ASB Securities Morning Brief for Monday, 14 April 2014
Monday, 14 April 2014

New Zealand Headlines

New Zealand Market Report: New Zealand stocks joined a global sell-off amid concerns high-growth companies may struggle to convert sales into profits, led lower by biotech firm Pacific Edge and software developer Xero. The NZX 50 Index fell 24.058 points, or 0.5 percent, to 5091.431. Within the index, 28 stocks fell, 11 rose and 11 were unchanged. Turnover was $101.8 million... Read more

The New Zealand dollar fell as weak equity markets around the world sapped demand for risk-sensitive assets, though the prospect of higher interest rates will likely give the local currency support. The kiwi dropped to 86.39 US cents at 5pm in Wellington from 86.84 cents at 8am and 87.17 cents yesterday. The trade-weighted index sank to 80.02 from 80.83 yesterday... Read more

'Paper thin' surplus, no ban on foreign house buyers - English on Budget 2014... Read more

Budget 2014: Tax changes to address bracket creep... Read more

Inflation expected to climb inexorably. Annual inflation is expected to be steady at 1.6 per cent in figures out this week but that will not stop the Reserve Bank lifting interest rates this month. Westpac Bank economists are expecting March quarterly inflation of about 0.4 per cent and an annual rate of 1.6 per cent, when official figures are released on Wednesday. If it hits 1.7 per cent, as some economists expect, it would be the highest rate of inflation for a couple of years... Read more

There are clear signs that national house sales turnover is easing, especially among cheaper properties, the Real Estate Institute says. It has released its latest monthly statistics, showing there were 7315 sales in March, down 10% on the same month in 2013. March is often the busiest month of the year for house sales. The national median price reached a new record of $440,000, up more than $40,000 on March 2013. Auckland had another record high median of $637,000 and Canterbury also recorded a new high, of $401,000.... Read more

Labour leader David Cunliffe told TVNZ’s Q+A programme that a Labour led government would impose a capital gains tax of 15% on realised gains from investment property. He says the family home would be exempt. ‘I’m comfortable with that because speculators are driving this market, and to make matters worse, according to the BNZ and Real Estate Institute about 12% of speculative house buyers, all house buyers last year in Auckland came from non-resident foreigners. Non-resident foreigners who have access to cheap finance are driving up the price of homes in New Zealand, so young Kiwis can’t get into their own homes.’ When questioned on why a capital gains tax isn’t working in Australia, Mr Cunliffe said, ‘the problem would be worse if they didn’t have it.’... Read more

Landlords take aim at WOFs. Property investors around the country are writing to their local MPs, urging them to support Labour MP Phil Twyford’s Healthy Homes Guarantee Bill – and not rental property warrants of fitness. NZPIF executive officer Andrew King said Twyford’s bill was sensible and pragmatic, tackled the two biggest problems – cold and damp – and would not incur the same compliance costs as a rental WOF scheme. A form letter has been distributed to the members of many property investors associations... Read more

Affordable Housing 20 years away - Housing Minister Nick Smith... Read more

Homeowners left exposed. Insurers are being urged to lift the figures they use to estimate rebuild costs when working out the "default" sum insured they offer homeowners, or many people risk not having enough money to replace their houses if disaster strikes. Leading quantity surveyor Construction Cost Consultants has just completed a report that showed a wide gap between the per square metre default rebuild costs assumed by insurers and the actual cost of the rebuild as estimated by expert quantity surveyors. Insurers must lift the per square metre rebuild cost figures they use or that gap would leave many grossly underinsured if disaster struck, said CCC general manager Gary Caulfield.... Read more

Manufacturers told to focus on managing risks. Bank of New Zealand economist Craig Ebert says manufacturers need to focus on managing the risk of significant movements in interest rates and the currency. Mr Ebert says the economy and financial markets are at an inflection point, or crossroads, and the currency and interest rates could move significantly from here. The warning came as the latest BNZ-Business NZ's performance of manufacturing index rose 1.9 points to 58.4 in seasonally adjusted terms, its highest level since July last year... Read more

Calls for Easter shop laws overhaul. Overly restrictive Easter trading laws have driven shoppers online at the expense of stores and Parliament should change the "outdated" law after the election, retailers say. Retail Association chief executive Mark Johnston said consumers were increasingly shopping online on Good Friday and Easter Sunday when most shops were forced to shut. According to electronic transactions operator Paymark, Good Friday, Easter Sunday and Anzac Day are three of the four slowest shopping days of the year... Read more

The Warehouse Group boss Mark Powell says the company's turnaround strategy is heading in the right direction but an overhaul of its core Red Sheds business still needs to deliver a bigger lift in profit. New Zealand's largest listed retail firm is two-thirds of the way through a $180 million refurbishment programme of its The Warehouse (Red Sheds) stores. It has also made 11 acquisitions in the last 18 months, including electronics seller Noel Leeming and its 51 per cent stake in online sports gear retailer Torpedo7. The Warehouse Group reported total sales of $1.42 billion in its half-year result, a 29.5 per cent lift on the prior period, while adjusted net profit fell 12.5 per cent to $46.2 million. The retailer completed a $115 million capital raising last week that will fund its move into financial services. Shares closed steady at $3.20 on Friday.... Read more

Shareholders in Renaissance Corp, which sold its last business unit earlier this month, are unlikely to receive any payments before June in what will probably be a two-part distribution if they decide to liquidate the company. Chairman Colin Giffney told shareholders at today's annual meeting in Auckland the board wants to wrap up existing leases and contracts before appointing a liquidator, which investors will then vote on... Read more

CricHQ delivers master stroke. Scoring a deal with global mobile phone company Nokia could drive CricHQ to more than two million users, the company's greatest stroke of its four-year career. But getting direct exposure to India's 900 million mobile phones and Nokia's 40,000 stores during the upcoming Indian Premier League tournament, starting this week, has the company looking ahead to the fifth day. The Wellington-based cricket technology company has signed a deal with Nokia that will see its app become available on the mobile brand's X, Lumia and Asha range of phones... Read more

Tough competition between Air New Zealand and Hawaiian Airlines has doubled the number of passengers flying to Honolulu. A year after breaking Air New Zealand's monopoly on the route, Hawaiian Airline's chief executive Mark Dunkerley said the airline had "undoubtedly" helped improve tourism flows to New Zealand. Hawaiian Airlines had aggressively marketed New Zealand as a premium destination to Americans and forced Air New Zealand to increase capacity and decrease airfares, Dunkerley said... Read more

NZ Credit Union accused of brand hijack... Read more

A Kiwi who uses a silver fern symbol on his Twitter account has been warned about copyright infringement by a government agency. The New Zealander said he chose the fern for his profile picture and background because it was a "symbol of who I am". But last week he received an email from New Zealand Trade and Enterprise asking him to remove it. "While it's great promotion and we're sure it's unintentional, the Fern Mark is a registered trademark and unfortunately this use is breaching copyright," the email said. The move has been questioned by a trademark lawyer, who says the symbol's use on a personal Twitter account is unlikely to be an infringement... Read more

Capital swift to make use of fibre. Wellington's small-and-medium-sized businesses have outpaced their counterparts in other centres in getting connected to ultra-fast broadband, with a quarter of the firms who took part in a survey saying they are hooked up to a fibre-based internet network. This compares with 16 per cent of small-and-medium-sized enterprises (SMEs) surveyed in Auckland and 10 per cent of the Christchurch respondents... Read more

Chorus will appeal a High Court ruling upholding the Commerce Commission's determination setting the regulated prices on the telecommunications network operator's copper lines. The Wellington-based company said it has sought leave to appeal Justice Stephen Kos's judgment this week, which tossed out its attempt to set aside the regulator's initial pricing principle (IPP), which directed the price Chorus can charge for unbundled bitstream access (UBA) services... Read more

NZ fertility services firm establishes clinic in Malaysia... Read more

The Kiwi who helped Vodafone make billions more, on a single deal, is honoured in the UK... Read more

Debt fugitives owe $250m. Hundreds of New Zealanders facing financial ruin have fled the country, leaving a quarter of a billion dollars in unpaid bills behind them - and they can't be forced to pay the money. According to the Ministry of Business, Innovation and Employment, 833 people left New Zealand over the past decade for all points of the globe, where they filed for bankruptcy to dodge compulsory repayments. One such owed $7.5 million. Figures released under the Official Information Act show that since 2003, $225m debt has been racked up, with just $308,700, or 0.13 per cent, repaid to unsecured creditors.... Read more

The royal visit on Saturday did not equal a royal flush for local businesses in Cambridge. Local retailers the Times spoke to said business did not boom as well as the atmosphere did. However, the day had thrust the small Waikato town onto the international stage, a move Chamber of Commerce chief executive Raewyn Jones said was brilliant for the town's image... Read more

Analysis - Hayley Buckley: Exploding the crowdfunding myths. Once again, New Zealand is leading the way in business reform. New laws allowing equity crowdfunding fundamentally change the way that private companies can raise funds, and give them a meaningful, cost effective and efficient way of doing so... Read more

Opinion - Bernard Hickey: Young and poor to pick up cheque for public assets... Read more





Australian Headlines

Australian Market Report: The Australian market looks set to open sharply lower after big falls on Wall Street led by tech stocks. At 0645 AEST on Friday, the June share price index futures contract was down 52 points at 5,424. The Nasdaq closed down 3.10 per cent with investors anxious about pricey technology equities. The Dow Jones Industrial Average sank 1.62 per cent while the broad-based S&P 500 fell 2.09 per cent... Read more

The Australian dollar is below US94c in late trade following a fall in global equity markets. At 5pm (AEST), the local currency was trading at US93.74c, down from US94.38c yesterday. The local currency hit a high of US94.19c and a low of US93.62c during the day's trade. Australian and Asian sharemarkets opened lower today following a sharp slide on Wall Street overnight, driven by a plunge in tech stocks. That impacted on risk appetite, dragging the Australian dollar lower, National Australia Bank global co-head of FX strategy Ray Attrill said.... Read more

Budget 2014: Treasurer Joe Hockey urged to cut deep... Read more

Hockey tips retirement age of 70. Generation X Australians should be prepared to work until age 70. In a strong indication that the nation's workers face an increased retirement age, Treasurer Joe Hockey, 48, admits his contemporaries will likely have to keep working until they reach their eighth decade. "It may be the case that my generation has to work for an extra three years," Mr Hockey told ABC TV on Sunday... Read more

Premier confident Tasmania will benefit from his Asian trade mission... Read more

Prime Minister Tony Abbott says his trip to Asia was a success and much of the surrounding commentary has been positive, but Labor and the Australian Greens are yet to be convinced. His week-long visit saw a trade agreement finalised in Japan and another signed in South Korea... Read more

Record-breaking number of properties go under hammer in Melbourne... Read more

Young workers too picky with first job as Generation Success tackles youth unemployment. Geneeration Y workers may be perfectly poised to excel in the workplaces of the 21st century but the inflated expectations of young workers means many are unwilling to take any role as their first job, a new survey has found. Youth unemployment is running at around 20 per cent in many suburbs but more than 70 per cent of older workers say gen Y’s refusal to accept lower paid and often boring roles as a starting point is part of the problem.... Read more

Engineering construction activity is expected to slump 25 per cent by 2018, hitting employment and economic growth, latest research warns. Construction work is expected to slip 11 per cent in 2015, with further falls over the following three years, according to construction industry analyst and economic forecaster, BIS Shrapnel. Research for the Engineering Construction in Australia report said falling investment in resources-related projects was a major factor... Read more

Nickel markets could repeat price spikes witnessed during the 2006-07 global supply shortages if Indonesia maintains its export ban, according to Macquarie Group. The basic metal has rallied 25 per cent since mid-January, when Jakarta moved forward with its export ban. The ban was legislated in 2009 as part of mining law reforms. “Such a strong rally is in line with our expectations...that prices would rally towards $20,000/t by the end of 2014, but is well ahead of where we would have predicted the price to be by now,” said the investment bank in a note to investors... Read more

Influential advisers to large shareholders plan to protest against excessive exit packages for Leighton Holdings' former top executives at the contractor's annual meeting next month as some criticise its new Spanish chief executive for failing to address minority investors' concerns. "The Spanish have been very unresponsive," said Aaron Bertinetti, a director of CGI Glass Lewis. He said Leighton's new CEO, Marcelino Fernandez Verdes, had recently dropped out of a conference call on corporate governance and remuneration with the proxy group and other Leighton executives... Read more

Suncorp CEO Patrick Snowball says only few years before customers make most purchases online... Read more

AMP makes pitch to stymie big four's dominance... Read more

Bank of Queensland has increased its first half cash earnings by 17 per cent to $140.2 million. The bank's statutory net profit after tax also rose, by 34 per cent to $134.7 million. The bank said the result was driven by a strong improvement in net interest margins, which were up 11 basis points to 1.77 per cent. An interim dividend of 32 cents per share, fully-franked, was declared, a four cent increase in line with expectations.... Read more

To achieve growth, analysts say the most likely course for BoQ is the continuation of acquisitions... Read more

Thousands of jobs could be at risk from an aggressive push into automotive spare parts mounted by insurer Suncorp and a controversial US company, the crash repair industry warns. Queensland-based bancassurance Suncorp, which controls swathes of the auto insurance industry through household names including AAMI, GIO and Bingle, has entered a joint venture with Nasdaq-listed LKQ, which has been under pressure from short-sellers over allegations it has exaggerated its revenue growth. Last month the joint venture, ACM Parts, made its first move, snapping up NSW vehicle salvage business Frank's Parts for an undisclosed sum... Read more

Brownes pores over milk plan. A WA processor is targeting bulk fresh milk exports to China as the State Government continues to shop around for a major overseas investor in the dairy industry. Brownes managing director Ben Purcell warned that tough trading conditions were holding back the local industry despite the demand on WA's doorstep.... Read more

Spud men spit chips over free market. Potato growers have warned that consumers could be left with a $100 million compensation bill if the State Government acts on advice to deregulate the industry.... Read more

Victoria's Premier Denis Napthine has pledged to build a rail link between Melbourne and the city's airport at Tullamarine. Speaking to delegates at the Liberal State Council, Dr Napthine said the Coalition's plans would be outlined in the upcoming Victorian budget. "This project has been on the books for over 40 years. Thirty million passengers a year use Melbourne Airport and that is expected to double in the next 20 years," he said. "Our airport rail link will provide high capacity, efficient service on a regular basis to Melbourne Airport... Read more

The Abbott government won't confirm whether it's planning to cut the ABC's budget but says any business can be more efficient. The federal government is considering a number of options to trim the public broadcaster's funding, with cabinet discussions centred on how deep and politically feasible the cuts will be, Fairfax Media reports. Labor says any cuts to the ABC would break a promise Prime Minister Tony Abbott made the night before the election... Read more

Greg Hywood commits to top job as Fairfax diversifies... Read more

A royal commission into union corruption and slush funds will uncover "dark secrets" that could raise uncomfortable questions for Opposition Leader Bill Shorten, a senior Liberal says. Government Senate leader Eric Abetz said he expects the commission may find instances where trade union funds have been used to back pre-selections and internal Labor ballots. "Those that have been dabbling in that dark art of Labor faction fundraising and bankrolling will undoubtedly be embarrassed if these matters come to light," Senator Abetz told the Ten Network. The disappearance of funds from the Australian Workers Union could spark one line of questioning.... Read more

Security researcher reports breach. An unknown number of subscriber email addresses have been breached on websites operated by Australia's consumer watchdog, including the security service SCAMwatch. The Australian Competition and Consumer Commission is currently investigating how much of its subscriber base was affected across its Recalls Australia, Product Safety Australia, SCAMwatch and Public Registers websites... Read more

Opinion/Analysis - Tom Richardson: Are these value stocks set for the best returns over a 5-year time horizon?... Read more

Opinion/Analysis - Michael West: Online betting unmasked: so, are we all being gamed by an entire industry?... Read more

Opinion - Rob Burgess: Hockey must work an economic miracle... Read more

Opinion/Analysis - Michael Janda: Woolworths' David Jones takeover a risky bet on Australian retail... Read more





International Headlines

U.S. Market Report: Markets are finally closed for the week after a truly bumpy ride that ended with investors running for the exits Thursday and Friday. The weakness in the technology sector appears to be spreading to the broader stock market. The Nasdaq was the biggest loser. The tech-heavy index fell more than 1.3% to end below 4,000 for the first time since early February. It lost 3.1% for the week. The Dow Jones Industrial Average fell 143 points after JPMorgan (JPM, Fortune 500) reported weaker-than-expected earnings growth. The blue-chip average sank 2.3% for the week, falling after three weeks of gains.... Read more

North/South Americas Market Report: North and South American markets finished mixed as of the most recent closing prices. The Bovespa gained 1.45%, while the S&P 500 led the IPC lower. They fell 0.95% and 0.17% respectively... Read more

European Market Report: European markets finished sharply lower on Friday with shares in Germany leading the region. The DAX is down 1.47% while London's FTSE 100 is off 1.21% and France's CAC 40 is lower by 1.08%... Read more

Asian Market Report: Asian markets finished broadly lower on Friday with shares in Japan leading the region. The Nikkei 225 is down 2.38% while Hong Kong's Hang Seng is off 0.79% and China's Shanghai Composite is lower by 0.18%.... Read more

Inflation Rears Its Head as Food Prices Rise Again. U.S. producer prices recorded their largest increase in nine months in March as the cost of food and services rose, pointing to some pockets of inflation at the factory gate.... Read more

The highest beef prices since 1987 are hitting the hip pockets of home cooks and restaurant owners in the US.... Read more

Lawmakers release 250,000 GM recall documents... Read more

IBM Squeezing Israel Cyber Guru as $584 Million Wiped Out. Shlomo Kramer, the Israeli entrepreneur who made his name by co-founding the world’s second-largest security networks maker, is seeing investor support vanish for his latest cyber venture. Imperva Inc. (IMPV), the Redwood Shores, California-based company that builds security systems for data centers, sank 44 percent last week after scaling back its first-quarter revenue growth outlook to a third of its previous forecast. Almost all of the declines came in a single day, April 10. The rout erased $584 million of market value and sent the stock to a 20-month low... Read more

A bigger 10%-15% correction is coming this autumn: Bank of America Merrill Lynch... Read more

Global capital flows are increasingly herdlike and volatile, making it harder for emerging economies to lock down capital, the International Monetary Fund says. The increased global power of bond funds, mutual funds and exchange traded funds, often underpinned by the savings of small investors, has made capital flows more fickle and risk-sensitive. That means countries on the receiving end have to work harder to hold on to capital, said Tharman Shanmugaratnam, chairman of the IMF's steering committee... Read more

The European Central Bank (ECB) has said it will provide "further stimulus" to the eurozone economy if inflation in the bloc continues to remain low. Mario Draghi, the bank's president, said a stronger euro would act as a trigger to looser monetary policy. The rise of the single currency's exchange rate is one of the main reasons eurozone inflation is at a dangerously low 0.5%. One of Mr Draghi's stimulus options would be quantitative easing (QE)... Read more

World finance chiefs fall short on growth plan. Leading economic policymakers meeting in Washington voiced worry Friday that the Ukraine crisis could hurt the world economy, but fell short of taking concrete action to strengthen growth amid signs of discord. Meeting on the sidelines of the IMF/World Bank spring meetings, G20 finance ministers and central bank chiefs pledged to follow up on reforms and support a $27 billion rescue program for Ukraine, even as Russia continues to menace its neighbor. But there was little firm action on how to stimulate world growth further, prompting Australia's Treasurer Joe Hockey, whose country leads the G20 this year, to label the sketchy plans "clearly inadequate."... Read more

The G20 pressed the United States on Friday to ratify crucial IMF reforms... Read more

World must end 'dirty' fuel use - UN. A long-awaited UN report on how to curb climate change says the world must rapidly move away from carbon-intensive fuels. There must be a "massive shift" to renewable energy, says the 33-page study released in Berlin. It has been finalised after a week of negotiations between scientists and government officials. Natural gas is seen as a key bridge to move energy production away from oil and coal.... Read more

A sale of several hundred German battle tanks to Saudi Arabia is likely to be cancelled because of opposition from Social Democrat Economy Minister Sigmar Gabriel, a German newspaper reported on Sunday. German media have reported interest by Saudi Arabia in buying up to 800 Leopard 2 tanks from Germany. Such reports are never confirmed because of the sensitivity of arms deals... Read more

The Co-operative Bank has confirmed it made a loss of £1.3bn for 2013. The losses, in line with expectations, come after the bank's failed bid to buy 632 branches from Lloyds Bank last year. The deal collapsed after the discovery of a £1.5bn black hole in the Co-op Bank's balance sheet. Parent company the Co-operative Group lost control of the bank to a group of US hedge funds that launched a rescue deal in December. The bank said it did not expect to make a profit in 2014 or 2015. It also apologised to its 4.7 million customers.... Read more

House of Fraser sells 89% stake to Chinese conglomerate Sanpower. Department store sells majority stake in £480m deal touted as largest overseas retail acquisition by Chinese business... Read more

Call it the Great Stretch. Two years ago, Greece's debt crisis almost brought the euro zone crashing down. Now European partners are preparing to ease Athens' debt burden without writing off their loans but by stretching them out into the distant future, extending maturities from 30 to 50 years and further cutting some interest rates, EU officials say. Greece made a successful, if artificially engineered, return to the long-term capital markets last week for the first time since its international bailout in 2010, and just two years after imposing heavy losses on its private creditors.... Read more

Europe's top banks cut 80,000 more staff in post-crisis overhaul... Read more

Putin plays gas card in Ukraine crisis. Vladimir Putin has warned Europe it may face a shutdown of Russian natural gas supplies if it fails to help Ukraine settle its enormous Russian gas bill - a debt that far exceeds a bailout package offered by the International Monetary Fund. The Russian President's letter to 18 mostly Eastern European leaders, released yesterday by the Kremlin, aimed to divide the 28-nation European Union and siphon off to Russia the billions that the international community plans to lend to Ukraine... Read more

US Treasury Secretary Jacob Lew has urged other countries to contribute more to the economic rescue of Ukraine. He told the International Monetary Fund (IMF) that Ukraine's "sizeable financing needs" meant other nations must add to its $1bn (£597m, 720m euros) loan guarantee. The appeal came as Ukraine's interim prime minister offered to devolve more powers to eastern regions. Pro-Russian separatists there are defying the government... Read more

Symrise AG’s planned 1.3 billion-euro ($1.8 billion) purchase of French flavors and pet-food additive maker Diana Group helps the German company close the gap on larger rivals Givaudan SA and International Flavors & Fragrances Inc. The company has entered into exclusive talks with owner Paris-based buyout firm Ardian Sarl, formerly known as Axa Private Equity. A deal is expected to be completed in the third quarter, Holzminden, Germany-based Symrise said in a statement. It expects the acquisition to be earnings accretive from 2015... Read more

China water contamination affects 2.4m after oil leak... Read more

Prime Minister Shinzo Abe’s bid to vault Japan out of 15 years of deflation risks losing public support by spurring too much inflation too quickly as companies add extra price increases to this month’s sales-tax bump. Businesses from Suntory Beverage and Food Ltd. to beef bowl chain Yoshinoya Holdings Co. have raised costs more than the 3 percentage point levy increase. This month’s inflation rate could be 3.5 percent, the fastest since 1982, according to Yoshiki Shinke, the most accurate forecaster of Japan’s economy for two years running in data compiled by Bloomberg... Read more

Analysis - Stephen Evans: Germans not keen to ruffle Russian feathers... Read more

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