ASB Securities Morning Brief for Monday, 27 June 2016
Monday, 27 June 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares plunged after the UK voted to leave the European Union, taking investors by surprise with financial institutions hit hard. The S&P/NZX 50 Index dropped 153.57 points, or 2.3 percent, to 6,667.78. Within the index, 44 stocks fell, four were unchanged and two rose. Turnover was $132.6 million... Read more

The New Zealand dollar tumbled more than 3 US cents, or 4.4 percent, and swap rates dropped as the UK voted to leave the European Union, confounding the predictions of bookmakers and pollsters. The kiwi dollar fell to 69.84 US cents at 5pm in Wellington, from as high as 73 cents when voting closed this morning at 9am NZ time and down from 71.80 cents late yesterday. The local dollar surged as high as 52.88 British pence, the highest in almost three years, and was recently at 52.21 pence, from 48.55 pence yesterday... Read more

New Zealand swap rates plunged as news of the likely victory for Brexit in the UK's referendum on whether to leave the EU rippled through global financial markets and sent investors fleeing for safe havens. The two-year swap rate dropped 14 basis points to 2.17% and 10-year swaps sank 22 points to 2.64% as investors in all asset classes grapple with the looming outcome of the UK referendum... Read more

Investors are bracing for more fall-out as trading resumes tomorrow after Britain's shock vote to leave the European Union sparked market chaos on Friday, evoking memories of the 1987 crash and Global Financial Crisis. "I don't think it's going to be just one bad day and we move on," said JBWere investment strategist Bernard Doyle.... Read more

Helen Clark says the United Nations is feeling the effects of the slowing global economy and says conflicts around the world are adding to the problem. The former Prime Minister and candidate for the UN's Secretary-General role made the statement during a live feed from the UN this morning... Read more

Wholesale rates may be falling fast toward record lows but risk premiums are rising. Mortgage rates may fall, but it is unlikely to be in the next week or two. Could Brexit affect our mortgage rates? Clearly it is too early to tell... Read more

New Zealand First is pushing for Closer Commonwealth Economic Relations (CCER) between New Zealand and the United Kingdom. Party leader Winston Peters said a trade deal with the UK is an absolute priority... Read more

Westpac chief economist Dominick Stephens ponders what Brexit might mean for NZ, now sees August OCR cut as much more likely... Read more

Auckland's CBD is officially the country's most expensive retail centre, forcing some of the smaller retailers out of their leases. Colliers estimates that the average net prime rent in Auckland's CBD retail space is now $2950 per square metre, up 12 per cent on last year. CBRE estimates that Queen St rents are even higher, about $3667 a square metre, 40 per cent higher than a year ago - although CBRE's estimate likely covers the more expensive end of town... Read more

How Brexit will hit your back pocket.... Read more

NZ cigarette plain packaging law would see Imperial Tobacco sue for compensation.... Read more

Silver Fern Farms and Shanghai Maling continue to work towards completion of the $261m investment and partnership. With more time required to meet information requests from the OIO, the parties are in the process of agreeing an extension to the 30 June 2016 date to meet the OIO approval condition... Read more

Allan Barber likes the Irish inclusive approach to industry strategy, which includes "impressive commercial and intellectual grunt", over MPI's silo approach... Read more

Ryman Healthcare's board will ask shareholders to sign off on a 9 percent pay rise for directors as they cope with an increasingly larger retirement village operator. Shareholders will vote on July 27 at Ryman's annual meeting in Whangarei on whether to lift the pool for directors' fees to $910,000 from $835,000, the notice of meeting says. The board last sought an increase in pay in 2014 when the fee pool was raised to $730,000 from $670,000 and was automatically bumped up further to cover the expansion of the board to eight directors... Read more

Cavalier Corp shares jumped to a 19-month high after the carpet maker raised 2016 earnings guidance as its broadloom carpets unit outperformed expectations and it sold an unprofitable carpet tile operation. Post-tax normalised earnings are expected to be $6 million in the 12 months ending June 30, up from $1 million a year earlier, and ahead of the $3-5 million range forecast at the November annual meeting. Net profit will be about $2.4 million, including restructuring costs associated with shuttering operations and laying off staff, and the gain on a property sale.... Read more

New Zealand media company NZME makes its debut on the NZX today with share trading expected to commence on the "ringing of the bells" at midday. The NZX listing is a huge milestone for NZME which will join Sky TV as one of only two listed media companies in New Zealand... Read more

Xero will start turning profits from 2020 as it continues to grow its customer base in North America and the UK, says Morningstar. The research house's fair value estimate for Xero is $21 a share, a premium to the current trading price of $18.50, on expectations the Wellington-based accounting software developer will start making money soon and probably won't have to raise more capital. Morningstar predicts Xero's annual loss peaked this year, and that it will go on to post a maiden profit of $87.6 million on revenue of $754.1 million in 2020. By 2021, profit is seen rising to $147.2 million on sales of $923.6 million... Read more

Cavalier Corp shares jumped to a 19-month high after the carpet maker raised 2016 earnings guidance as its broadloom carpets unit outperformed expectations and it sold an unprofitable carpet tile operation... Read more

Smiths City Group reported a 30 percent decline in annual profit while at the same time lifting sales as the Christchurch-based retailer overhauled its operations to exit low-margin business. Net profit fell to $5.6 million, or 10.6 cents per share, in the year ended April 30, from $8 million, or 15.2 cents, a year earlier, Smiths City said in a statement. Trading profit rose 54 percent to $4 million on a 0.2 percent rise in revenue to $221.9 million. In 2015, Smiths City recognised $8.5 million in other income due to insurance payments to help repair its flagship Colombo St store... Read more

Australian publisher APN News & Media and New Zealand-based NZME are to each pay around $18 million to the Inland Revenue Department after reaching a binding heads of agreement to settle an alleged tax avoidance case and other disputed tax issues. In a statement to the stock exchange, APN said the $36.3 million settlement cost would be shared on a “near equal” basis with NZME and then later said it was around $18 million each... Read more

Fronde chairman Jon Mayson ousted, two other directors also exit. Fronde last traded on Unlisted at $1 per share in January... Read more

The International Institute for Sustainable Development welcomed five new members to its board of directors today, following a unanimous vote at the board’s general meeting. "I am delighted to welcome our new members in what is a pivotal time for sustainable development—and therefore also for IISD,” said Alan Young, IISD Board Chair... Read more

The investigation into abuse against bobby calves is continuing, the Ministry for Primary Industries (MPI) says. MPI disagreed with Farmwatch, which this week said MPI wasn't doing enough to protect animal welfare in New Zealand, ministry spokeswoman Helene Ambler said... Read more

Opinion - Liam Dann: Reserve Bank well placed for Brexit fallout. At a meeting in Zurich on Saturday central bank governors from around the world pledged to support financial markets to avoid Brexit contagion damaging global growth. It was a reassuring statement. The really good news for New Zealand is that our Reserve Bank is among the best placed in the world to deal with the downturn risk... Read more

Opinion - Liam Dann: Brexit crash vs historic meltdowns. How does the Brexit crash compare to the other market meltdowns of history? The shock decision of UK voters destroyed $2 trillion in wealth overnight and there is certainly more turmoil to come. But so far it doesn't compare to the massive slumps of 1929, 1987 or 2008.... Read more

Opinion - Charles Finny: Markets have over-reacted to vote result... Read more

Australian Headlines

Australian Market Report: The Australian sharemarket has suffered its worst decline in nine months, with close to $50 billion wiped after UK voters opted to leave the European Union. The shock Brexit vote caught markets off-guard after investors had this week grown increasingly comfortable with the prospect of a ‘remain’ vote. At the close of local trade, the benchmark S&P/ASX 200 index tumbled 167.5 points, or 3.17 per cent, to 5,113.2, while the broader All Ordinaries index sank 165.8 points, or 3.09 per cent, to 5,192.8.... Read more

The Australian dollar has plummeted against the US dollar and soared against the pound after the UK unexpectedly voted to pull out of the European Union. At 5pm (AEST) on Friday, the local unit was trading at US73.61 cents, down from US75.26c on Thursday, and at 54.01 British pence, up from from 51.06 pence.... Read more

Brexit rocks Australian sharemarket, worse to come... Read more

RBA Chief Risks Being Dragged Back Into Rate-Cut Fray by Brexit. If Glenn Stevens thought he’d delivered his last interest-rate cut in May, the shock of the U.K.’s decision to exit the European Union last week has traders betting he will change that view. While the swaps market had previously been pricing in less than one-in-two chance that the Reserve Bank of Australia would ease again before the governor steps down on Sept. 17, the market at 6 p.m. on Friday in Sydney showed a more than 60 percent probability that he would lower the cash rate in August from an already record low 1.75 percent... Read more

Central bank group urges branch closures. Banks should shut branches to help lift flagging profits and get on a healthier long-term footing, an influential global central banking forum said in a report on Sunday. Closing bank branches is politically sensitive, particularly in Europe, with a backlash in countries including France, Spain and Britain where opponents say remote areas or regions where people are less well off have been targeted... Read more

Scope BusinessDay Economic Survey: Cut negative gearing, not company tax, economists say. If Australia's top economists were deciding the election, they'd vote for Labor's cuts to negative gearing and against the Coalition's cuts to company tax. Of the 23 leading economists polled for the Scope BusinessDay Economic Survey, those that answered the questions about tax backed Labor's plan 10 to three and opposed the Coalition's plan 10 to six... Read more

As Australian financial markets brace for a volatile trading week, the major parties are setting out their economic management stalls in the run-up to Saturday's federal election. Australian shares slumped more than three per cent on Friday after the shock decision by UK voters to back a British exit from the European Union sent markets into free-fall... Read more

Brexit: how the result will affect Australia. Britain's shock referendum decision to quit the European Union has unleashed a wave of global jitters which will immediately influence the outcome of our July 2 election. Markets of all sorts — stocks, futures, oil, butter — want certainty, and the Brits have removed that by a tiny majority of votes... Read more

Aussies to enjoy cheaper British holidays. While many UK holidaymakers travelling abroad will pay more for foreign currency as a result of the Brexit referendum, foreign tourists can enjoy cheaper holidays in Britain - at least in the short term. The pound plunged to its lowest level since 1985 following the EU referendum on Thursday, with the sterling down against every single major currency group... Read more

Britain's shock decision to exit the European Union should have little impact on Australia's diplomatic and trade relationships, according to the EU's ambassador to Australia. Speaking to the ABC's AM program, Sem Fabrizi said despite global financial fallout from the Brexit vote, nothing would change immediately. "Until the new agreement for the separation from the UK takes effect, rights and obligations under the treaties will continue so there will be no immediate change," Mr Fabrizi said.... Read more

Brexit 2016: Super funds are losing cash after UK vote. A large slice of Australia’s super fund members are facing negative annual returns on their nest eggs amid turmoil on sharemarkets since Friday. The shock Brexit vote, which caused a 3 per cent slide in Aussie shares, created further carnage in US, British and European markets yesterday morning... Read more

Rio challenge remains the same. When Chris Salisbury takes the reins at Rio Tinto’s biggest and most profitable division next month he will inherit a section that is, on the face of it, in pretty good shape... Read more

Broken Hill Prospecting Ltd recently raised about $1 million through a placement of shares to sophisticated and professional investors at $0.08 each. The company will open a Share Purchase Plan with the opportunity to subscribe for shares to the value of A$2,000, A$3,000, A$5,000, A$7,500, A$12,500 or up to the maximum of A$15,000... Read more

Oilex Ltd plans to drill a vertical well at the Cambay Block in Gujarat state in India once it can get the finances. The well will target the Eocene siltstone (EP-IV or Y Zone) and is essential prior to drilling a horizontal extension for potential later fracking and exploitation of the Eocene siltstones. Detailed planning for this well is still being finalised and is subject to JV/Budget approvals... Read more

Kimberley Diamonds Ltd has completed a capital raising of $4,024,678 via a rights issue and shortfall placement at $0.10 per share. Zhejiang Huitong Auction Co Ltd, the lender of $13 million to Kimberley, was issued shortfall shares worth $704,120... Read more

Three Australian workers kidnapped from a worksite in Nigeria have been released, engineering giant Macmahon Holdings says. The men, who work for the Perth-based mining company, were attacked by gunmen on Wednesday. Their Nigerian driver was killed in the assault, and a fourth Australian man escaped... Read more

Australia has proved a bright spot for Swedish fast-fashion giant H&M, with sales surging more than 50 per cent in a highly-competitive market. Fresh from Wesfarmers department store boss Guy Russo warning that H&M and its international peers Zara and Uniqlo will "regret making the trip Down Under", H&M has revealed that sales in Australia rose to 449 million Swedish krona ($A71 million) in the May quarter... Read more

Downer EDI has won a $512 million contract with the Public Transport Authority to supply 10 commuter trains and maintain the Transperth rail fleet for 10 years. The Downer Bombardier joint venture will manufacture the three-car B Series trains in Queensland and deliver them by December 2020... Read more

Buddy Platform Ltd to update on potential acquisition. Buddy Platform Ltd provides data aggregation and management platforms for the IoT (internet of things) and connected devices... Read more

The company that installed an early warning system at the Fremantle rail bridge wants to extend the use of the technology to Perth’s train crossings and subways. The ARCS Group says the technology, which can detect vehicles on rail crossings and warn approaching train drivers, cuts the risk of collisions substantially... Read more

Western Australia's emerging truffle industry has grown rapidly over the past five years, trebling production to become the second-largest producer of the black truffle behind Europe. The epicentre of the state's truffle industry lies on the outskirts of the old timber milling town of Manjimup, 300km south of Perth. The farm gate value of the industry has trebled since 2011 to $8.5 million after dozens of producers jumped on board.... Read more

Woolworths has been heavily criticised by the Fair Work Ombudsman over the underpayment of trolley collectors working at its supermarket stores. In a new report, the ombudsman said it uncovered workers employed through trolley collection service providers who were being paid as little as $10 per hour... Read more

The long-term partner of late billionaire Len Buckeridge has challenged his will, with claims he promised to leave her the multimillion-dollar Mosman Park house they shared. Siok Puay Koh, known as Tootsie, lodged a Supreme Court writ last week to get ownership of the house as part of a bigger challenge for substantially more of the $2.5 billion he left behind when he died in March 2014.... Read more

Opinion - Shirley Jackson: Australia’s youth unemployment policy needs to be seen as a hand up, not a hand out. There are two youth unemployment programs offered by the major parties this election. Both are distinct, but surprisingly similar to the two main policy approaches to unemployment internationally. The question for Australian voters is do we see unemployment policy as a ‘hand out’ or a ‘hand up?’... Read more

International Headlines

U.S. Market Report: S&P 500 could drop as much as 7% in Brexit swoon... Read more

North/South Americas Market Report: North and South American markets finished sharply lower on Friday with shares in U.S. leading the region. The S&P 500 is down 3.59% while Brazil's Bovespa is off 2.82% and Mexico's IPC is lower by 2.73%... Read more

European Market Report: European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.36%, while the DAX led the CAC 40 lower. They fell 6.82% and 6.24% respectively... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.77%, while the Nikkei 225 led the Shanghai Composite lower. They fell 7.92% and 1.30% respectively... Read more

‘Brexit’ in America: A Warning Shot Against Globalization. When the mills that birthed the industrial revolution in cities like Manchester and Birmingham still powered the British economy of the mid-20th century, Robert Stevenson was a frequent visitor to the Midlands... Read more

Hedge Funds Win World-Beating Rally With Record Gold Holdings... Read more

On Friday, as markets collapsed around the world after Britain voted to leave the European Union, investors in one kind of asset did fabulously: owners of gold. The precious metal saw a huge one-day price jump, increasing in value by $59.30, or 4.7 percent, to $1,322.40 per ounce, a two-year high.... Read more

Many U.S. firms playing catchup after surprise EU exit vote... Read more

Two additional SolarCity Corp board members with ties to Elon Musk are recusing themselves from making decisions regarding Tesla Motors Inc's offer to buy the solar power company, in a bid to alleviate corporate governance concerns surrounding a potential deal. The new recusals mean the majority of SolarCity's board will be sitting out the decision on whether to be acquired by Tesla... Read more

The U.K. vote to leave the European Union slammed U.S. grain prices Friday and created new challenges for agricultural companies struggling against a strong U.S. dollar. The global market tumult unleashed by the U.K.’s referendum sent the U.S. dollar surging against foreign currencies, spelling trouble for grain and meat exports, even as some analysts saw food stocks as a haven from volatility... Read more

Chipmaker Intel Corp is considering the sale of its cyber security business, the Financial Times reported on Sunday. According to the report, the company has been talking to its bankers about options for the Intel Security unit, which was previously known as McAfee. Intel bought McAfee for $7.7 billion in 2011.... Read more

The people lining up to profit from Maryland’s legal medical-marijuana market include former sheriffs and state lawmakers, wealthy business executives and well-connected political donors, according to previously undisclosed public records obtained by The Washington Post. Nearly 150 businesses are competing for up to 15 cultivation licenses that will be awarded starting this summer, the first footholds in an emerging industry that is already worth billions nationally.... Read more

TransCanada Corp is formally requesting arbitration over U.S. President Barack Obama's rejection of the Keystone XL pipeline, seeking $15 billion in damages, the company said in legal papers dated Friday. TransCanada submitted a notice for an arbitration claim in January and had then tried to negotiate with the U.S. government to "reach an amicable settlement," the company said in files posted on the pipeline's website... Read more

The chief executive of Deutsche Bank says London will not die as a financial center but it will become weaker after Britain voted to leave the European Union. John Cryan, a Briton who divides his time between Frankfurt and London, told Germany's Handelsblatt business daily that he expects higher volatility than usual on the financial markets in the coming weeks... Read more

A sense of panic has taken over London's financial center after the U.K. voted to leave the European Union. The city is the undisputed financial capital of Europe, but that status is now clearly in doubt. Many global banks use Britain as a springboard for their business throughout the EU. Banks that set up business in one EU country can automatically operate across the entire bloc, without having to apply for additional permits.... Read more

Billionaire investor George Soros on Saturday called for thorough reconstruction of the European Union in order to save it, even though he warned that Britain's vote to leave the bloc makes "disintegration of the EU practically irreversible." Soros, who warned of financial meltdown if Britain voted to leave the EU before Thursday's referendum, also said the effects of the decision will likely damage Britain... Read more

Brexit hangover: 3 huge headaches facing the U.K.... Read more

Brexit + deep uncertainty = Market chaos... Read more

The UK has had its credit rating outlook cut to "negative" by the ratings agency Moody's after the country voted to leave the EU. Moody's said the result would herald "a prolonged period of uncertainty". Meanwhile, PM David Cameron is under pressure to speed up "divorce" talks with the EU after Brussels said exit negotiations should start immediately... Read more

The big question for pound traders may have been answered, but the outlook for the currency is murkier than ever. Sterling suffered a record one-day loss on Friday after Britain voted to leave the European Union, pushing it to the lowest level since 1985. Investors face months of uncertainty -- the mechanics and terms of the U.K.’s exit are yet to be determined, and the nation’s political leadership during the negotiations is unclear after Prime Minister David Cameron announced his resignation. Scotland is agitating for independence and the opposition Labour Party has been thrown into chaos by the historic vote... Read more

Britain must strike a trade deal with Europe as soon as possible to protect the country's multi-billion pound car industry and avoid high tariffs. David Bailey, professor of industry at Aston University, warned of a "big uncertainty" for the sector following the UK's vote to leave the EU. Without a deal, he fears a return to the days when the industry faced a 10% tariff on exports. The UK exports 77.3% of its car output, 57.5% of which goes to Europe.... Read more

Business Secretary Sajid Javid says he will hold a meeting this week with business leaders following the UK's vote to leave the European Union. Mr Javid told the BBC his message to businesses was "there's no need to be panicking". The UK's economic fundamentals are strong enough to weather any short-term market volatility, he said... Read more

German robotics maker Kuka is on the brink of agreeing to an investor agreement with Chinese bidder Midea that includes a long-term commitment to existing headquarters, factories and jobs, a source close to the negotiations said. Kuka needs to decide in the coming week whether it wants to recommend the acceptance of Midea's 4.5 billion euro ($4.99 billion) bid, the biggest German industrial technology company to be targeted by a Chinese buyer in a wave of recent deals... Read more

HSBC 'to move jobs to Paris if UK leaves single market'... Read more

Spain’s Left-Wing Parties May Win Majority of Seats: Exit Poll... Read more

The $100 billion overseas order book of Russia's nuclear power plant builder Rosatom -- bigger than all its Western competitors combined -- makes it look like the giant in its field. But if the company -- formed in 2007 from the Russian Atomic Energy Ministry and tasked with turning nuclear power into a major export industry -- is ever to reach its potential as a global industrial giant, it will have to shed Russia's reputation for using energy policy as a means to political ends... Read more

Some of Asia's biggest economies have expressed concerns over the world's economic stability as a result of Britain's vote to leave the EU. China's Finance Minister Lou Jiwei said the consequences were unclear, but that they would be felt for years to come... Read more

China Signals Coal-Capacity Cut Equal to 7.5% of Output in 2015. China says it’s reining in coal production as the country tries to curb the pollution choking the nation’s cities and eliminate so-called “zombie” companies in the struggling industry. Coal output capacity will fall by 280 million tons this year, National Development and Reform Commission Chairman Xu Shaoshi said at the World Economic Forum in Tianjin on Sunday. That’s equal to about 7.5 percent of the 3.75 billion tons that BP Plc says the country produced in 2015... Read more

Yen Brexit Surge Seen Testing 95 in Threat to BOJ Stimulus Goals. When Mohamed El-Erian called the yen at 106 per dollar “a total nightmare” for Japan this month, few envisaged it would get even worse so quickly... Read more

Opinion -Pravakar Saho: India’s looking for a new central bank governor to perform a tough balancing act... Read more

Opinion - Ambrose Evans-Pritchard: The sky has not fallen after Brexit but we face years of hard labour... Read more

Latest reports

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