ASB Securities Morning Brief for Wednesday, 20 July 2016
Wednesday, 20 July 2016

New Zealand Headlines

New Zealand Market Report: New Zealand shares hit another record high in light turnover, with Auckland International Airport, SkyCity Entertainment Group and Moa Group gaining, while Comvita fell. The S&P/NZX 50 rose 48.88 points, or 0.7 percent, to 7.154.83. Within the index, 24 stocks rose, 14 fell and 13 were unchanged. Turnover was $129 million... Read more

The New Zealand dollar dropped after the Reserve Bank opened the door for interest rate cuts as soon as next month with the extension of mortgage loan restrictions set for September. The kiwi fell to 70.56USc from 71.14 cents immediately before the Reserve Bank release and the trade-weighted index sank to 75.37 from 76.03, still well above the 71.6 quarterly average projected in the June monetary policy statement.... Read more

The New Zealand dollar dropped and swap rates fell to record lows after the Reserve Bank announced plans to extend restrictions on mortgage lending, stoking speculation it may have room to cut interest rates twice in the next eight months. The kiwi fell to 70.27 US cents from 71.14 cents immediately before the RBNZ release and from 70.93 cents yesterday. The two-year swap rate fell about 6.5 basis points to 2.05 percent and has declined almost 80 basis points this year, according to Reuters data... Read more

The Reserve Bank plans to roll out tougher lending restrictions across the nation from September in an effort to mitigate the risk the country's rapid house price growth poses to the wider financial system. The central bank wants to cap bank lending to property investors with a deposit of less than 40 percent at 5 percent and restore the 10 percent limit for owner-occupiers wanting to take out a mortgage with a deposit of less than 20 percent, according to a consultation paper released today... Read more

Reserve Bank calls for changes to investor LVRs. Moves to severely restrict lending to property investors with less than 40% equity will make life easier for experienced landlords, it has been claimed.... Read more

First-home buyers should benefit from Reserve Bank proposal: PM. The Reserve Bank made the "right decision" to impose new lending rules on property investors, says Prime Minister John Key. Proposed restrictions announced on Tuesday would require banks to lend only a small fraction of their loans to investors with less than a 40 per cent deposit... Read more

Property investors are being blamed by both sides of the political divide as significantly contributing to Auckland's property price increases. There is little doubt that the property market in Auckland is well into the upper stages of this market cycle, however, is this really the result of property investors?... Read more

Property Institute of New Zealand Chief Executive, Ashley Church, is asking the Government to consider removing the Reserve Bank’s ability to influence housing policy in light of what he describes as ‘a politically motivated response to house price inflation’... Read more

How the Reserve Bank makes OCR decisions. Assistant Reserve Bank Governor John McDermott has explained how the bank formulates and assess monetary policy and comes to its OCR decisions... Read more

Australia and New Zealand sign arrangement to streamline trade. Trusted Trans-Tasman exporters will be rewarded with fast-tracked customs processing at Australian and New Zealand borders under a new arrangement between the two countries... Read more

New Zealand should get greater access for beef exports after agreements in Indonesia between Prime Minister John Key and President Joko Widodo. The two countries are also exploring a "comprehensive partnership" that falls short of a free-trade agreement... Read more

John Key: NZ can benefit from Indonesian plans to become 'milk hub' of Southeast Asia... Read more

Fund managers struggle to add value in periods of market volatility, one analyst says. MJW has released its latest investment survey, which shows the returns from core Australasian share managers ranged from 19.2% to 24% for the year to June 2016. Quay Street achieved the top return of 24.0% for the year with Milford close behind at 23.8%. But the median manager return was 21.6%, compared with an index 12.9%... Read more

World dairy prices were unchanged at the GlobalDairyTrade auction overnight. The average price per metric tonne remained at US$2336, set a fortnight ago when prices fell 0.4 per cent. The price of New Zealand's major export, whole milk powder (WMP), rose 1.9 per cent to $2079, recovering from their fourth consecutive drop last fortnight... Read more

Silver Fern Farms, the country's largest meat processor, has warned farmer shareholders that it now expects to only break-even in the current financial year, down from a pre-tax profit of $27.16 million in the previous year. It had earlier warned in April that profits would be "materially below" 2015. Silver Fern Farms' financial year runs to the end of September... Read more

Internal Treasury documents released under the OIA suggest the government could save up to $400 million a year and reap an additional $150 million a year if cannabis laws were reformed. The documents, prepared for an internal Treasury forum “designed to test policy thinking on a range of issues” were not “official Treasury opinion,” according to Finance Minister Bill English, who released them as a result of an information request from Nelson lawyer Sue Grey... Read more

Hold Tight Till ‘Perfect Storm’ Clears Says Wool Brokers in Lead-Up To Next Wool Auction. Three of New Zealand’s leading Independent Wool Brokers seek to reassure growers that the disappointing sale last week is likely to be a blip due to a perfect storm of events. “Coming off one of the best seasons for wool for many years it was disappointing to witness a poor sale in Napier last week,” says Ms Philippa Wright, Wright Wool Ltd... Read more

Kiwifruit marketer Zespri says reports that it was called to a meeting in Beijing or has been pressured by the Chinese government over a potential Ministry for Business, Innovation and Employment inquiry into the dumping of Chinese steel are false. In a statement issued by a spokeswoman, the company said that two weeks ago local staff had received "unsubstantiated information from an industry body in China on purported industry consultations related to the importation of New Zealand agricultural products"... Read more

Dairy giant Fonterra told Government officials it had been approached by Chinese commerce representatives, warning of reprisals if they did anything to compromise Chinese steel imports. It's the latest revelation in a series of about-turns about the Government's knowledge of Chinese threats of a wider trade war... Read more

Oceania Natural has secured about $3.5 million to form a Hong Kong-based subsidiary that will help build the company’s Chinese distribution network. The Albany-based company, which makes food supplements from manuka honey and noni fruit, listed on the small cap growth market NXT in March. Oceania’s shares first traded on March 31 at 74c, up from the 64c touted in the compliance listing of 25.7 million shares. There has been a 282% gain in share price since then to $2.45, giving it a market capitalisation of $64.2 million.... Read more

Tech incubator Powerhouse revalues portfolio pre-ASX listing. Technology incubator Powerhouse Ventures has recorded a $7.7 million increase in the fair value of its investments in early stage start-ups in just six months as it readies itself for a listing on the Australian Securities Exchange this year. Christchurch-based Powerhouse takes technology in New Zealand's universities and research institutes to market through a portfolio of start-ups. It is yet to make any divestments since it started investing in 2010, though it has written off two failed ventures... Read more

Federated Farmers has appointed Wellington communications strategist Leigh Catley to the role of General Manager, Communications. Leigh was previously head of communications at Horticulture New Zealand for 10 years... Read more

Tower Insurance Limited (TIL) is skating on thin ice in the wake of the Canterbury earthquakes. It has announced the resignation of its Chief Financial Officer of two years, Brett Wilson, the day after ratings agency, A.M. Best, has sounded the alarm bells over the insurer's finances... Read more

Serko chief financial officer Tim Bluett has resigned and will leave the online travel booking company in October. Bluett joined the Auckland-based company from Telecom New Zealand in 2013, where he had risen to become acting group chief financial officer, his Linkedin profile shows... Read more

New Zealand Global Women appoints new CEO. A leadership change at Global Women paves the way for continued national growth in accelerating our country toward the new normal of diversity and inclusion in New Zealand businesses. Newly appointed CEO Miranda Burdon will take the Global Women reins from 25 July to build on the strength of foundations laid by founding CEO Faye Langdon... Read more

Hunting and Fishing's online customers have been urged to contact their bank and check their transaction history after the website was hacked. ... Read more

WorkSafe says a testing company failed in its duty as an employer after 13 people contracted legionnaires' disease or pontiac fever at the Fonterra Pahiatua site. One self-employed contractor from New Plymouth was put on life support twice after being exposed to the legionella bacteria, which then developed into legionnaires' disease... Read more

Opinion - Hamish Rutherford: New lending rules are the result of house market problems, not a solution. At a time when home ownership appears to be a vanishing dream for many, almost any move which might tilt the scales towards owner-occupiers should be welcome. But the Reserve Bank's latest move on the housing market looks like policy developed on the hoof, and anyone hoping it will make a material difference to an overheated market is likely to be disappointed.... Read more

Opinion - Liam Dann: Reserve Bank makes the right call... Read more

Opinion - Andrew Gunn: Proposed two-tier system has major flaws. IFA Manager, Member Learning & Development Andrew Gunn says the FAA proposals have some laudable aspirations however it has a major loophole which benefits QFEs.... Read more

Q+A: Jonathan Milne and Vernon Small: Why China cares so much about NZ's steel-dumping probe that it is threatening reprisals... Read more

Opinion - Siah Hwee Ang: ASEAN single market on the backburner... Read more





Australian Headlines

Australian Market Report: The Australian sharemarket has seen its eight-session winning run come to an end, as growing speculation of an August rate cut failed to offset weakness in the materials sector. At the closing bell, the benchmark S&P/ASX 200 index had dipped 7.2 points, or 0.13 per cent, to 5,451.3, while the broader All Ordinaries index edged down 5 points, or 0.09 per cent, to 5,533.9.... Read more

The Australian dollar has fallen after the Reserve Bank minutes set the scene for an August rate cut. At 12.20pm (AEST), the currency was trading at US75.26 cents, down from US75.90 cents yesterday.... Read more

The proportion of Australian home owners falling behind on their mortgage repayments has increased, according to ratings agency Standard & Poor's. The global credit ratings giant said May was the seventh consecutive month where mortgage arrears had increased... Read more

The Reserve Bank says Brexit fears won't hit the global economy too hard, but more sluggish local consumer prices could set the scene for an August rate cut. In the minutes of the July meeting, released on Tuesday, the central bank said updates on inflation, the jobs market and housing activity in the coming month would be important... Read more

The latest minutes from the Reserve Bank show Australia's central bank is set to cut interest rates if the economic outlook worsens and underlying inflation remains weak. Earlier this month, the Reserve Bank kept the official cash rate on hold at 1.75 per cent noting that was the most "prudent" course of action... Read more

Fiji-Australia trade ties almost normalised, says Fijian Government minister... Read more

Helicopter money would help economies trapped in a cycle of below-potential economic growth, but politics and ignorance are standing in the way, Citi's global chief economist Willem Buiter says. Helicopter money is a term used to describe central bank funding of government spending - as if a helicopter were flying over the country dropping freshly printed bank notes... Read more

Tasmanian super funds merger 'a fantastic outcome for investment' in state. The architects of a merger of three Tasmanian public and private superannuation funds say the newly created $7 billion fund will deliver lower fees for members and secure a vital stream of capital investment in the state. Members of the Retirement Benefits Fund, which manages Tasmanian public servants' super, will be transferred to Tasplan in March 2017 after legislation clearing the merger came into effect this week... Read more

Rio Tinto is set to boost iron ore shipments during the second half of the year after maintaining its 2016 guidance of 350 million tonnes, despite posting slightly weaker-than-expected June quarter volumes. The world's second largest iron ore producer lifted shipments from its giant Western Australian operations by six per cent, to 82.2 million tonnes, for the three months ending June 30. Production of the steelmaking ingredient was up eight per cent to 80.9 million tonnes... Read more

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

Odin Energy Ltd (ASX:ODN) has been granted a trading halt by the ASX, pending finalisation of documentation in respect of the company's acquisition of gridComm Pte Ltd (via Austasia Industrial Pty Ltd). gridComm is a technology company that enables data communications across cities’ power grids... Read more

Kasbah Resources Ltd has been granted a trading halt by the ASX, pending a response to a Price Query.... Read more

The good news keeps coming for Dacian Gold with the company announcing another resource upgrade. The aspiring, mid-tier gold miner said today the measured and indicated resources for its Jupiter prospect had risen 69 per cent to 1.1 million ounces. The total mineral resources for the Jupiter prospect had also risen by 19 per cent to 1.4 million ounces. Dacian shares were off 1.5 cents to $3.395 at 9.40am, but the company’s shares have been on a long and steady run higher from a year ago when they were trading around 38 cents.... Read more

Cardinal Resources Ltd has now finalised tranche 1 of a placement by issuing 55.5 million shares, with the final 19.5 million shares subject to shareholder approval at a general meeting to be held in August 2016. The placement was priced at $0.29.... Read more

Matsa Resources Ltd has been granted a trading halt by the ASX, pending details of an acquisition... Read more

Intermin Resources has formed an alliance with Resource Mining for the development of Teal stage 1. Resource Mining will undertake all mining activities and be statutorily responsible for mining operations with oversight from Intermin management. A more formal contractual agreement is expected to be completed in the next 30 days... Read more

Investigator Resources Ltd has capitalised on the renewed interest in silver stocks after receiving firm commitments to raise $5.4 million to fund the South Australian Paris Silver Project. The capital raising comprises the placement of 114,893,617 shares at $0.047 to sophisticated and professional investors... Read more

Renaissance Minerals and Emerald Resources have agreed to merge in a $95 million all-scrip deal. Under the terms of the deal, Emerald will acquire all of the shares of Renaissance that it does not already own by offering 1.55 new Emerald shares for every Renaissance share. Renaissance shares were up 0.4 cents, or 7.02 per cent, to 6.1 cents while Emerald shares were up 0.1 cents, or 2.22 per cent, to 4.6 cents shortly before the close.... Read more

Perth-based mortgage lender Homeloans, whose share register includes Macquarie Group and National Australia Bank, is in talks over a transformational deal. Shares in the company went into a trading halt today pending an announcement regarding “a proposed material transaction that involves a change of control”. The stock last traded at 44¢, capitalising Homeloans at $48.6 million.... Read more

Homeloans Ltd has been granted a trading halt by the ASX today, pending details of a proposed material transaction that involves a change of control... Read more

Independent supermarkets are absorbing the customers that Woolworths is losing, the boss of Australia's largest IGA network claims. Ritchies IGA supermarkets chief executive Fred Harrison says IGA stores are achieving positive like-for-like sales growth - a sign the independent supermarkets' market share is growing, contrary to analysts' belief that share is shrinking and customer numbers are dropping... Read more

The Muir family could retain as much as 40 per cent of The Good Guys business if it knocks back JB Hi-Fi's $850 million offer for the business and goes ahead with a public float slated for November... Read more

Invigor Group Ltd raising cash to expand mobile engagement... Read more

Amaysim buys AusBBS to enter fixed broadband market. Mobile virtual network operator Amaysim has revealed plans to become a fixed-line broadband retail service provider through a $5.45 million takeover of retail service provider AusBBS. The agreement sees Amaysim pick up AusBBS proprietary IT systems, with the low-cost MVNO citing the “scalable and feature-rich platform” for ADSL and NBN provisioning and subscriber management as an influencing factor in the deal... Read more

Online betting companies in tie-in with retailers. Punters will be able to top up their online betting accounts at convenience stores and service stations around the country, following a deal between retailers and ASX-listed card company Emerchants.... Read more

Seattle-based software firm Syntonic will on Wednesday list on the ASX in a reverse-listing that values the company at $60.5 million. Syntonic, founded in 2013, has developed two software products for sponsored data — one for consumers and one for business... Read more

Deloitte has acquired Melbourne-headquartered enterprise integrator Sixtree to form the basis of a new engineering platform unit within the audit firm's technology advisory practice. The value of the deal was not disclosed... Read more

Big-four audit firm KPMG has split its digital operations out from its technology function and welcomed a new chief information officer in former UXC CIO Craig Wishart. Wishart joins the firm after almost two years at the IT integrator and steps into the shoes of Anthony Stevens, who ended three years as KPMG's CIO in March to take on the newly-created position of chief digital officer... Read more

The company behind the nationwide Eagle Boys pizza chain has collapsed. Administrators from Brisbane insolvency firm SV Partners were appointed to Eagle Boys Dial-a-Pizza Pty Ltd on Thursday, but the appointment does not include the chain’s nearly 130 stores, which are owned by franchisees... Read more

Liquidators are refusing to hand over Clive Palmer's private jet unless he covers the costs Queensland Nickel spent on operating and maintaining it, court documents reveal. In an application lodged to the Brisbane Supreme Court, liquidators claim QN spent more than $2 million on the Cessna Citation X, which was bought for $US5 million ($A6.6 million) in late 2011... Read more

Former Seven Group boss Don Voelte loses defamation action against ABC... Read more

Infrastructure giant Thiess will be forced to overhaul its recruitment practices after using illegal employment contracts that threatened to sack and deport migrant workers if they joined a union. Thiess management will also send out letters of apology to the affected workers on Wednesday, concluding a 12-month investigation by the Fair Work Ombudsman... Read more

Opinion/Analysis - Adele Ferguson: Private equity's botched pizza strategy. It's the tale of two pizza companies. At Eagle Boys, long-suffering employees, minority shareholders and franchisees are trying to come to grips with how the outfit went from being a sound, profitable business to one that is now in administration. The runaway success of rival Domino's has made Eagle Boys' descent into disaster even more fascinating.... Read more





International Headlines

U.S. Market Report: U.S. stocks ticked lower on Tuesday as mixed earnings reports dented investor optimism entering the earnings season, while lower expectations of global growth also weighed on sentiment. The S&P and the Nasdaq were pulled down by Netflix and health stocks, while the Dow's fall was cushioned by Johnson & Johnson's strong results.... Read more

North/South Americas Market Report: North and South American markets are mixed today. The IPC is up 0.18% while the Bovespa gains 0.07%. The S&P 500 is off 0.24%... Read more

European Market Report: European markets finished mixed as of the most recent closing prices. The FTSE 100 gained 0.03%, while the DAX led the CAC 40 lower. They fell 0.81% and 0.63% respectively... Read more

Asian Market Report: Asian markets finished mixed as of the most recent closing prices. The Nikkei 225 gained 1.37%, while the Hang Seng led the Shanghai Composite lower. They fell 0.60% and 0.23% respectively... Read more

U.S. housing starts rise in June; momentum slowing... Read more

Goldman Sachs Group Inc., the Wall Street bank most reliant on trading, posted a 74 percent increase in second-quarter profit as revenue from fixed-income trading and debt underwriting surpassed analysts’ estimates. Expenses declined less than some projections... Read more

Yahoo gave no update on attempts to sell its core internet business as the firm slumped to a $440m (£332m) loss in the second quarter. Investors are likely to be disappointed by the lack of an update on the sale of its search and advertising operations... Read more

SABMiller directors will tomorrow discuss mounting frustration among some of the FTSE 100 brewer’s shareholders with the terms of its £77bn takeover by rival Anheuser-Busch InBev. The SAB board is due to convene ahead of the company’s annual general meeting on Thursday. It is thought that increasing investor pressure for SAB to seek a higher cash offer from Stella Artois-owner AB InBev will be a topic of discussion... Read more

Netflix price rises prompt subscribers to turn off. Netflix shares fell sharply after the video streaming firm added fewer subscribers than expected ahead of US prices rises. The company added 1.68 million users in the three months to June - well below its forecasts of 2.5 million.... Read more

U.S. seed company Monsanto Co turned down a sweetened $64 billion acquisition offer from Bayer AG, but said it was open to further talks with the German healthcare and chemicals group as well as other parties. The widely expected rejection puts pressure on Bayer to sweeten its offer once again, at least enough to get access to Monsanto's books. The two companies have been in negotiations about a potential confidentiality agreement, Reuters reported on Monday... Read more

Johnson & Johnson on Tuesday raised its full-year 2016 sales and earnings forecasts and reported quarterly results that beat estimates, helped by strength in its prescription drugs business. Shares of the diversified healthcare products maker rose 1.6 percent at $125.06 on the New York Stock Exchange after touching a new record high of $125.75.... Read more

The new U.K. chancellor of the exchequer, Philip Hammond, said he’ll wait until his end-of-year policy statement to Parliament before announcing any new tax and expenditure measures following Britain’s vote to leave the European Union.... Read more

Brexit could mean weakest global growth since 2009. Britain's vote to leave the European Union is already weighing on the world economy and could push growth below 3% for the first time since the global financial crisis. The International Monetary Fund on Tuesday cut its forecast for global economic growth by 0.1% to 3.1% for 2016, a result that would match last year's pace of expansion.... Read more

IMF slashes UK growth forecasts after Brexit - but Britain will still outstrip Germany, France and Italy... Read more

Brexit bargain hunters are descending on London. Commercial property buyers are lured by the combination of the cheap pound and declining value of London real estate.... Read more

U.K. inflation accelerated more than economists forecast in June, boosted by airfares on trips to continental Europe. The rate rose to 0.5 percent from 0.3 percent in May, the Office for National Statistics said in London on Tuesday. Economists had expected 0.4 percent, according to the median estimate in a Bloomberg survey. Core inflation, which excludes volatile food and energy prices, strengthened to 1.4 percent... Read more

Four truck manufacturers have been fined a record €2.93bn (£2.46bn) by the European Union (EU) for colluding on prices and passing on the costs of emissions-reducing technology. The European Commission said Daimler, DAF, Iveco, MAN and Volvo/Renault colluded over 14 years to fix prices. VW-owned MAN avoided a fine as it blew the whistle on the cartel... Read more

BT Group Plc is using its control of the U.K.’s main broadband network to favor its own interests and regulators should consider a breakup unless the company steps up investment and gives rivals better access, a parliamentary select committee said. If BT fails to “offer the reforms and investment assurances necessary to satisfy our concerns, telecommunications regulator Ofcom should move to enforce full separation of Openreach,” as the broadband grid is known, the panel said in a report Tuesday... Read more

Lockheed Martin raises forecast as quarterly sales beat... Read more

Top Volkswagen executives engaged in a "massive fraud" to intentionally sell diesel cars that violated emissions rules, according to a lawsuit filed Tuesday by the New York and Massachusetts attorneys general. VW has admitted that about 500,000 diesel cars it sold in the U.S. had software designed to cheat on emissions tests. But it repeatedly claimed the deception was executed by lower level employees, without any knowledge of top executives... Read more

Deutsche Bank AG named Patrick Frowein and Berthold Fuerst co-heads of corporate finance for Germany, Austria and Switzerland in the latest shake-up at Europe’s biggest investment bank. Frowein, most recently co-head of global industrials, and Fuerst, the co-head of mergers and acquisitions in Europe, the Middle East and Africa, will focus on providing investment banking products and advice to clients in German-speaking countries, according to an e-mailed statement from the Frankfurt-based lender... Read more

Officials say inflation in Nigeria soared to 16.5 per cent in June, with household and utility costs up 24.2 per cent. Africa's biggest and most import-dependent economy is struggling with foreign currency shortages and a much-devalued local naira currency amid low oil prices. Meanwhile, militant attacks on oil pipelines and other installations have cut petroleum production... Read more

The Asian Development Bank has cut cut its 2016 growth projection for developing economies in Asia and the Pacific, but still believes economic performance will remain solid and help offset US economic softness and Brexit's near-term market shocks. It now expectes to 5.6 per cent growth, down from its earlier forecast of 5.7 per cent... Read more

State-run carriers China Telecom Corp. and Saudi Telecom Co. have expressed interest in acquiring 4G mobile-phone licenses offered by the Egyptian government, joining Kuwait’s Zain, which made an official request last week, a Communications Ministry official said... Read more

Shares in Japan's Softbank fell by more than 10% on Tuesday after being hit with a glut of sell orders following its purchase of ARM Holdings. The £24bn ($32bn) deal for the UK chip designer is Softbank's biggest acquisition. Investors could not react to the takeover on Monday as the Tokyo stock market was closed for a holiday... Read more

Can anything stop the great Nintendo rally of 2016? Nintendo shares had another banner day on Tuesday, surging more than 14% in Tokyo amid widespread mania over the company's sensational Pokemon Go game... Read more

Pokemon Go Offers Glimpse Into $32 Billion SoftBank-ARM Deal... Read more

India to Inject $3.4 Billion to Boost Capital at State Banks... Read more

Opinion - Mariana Mazzucato and Michael Jacobs: If Theresa May is serious about inequality she’ll ditch Osbornomics. The inequality speech could have been lifted from Ed Miliband. But if she really means it she must reverse austerity and introduce a new industrial strategy... Read more

Opinion - James Titcomb: ARM's sale is not a national tragedy... Read more

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