion total for the whole of last year, according to the research firm Dealogic. Chinese firms are also spending far more on average -- there have been 281 deals announced this year, versus 611 in 2015... Read more

Opinion/Analysis - Paul R La. Monica: What's wrong with Apple? Apple has been one bruised and wormy stock lately... Read more

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