Markets Live: 10% of stocks at highs
3:49pm: Turning to todays best and worst among the top 200 stocks, and precious metal miners are over represented in the biggest gains. Mining services business Ausdrill muscled its way on to the winners list, adding 6.8 per cent and without any obvious catalyst.
The worst was oil and gas explorer Buru Energy, which crashed 19 per cent off the back of an underwhelming update on drilling at one of its wells. UGL was next worst, dropping 12 per cent after reporting interim profits and being forced to defend allegations from a former executive that the engineering company had cooked the books.
Ansell fell 5.1 per cent despite what looked pretty good profit numbers.
Pacific Brands was off 3.4 per cent after the company reported to a speeding ticket from the ASX asking why its share price was running so hot. Pacifics answer? No idea. Its up around 10 cents to 72 cents this month, even after todays fall.
Best and worst performing stock sin the ASX 200. Upvotes:0 Downvotes:0 Copy Link
3:30pm: Another good day in the markets, with investors pushing the benchmark ASX 200 index up 27 points, or 0.5 per cent, to reach 5376.9 and make fresh highs for the year, despite CBA shedding 2.2 per cent after going ex-dividend.
The broader All Ords finished up 22 points to 5389.2.
NAB shareholders enjoyed a 1.9 per cent gain in the share price to $34.75.
Rio Tinto did even better, gaining 2.4 per cent, while BHP ended the day 0.8 per cent higher. Fortescue joined in the general optimism around miners following the bullish China credit figures, released Saturday. Fortescue jumped 2.1 per cent.
Gold miners had another fantastic day, led by Newcrest (up 3.6 per cent), gaining 3.9 per cent as a group.
Health care was among the best corners of the market, up 1 per cent after CSL climbed 2.2 per cent.
Consumer staples was the only sector to move backwards, falling 0.1 per cent after Wesfarmers dropped 0.6 per cent ahead of its interim results, which are due Thursday.
Ansell was among the bigger losers, 5.1 per cent lower; the market found something not to like in the companys strong interim profit results. Upvotes:0 Downvotes:0 Copy Link
3:06pm: Textiles, clothing and footwear company Pacific Brands says it is at a loss to explain the reason for a recent run up in its share price which has seen shares in the underwear and workwear group gain 16 per cent since February 3.
Hit with a ‘please explain’ from the ASX after its shares rose from 64¢ on February 3 to 74.5¢ today, the company said it was unaware of any information that has not been announced to the market.
Shares in Pacific Brands eased slightly after the company said it had no new news to announce, and are trading weaker at 72.5¢, down 2.7 per cent.
The speeding ticket comes as Pacific Brands, owner of popular consumer brands such as Bonds, Holeproof, Hard Yakka and Sheridan, prepares to unveil its first half results tomorrow with a downgrade at the group’s AGM in October already setting the scene for an earnings slump.
Citi analyst Craig Woolford expects Pacific Brands to report first half core net profit of $32.9 million, reflecting a 15 per cent decline with sales tipped to soften by 0.7 per cent in line with commentary given at the shareholders’ meeting last year.
PacBrands is at a loss to explain its recent share spike. Upvotes:0 Downvotes:0 Copy Link
3:01pm: Australand sold about 15 per cent of the homes in its residential developments to offshore investors in 2013, primarily Chinese, almost double the average of 8 per cent historically, managing director Bob Johnston told Bloomberg.
The Australand boss also said:Sydney, where Australand has many apartment projects, has been a “standout,” for investor and offshore demand.The company markets certain projects it deems will be attractive to Chinese buyers on mainland through a Hong Kong office it opened roughly 10 yrs ago.Australand expects Chinese demand to continue at same level in 2014.The company not expecting further housing project writedowns after ~A$65m impairments taken in November.The property developer is “open to exploring options that add shareholder value,” Johnston said, declining to comment directly on media reports it may sell half of residential development business.
The company today reported full year 2013 net profit of $135.3m, down 25 per cent year-on-year. Australand shares are flat at $3.93. Upvotes:0 Downvotes:1 Copy Link
2:35pm: Has BHP Billiton been reconsidering its dual listing on the Australian and London stock exchanges? The official line from the worlds largest diversified resources is that no serious work has been done on collapsing the dual-listed company structure.
Yet there are those who remain convinced that in the second half of 2013 a team was assembled to look at simplifying parts of the vast $121 billion business, including the dual listings.
The project was known as “unification”, according to multiple sources, and later focused on simplifying internal processes, financial management and legal entity structures.
It had the blessing of chief executive Andrew Mackenzie, who assumed the top job in May and will hand down what is expected to be a $US6.9 billion interim profit on Tuesday.
Everyone agrees that it was eventually decided that it would be too difficult to collapse the dual-listed structure. Not only would it be a highly complicated task but there were doubts the Australian market could handle a company with a market cap almost twice the size of CBA.
But there is no mistaking the symbolic importance of the work that was done.
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2:35pm: As Myer prepares to dust off its $3 billion merger proposal for David Jones, research suggests the combined group could lose millions of loyal customers unless they successfully differentiate their brands.
Analysts say David Jones risks losing about 26 per cent of its customers - those who only shop at the upmarket department store rather than its mid-market rival - if the merger of equals is mishandled - if cost cutting, sourcing and sharing of services went too far and each chain lost its identity.
According to Roy Morgan data, about 74 per cent of the 3.4 million customers who shopped at David Jones last year also shopped at Myer, which served around 5.8 million customers.
Anything that blurs the boundaries between the department stores could create more problems and this data backs that up, one analyst said.
The biggest risk is the customers who dont shop at both - they should be able to retain those customers who shop at both (Myer and David Jones), he said. They might not be as loyal to David Jones if its no longer as differentiated from Myer because its owned by Myer.
According to Roy Morgan, the typical David Jones shopper spends on average $195 at its stores in a four-week period - about $30 more than the typical Myer customer.
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2:04pm: UGL has described as ‘‘vexatious’’ a claim by a former employee that it had cooked the books, saying that the claim has ‘‘no substance’’.
‘‘It’s a vexatious claim,’’ UGL chief executive Richard Leupen told journalists when discussing the group’s December half earnings earlier Monday.
‘‘There is no substance to it.’’
Earlier on Monday, News Ltd publication The Australian, reported that a former property services chief within UGL, Robert Shibuya had lodged a claim in a US court that he had been sacked for complaints about the company ‘‘cooking of the books by misstating financial results and manipulating employee bonuses so as to deceive investors’’.
‘‘If it is a regulatory [issue] then go to the authorities’’, Mr Leupen said, going on to say there was no indication that a regulatory complaint had been lodged.
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An exterior view of the Kirribilli mansion. Photo: Realestate.com.au
1:34pm: Is this a sign the Reserve Bank thinks Sydneys property market has peaked?
The RBA has listed for sale the six-bedroom, 920-square-metre Eversley mansion near the northern end of the Sydney Harbour Bridge through broker Ray White Group, according to a listing on realestate.com.au.
No price guide was given for the property in Kirribilli, where the median house price is $2.35 million.
Its a sellers market quite clearly, there are plenty of buyers out there, not many listings, and prices are rising, so its not a bad time to sell, said Louis Christopher, managing director of Sydney-based real estate data provider SQM Research. Its a little bit perplexing as to why the RBA was holding residential property.
The Reserve Bank bought Eversley, at 10 Carabella Street, in 1986, according to a city council document. The central bank also owns a training college in Kirribilli. Upvotes:2 Downvotes:1 Copy Link
1:21pm: Investors’ flight from cash may be ill-timed or poorly designed if behaviour among the super-rich is any guide, Jacquie Hayes writes in the AFR:
Unfortunately, Australia’s wealthiest families aren’t very forthcoming with details of their personal holdings. Collectively, however, they reveal a glimpse of their wealth-preservation and growth strategies through one of the more popular advice machines at their beck and call – family offices.
These are highly specialised, design-driven and sophisticated operations often offering a holistic suite of in-house solutions for seriously rich families, with needs ranging from estate planning and philanthropy to wealth creation and preservation, and generational succession.
To qualify for the top 250, each single family office must have assets of more than $200 million. The top 100 family offices are worth $186.9 billion, each family averaging $1.87 billion. The latest top 20 list includes names like Rinehart, Smorgon, Packer and Pratt. Further down are Andrew Forrest (7), Kerry Stokes (13), Kerr Neilson (15) and Clive Palmer (still hanging in there at 18).
One multifamily-office view is that anyone still stuck with large cash holdings is about two years late in offloading.
Likewise, on the growth side of their portfolios, investors had been increasingly willing to take greater risks over the past 18 months. Rather than invest in traditional equities, they took larger positions in alternative assets like private equity, long-short hedge funds, infrastructure and venture capital.
On the flip side, there’s concern about the reflation, financial-repression argument apparent in many parts of the financial world. The worry is that current policymaking will create currency wars, currency devaluation and mass inflation, which would make cash and corporate bonds the very worst place to be.
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1:09pm: Australians risk becoming complacent with their shares investments five years after the global financial crisis, even as the market enters risky territory peppered with expensive stocks.
“We sense that we could be approaching a major turning point in this recovery cycle,” Justin Braitling, chairman of one of Australia’s rare long-short listed investments companies, Australian Leaders Fund, said. “Unfortunately even the defensive sectors look vulnerable because they have led most of the recovery,”
The risk of buying equities is climbing as shares become increasingly fully valued, Braitling said.
“While investors are becoming more comfortable with owning shares, we fear that this is turning to a level of complacency,” Mr Braitling said. “Five years into a bull market, this should be a time to be more nervous of owning shares but the opposite is actually the case.”
Australians have flocked particularly to yield-producing stocks including Australia’s big four banks such as Westpac and Commonwealth Bank to supplement their income.
The boost in demand for yield-focused companies, coupled with a drop in cash and term deposit rates, have sent the prices of blue-chip companies skyward.
“Recognising this trend, we would be looking to retain the majority of our capital in cash in the medium term,” Mr Braitling said.
The company currently holds 45 per cent of its funds in cash.
“We think it’s time to be more defensively positioned, valuations are very full,” Mr Braitling said.
Read more ($). Upvotes:2 Downvotes:3 Copy Link
Lots of highs, where are the lows?
12:53pm: A rather lengthy list of 18 stocks in the ASX 200 have hit 52-week highs today - and not one is at a low.
On this evidence, looks like reporting season is coming along quite nicely - and the bulls have taken over. Upvotes:1 Downvotes:0 Copy Link
12:30pm: Regional markets are trading higher, perhaps buoyed by Saturdays strong Chinese credit data report.Japans Nikkei is up 0.2 per centHong Kongs Hang Seng is 1.1 per cent higherThe Shanghai Composite Index in mainland China has gained 0.1 per centTaiwans TAIEX index is up 0.2 per centKoreas KOSPI has gained 0.3 per centThe key Thai index is 0.2 per cent lowerJakarta Composite is 0.7 per cent higherThe Kiwi NZX 50 index is 0.3 per cent up. Upvotes:0 Downvotes:0 Copy Link
12:24pm: More on earnings season thus far, this time courtesy of Citis equity strategist, Tony Brennan:
Reporting season still has a way to go and results are likely to be mixed overall, given the still patchy economy.
But earnings downgrades have been moderating for over a year, as interest rates have come down and business conditions have shown some improvement, and downgrades should remain relatively minor, barring some unforeseen shock.
This leaves a reasonable prospect now of forecast earnings growth being broadly delivered this year, underpinning our end-year forecast of 5850 for the ASX 200 index, despite some wariness of the risks.
Though still early, some of the features in last year’s results have continued, with good growth in financial sector earnings, underpinned by the banks.
This is compensating for still challenging conditions in other areas, so far wagering, food and beverages, mining and engineering services, and commercial property, but the recovery in housing is also clearly starting to benefit companies, in building materials and development.
Meanwhile, cost discipline remains very widespread, and is supporting better earnings growth than revenues would imply.
Then and now: expected earnings growth by sector Upvotes:0 Downvotes:0 Copy Link
12:01pm: Another Australian uranium miner has been forced to clean up a spill of radioactive material, with ASX-listed Paladin Energy reporting a spill near one of its African mines.
Perth-based Paladin said a truck carrying a container of uranium oxide from its Kayelekera mine in Malawi over-turned while negotiating a curve in the road, and the container fell loose and was punctured by a tree stump. An amount of uranium oxide concentrate - described by Paladin as a small quantity - spilled out.
The incident comes less than three months after ASX-listed Energy Resources of Australia (ERA) suffered a spill at its Ranger precinct in the Northern Territory. That spill is still under federal investigation and processing at the site has not resumed since.
Shares are up 0.5 per cent at 47.75 cents. Upvotes:0 Downvotes:0 Copy Link
11:41am: Only a bit over 20 per cent of companies have reported for the half year, but so far results have been impressive, AMP Capital chief economist Shane Oliver notes:
This reporting season seems to have almost caught investors by surprise.
AMPs done the numbers and by Friday last week, the percentage of earnings reports surprising on the upside was at its highest since August 2008:
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11:33am: Shares in Buru Energy have crashed 17 per cent after the West Australian oil and gas explorer posted an update on drilling operations at its Ungani 3 well.
The stock was down as much as 21 per cent.
It could have been this line (although were no oil and gas experts):
“Sample descriptions, drilling parameters, and mud log and mud gas shows over the main part of the reservoir section indicate that porosity development is anomalously poor at the Ungani 3 location relative to the central Ungani Field area around the Ungani 1 and 2 wells.”
Upvotes:1 Downvotes:0 Copy Link
11:26am: The largest gas supplier in NSW, AGL, has applied for a 20.3 per cent hike in the regulated gas tariff, citing surging wholesale prices due to the planned export of large volumes of gas from Queensland.
As a result, the average household gas bill could rise from around $901 a year at present, to $1033 for 2014-15 and to as much s $1136 in 2015-16.
AGL said the planned export of gas from Queensland, this is forcing up the wholesale gas price to around $6-7 a gigajoule of gas from $4.70 at present. Already, the price in Queensland is estimated at around $9.40 a gigajoule, it said. Upvotes:1 Downvotes:0 Copy Link
11:25am: SME (small and medium-sized enterprise) business confidence saw its fourth consecutive rise in the December quarter, reaching its highest level since 2010, according to NAB’s SME survey:
The increase was consistent with what we have seen from larger firms in the quarter, suggesting that lower interest rates and (to a lesser extent) Australian dollar are having the desired impact on the economy.
NABs chief economist Alan Oster writes:
While not market sensitive, it’s a very useful adjunct on this employment-generating sector of the economy and a positive. SMEs have been outperforming in a number of industries, especially services, though not so in retail that’s been struggling as an industry.
In short, small business seeing more of an improvement in business through the latter part of last year than the larger end of town. While a lack of demand was still the most significant constraining factor on small business in Q4, that’s eased a bit through last year.
Some main points:Property/construction and finance/business firms are the most confident, reflecting a pick up in leading indicators of construction activity.Confidence rose the most, and is now highest, in Western Australia despite anticipated headwinds from mining investment.Forward orders improved, but remain subdued, while employment conditions continue to be weak. This suggests little likelihood of any near-term strengthening in sales.
Better, but still not great: NABs quarterly survey of SMEs Upvotes:0 Downvotes:0 Copy Link
11:07am: McAleese, the owner of Cootes Transport’s fuel tankers, has sought a suspension from trading ahead of it revealing the details of the restructure of the trucking division and an expected deterioration in earnings.
The Mark Rowsthorn-chaired company was placed in a trading halt last Thursday after warning that it was reviewing its earnings forecast for this financial year in light of trading conditions last month.
In seeking a further suspension from trading today, McAleese said it was continuing to work on the review, which would detail the timing and restructure of the wholly-owned Cootes division. It now expects to release details before Tuesday.
McAleese shares plunged 29 per cent last month after it revealed it had lost key haulage contracts with oil and gas companies Shell and BP.
The loss of the contracts came just three months after two people were killed and five injured when a Cootes fuel tanker lost control on a bend in Sydney’s northern suburbs and burst into flames.
Shares last traded at $1.10, well off their highs of $1.605 in late November. Upvotes:0 Downvotes:0 Copy Link
10:56am: Rupert Murdoch’s News Corp has blown an $880 million hole in the federal budget after winning a long-running battle with the Tax Office over deductions.
The ATO had refused to allow the deduction, which relates to a 1989 restructure within Mr Murdoch’s media empire in which no money changed hands.
News Corp defeated the ATO in the Full Federal Court in July and the money began flowing to the company over the Christmas break.
The payout represents a significant proportion of the $16.8 billion deterioration in the federal budget announced by Treasurer Joe Hockey in December. It all but wipes out $1.1 billion in savings announced by Mr Hockey when he unveiled the mid-year economic and fiscal outlook on December 17.
Hockey did not mention the payout at the time, instead blaming the budget’s ‘‘fiscal deterioration’’ on a softer economic outlook, downgraded exports forecasts and the previous Labor government. Upvotes:1 Downvotes:0 Copy Link
10:32am: Childcare operator and small-cap investor darling G8 Education has reported a 62 per cent boost in first-half profits to $31.07 million, from $19.2 million in the previous December half, and announced plans to raise $50 million in the debt markets.
The four-year unsecured senior note will be priced at the 90-bank bill swap rate (currently 2.63 per cent) plus 3.9 percentage points, with a minimum investment of $50,000.
Revenue was up 53 per cent to $275.2 million, while underlying earnings per share jumped 27 per cent to 11.72 cents from 9.2 cents. Gearing fell from 22 per cent to 12 per cent.
The company added 78 child care centres (on a net basis) in calendar 2012.
An oddity is that net tangible assets per share for the company is negative at -8 cents, a figure G8 has felt the need to explain:
G8 Education does not have a large tangible asset base as it is a service organisation. NTA is low as G8 Education’s value is derived from its ability to generate future proﬁts.
The companys shares are broadly flat at $3.70. Upvotes:0 Downvotes:1 Copy Link
10:30am: Japan’s economy grew less than economists forecast in the final quarter of last year, underscoring risks to the nation’s recovery as a sales-tax increase looms in April.
Gross domestic product expanded an annualised 1.0 per cent from the previous quarter, well below analyst expectations for a 2.8 per cent rise.
While capital spending rose by the most in two years and consumer spending growth picked up, external demand dragged on the expansion. Recent declines in consumer confidence and limited gains in exports have highlighted the risk that Japan’s recovery under Abenomics could fade after the levy increase.
Economists still expect that growth will accelerate in the current quarter as shoppers buy more goods before the tax hike scheduled in April, but lingering concerns about weak exports could weigh on the outlook.
I am not so concerned about domestic demand given a buying rush ahead of a sales tax hike in April will play out more strongly in the current quarter, said Taro Saito, senior economist at NLI Research Institute.
Whats more worrying is sluggish exports despite long-expected impact of a weak yen on boosting external demand.
Japanese stocks have so far shrugged off the poor economic data - and a small rise in the yen - to gain around 0.3 per cent in early trade.
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10:12am: Its not only the sharemarket trading near its highs of the year - so is the Australian dollar.
The currency that keeps bouncing back is currently fetching 90.55 US cents this morning, after hitting an early high of 90.65 US cents - just below this years peak of 90.86 US cents hit on January 13.
The dollar was hovering below the 90 US cents-level late on Friday, but got a bit of a lift from strong Chinese lending data on the weekend, which suggested the worlds second biggest economy may not be cooling as fast as some were fearing.
However, analysts warned the Chinese data may be distorted by the lengthy Chinese Lunar New Year holidays late last month.
BK Asset Management managing director Kathy Lien says traders are looking ahead to tomorrow’s release of the Reserve Bank’s February board meeting minutes:The Australian and New Zealand dollars continued to rebound against the greenback in a way that suggests that investors have completely forgotten about last week’s ugly Australian jobs number.Market participants are clearly looking beyond this week’s release and hoping that the RBAs decision to drop their easing bias means that brighter times lie ahead.
Back above 90 US cents Upvotes:2 Downvotes:1 Copy Link
9:51am: Heres the upside to having a banking oligopoly:
Australias banking sector has been rated one of the five safest in the world as profits soar and bad debts decline.
As the Murray inquiry prepares to examine the banking and financial services sector, global credit ratings agency Standard & Poors has bestowed the ranking on Australias banks, despite pointing to a decline in property prices, a hard landing in China and regulatory changes as potential - though unlikely - threats.
We believe that Australia is currently one of the five least-risky banking systems of the 86 for which Standard & Poors has published banking industry country risk assessments, S&P credit analyst Gavin Gunning said.
Australia sits alongside Switzerland, Canada, Germany and Hong Kong as one of the safest banking sectors in the world, according to an S&P report.
The report was based on an assessment of both the economic and industry risks confronting banks in each country.
Despite the upbeat view of Australias banks, S&P said they faced downside risks, which were plausible but lower probability.
This included the re-intensification of problems in Europe and a hard landing in China where the countrys economic growth slows to just 5 per cent.
We retain our view that an economic hard landing in China could cause many Australian financial institutions to be downgraded, S&P said in the report.
We currently believe, however, that the prospect of such a scenario unfolding is low.
Closer to home, S&P said Australias banks high exposure to home loans was a natural red flag. While the prospect of a 20 per cent to 30 per cent decline in property prices was viewed as a low probability scenario, it would nevertheless have a significant impact on the banks, S&P said.
The ratings agency said the potential impact - both positive and negative - of regulatory developments in 2014 could be more pronounced than in prior years.
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9:47am: The local sharemarket has staged quite a remarkable comeback from this years lows, touched less than two weeks ago on February 5.
Since that days intra-day low of 5052.2, the ASX200 has added 325 points, or 6.3 per cent - thats nearly $100 billion in market capitalisation.
The benchmark index is currently trading just 6.5 points shy of its 2014 high, touched on January 2, and is about 70 points away of the six-year highs climbed late October last year.
Quite a recovery ... ASX200 over the past weeks. Upvotes:1 Downvotes:1 Copy Link
9:41am: Cooper Energy has posted a record first-half net profit of $13.6 million, almost triple the level of a year ago, thanks to higher production from the Cooper Basin and Indonesia, and a lift in oil prices.
Managing director David Maxwell reaffirmed full-year production guidance of between 540,000 and 580,000 barrels of production, up as much as 18 per cent on the 2013 financial year.
He said the second half would see the appraisal of the Patchawarra oil discovery in the Warrior field in the Cooper Basin, a two-well program targeting unconventional gas in the onshore Otway Basin, and further exploration in the Cooper Basin “where success rates are high.”
Work is also planned on revamping wells in the South Sumatra Basin to further increase oil production in Indonesia.
Net profit for the December half was up from $4.6 million in the first half of fiscal 2013. EBITDA more than doubled to $21.2 million, up from $8.1 million.
Production rose 41 per cent to 300,000 barrels, while the average oil price increased 15 per cent to $126.50 a barrel. Cash flow from operations was $24.2 million, enabling Cooper to end the half with cash and investments of $65.7 million, with no debt. Upvotes:2 Downvotes:1 Copy Link
9:31am: Engineering contractor UGL delivered a 12 per cent rise in first-half net profit to $31.3 million and confirmed a potential sale of property group DTZ is on the agenda as it outlined further cost cuts to strengthen its weak engineering division.
UGL plans to split up DTZ and its engineering arm by the end of calendar 2014, either through a demerger, which it has been considering since last year, or a sale to private equity.
“The board, in recognition of its obligation to act in the best interests of shareholders, will evaluate unsolicited third party interest received in DTZ to determine whether these indicative proposals are in the best interests of shareholders,” the company said.
UGL added it was making “good progress” on establishing DTZ and the engineering group as two separate entities as it continued with the de-merger process.
UGL has already cut some $100 million in costs from its engineering business over the past 12 months and said it would make further cuts in the second half of 2014 and into fiscal 2015.
The company also plans to reduce capital spending to lower its gearing, which is running at 35.3 percent.
UGL is not paying an interim dividend, aruging it needs to “conserve its cash position” to pay for the separation of DTZ and its engineering arm. Last year it paid a dividend of 34 cents per share.
UGL’s full-year net profits after tax are likely to be “at the lower end” of its previous guidance range of $120 million - $130 million, coming in at around $120 million “subject to a reasonable trading outlook,” the company said.
UGL’s group revenues rose 0.5 per cent to $1.9 billion. Upvotes:1 Downvotes:0 Copy Link
9:27am: Chinas new credit rose to a record in January, supporting growth in the worlds second-biggest economy while underscoring risks to the financial system from defaults and bad loans.
Aggregate financing, the broadest measure of credit, was 2.58 trillion yuan ($470 billion), the Peoples Bank of China said.
New local-currency lending was 1.32 trillion yuan, the highest level since 2010. Trust loans, under scrutiny because of default risks, were about half the level of a year earlier.
The data adds to better-than-forecast trade numbers in suggesting that China can limit the scale of any slowdown from last years 7.7 per cent expansion in gross domestic product. At the same time, the figures contrast with a central bank call in mid-January for lenders to control surging loans and highlight diminishing economic returns from credit growth.
Banks are still extending a lot of credit and this will somewhat cool down fears that China is slowing dramatically, said Liu Li-Gang, head of Greater China economics at ANZ Bank in Hong Kong.
As Chinas Communist Party leaders prepare for next months annual meeting of the legislature, the National Peoples Congress, officials are grappling with swelling local-government debt, volatility in money markets and risks from shadow banking, highlighted by a bailout last month that averted the nations first trust default in at least a decade.
A 10.6 per cent jump in exports in January may help Premier Li Keqiang to achieve annual economic growth of at least 7.2 per cent, the level that he says is needed to protect jobs.
The government has allowed credit conditions to ease, said chief China economist at UBS, Wang Tao. Worries about policy being too tight or that rate increases are hurting credit and economic growth are exaggerated.
Upvotes:1 Downvotes:0 Copy Link
9:21am: Shares are pushing towards new highs for the year ahead of a big week for corporate earnings.
The ASX 200 index is 20 points higher, or 0.4 per cent, in early trading to 5376.5, and the All Ords has gained a similar amount to 5388.7.
ANZ and NAB are among the early movers, both banks up 1 per cent early, but CBA stock has fallen a hefty 2.3 per cent. CSL is up 1.8 per cent and Rio 1.3 per cent.
Investors have responded warmly to Aurizons interim results announcement - the shares have gained 2 per cent, while the ever-volatile Newcrest is 2.4 per cent higher.
Other companies reporting this morning: Ansell (down 2.3 per cent), UGL (-4.8 per cent), and G8 Education (-1.9 per cent).
Turning to the sectors, mining (especially gold producers), energy and health care are up strongly.
Financials are among the underperformers, dragged lower by CBA. Upvotes:1 Downvotes:1 Copy Link
9:06am: Cheaper funding and low bad debts have helped Bendigo and Adelaide Bank boost its first-half cash profit by 9.5 per cent to $185.9 million.
However, its statutory results were down 4.6 per cent to $180.7 million due to higher taxes, losses on the sale of securitised mortgages and ineffectiveness of cash flow hedges related to the acquisition of Adelaide Bank in 2007 and consolidation of Rural Bank, which it took over from Elders in 2010.
Chief executive Mike Hirst announced cash earnings per share of 45¢, a rise of 7.4 per cent and an interim dividend of 31¢ per share, fully franked. In a statement to the ASX, he said the bank’s margins were improving because funding was becoming more available and cheaper.
“We’re seeing low growth due to subdued demand and an increase in people making additional efforts to pay down their debt,” Mr Hirst said.
With 70 per cent of the bank’s funding coming from deposits, easing interest rates has reduced its cost of funding.
“Deposits are at pleasing levels and wholesale markets are working well,” he added. “We have a lot of flexibility in how we fund our business and this is reflected in our increased margin.”
Upvotes:1 Downvotes:2 Copy Link
9:04am: Some headwinds for the ASX200 over the next days may come from stocks trading ex-dividend.
The big one today is CBA, which is likely to shave around 11 points off the benchmark index. The other stock trading ex-dividend today is Bradken. Upvotes:0 Downvotes:1 Copy Link
8:51am: Last week gold posted the biggest weekly gain since August as signs of a faltering recovery in the US economy boosted demand for precious metals as a haven. Silver had the longest rally since March 2008.
US factory production unexpectedly declined in January by the most since May 2009, figures from the Federal Reserve showed. Gold rose for the eighth straight session, extending the longest rally since July 2011. The price closed above the 200-day moving average for the first time in a year.
The price of the precious metal has jumped 9.7 percent this year.
In 2013, the price plunged 28 per cent, the most since 1981, as billionaires John Paulson and George Soros sold holdings, while other investors lost faith in the metal as a store of value amid a US equity rally to a record and tame inflation.
Fed Chair Janet Yellen said on February 11 that the recovery in the labour market is “far from complete”.
Shine on, you crazy safehaven Upvotes:1 Downvotes:0 Copy Link
8:41am: Condom and glove maker Ansell has benefited from the popularity of new products and shrugged off economic weakness in a handful of its markets, including Australia, to report a 14.9 per cent rise in interim net profit to $US$65.6 million ($72.4 million).
The protective equipment maker’s revenue rose 9 per cent to $US703.6 million in the six months ended December 31. Earnings before interest and tax increased 20 per cent to $US82.7 million.
The company declared an unfranked dividend of US17¢ a share, to be paid on March 25, against the previous years interim dividend of 16¢ higher, paid in local currency.
The company reiterated guidance of full year earnings per share in the range of $US1.10 to $US1.16.
EPS for the first half came in at $US49.6¢, which was just below consensus of US50.2¢. Excluding the effect of a dilutive share issue in December, in anticipation of the $US615 million BarrierSafe acquisition, EPS rose 15 per cent to the consensus estimate of US50.2¢.
Ansell chief executive Magnus Nicolin said organic growth in Ansell’s three units that sell to businesses, medical, industrial and specialty markets, approached 4 per cent in the second quarter and was 2.6 per cent for the interim period.
“A moderate improvement in economic conditions contributed to growth rates, although mostly offset by significant economic weakness in select markets such as Australia, Russia and Turkey,” Mr Nicolin said in a statement.
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8:36am: Australand‘s net profit fell 25 per cent to $135.3 million in the year ended December 31 thanks to write-downs on a number of its projects.
The commercial and residential property developer announced an impairment of approximately $65 million would be taken as at December 2013 following a review of the inventory-carrying values of its residential, commercial and industrial development assets in November.
“While disappointing, the write-downs reflected the group’s strategic decision to take advantage of current market conditions to accelerate capital recovery from these projects,” managing director Bob Johnston said in a statement.
The group achieved an operating profit after tax of $147.9 million, a 4 per cent rise on 2012.
Management said subject to operating conditions not changing in 2014, the group expects to deliver growth in earnings per security for 2014 and for distributions to increase to 22¢ per security, up from 21.5¢ in 2013.
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8:34am: Aurizon lifted its coal haulage forecast for 2014 as the rail operator reported a 39 per cent drop in net profit after slashing jobs and shrinking its locomotive fleet.
Net profit for the six months ended December 31 fell to $107 million from $176 million in the year-earlier period, the company said in a statement to the ASX.
The drop follows previous warnings from the rail group that it would take $197 million asset impairment charges in the first half, mostly due to shrinking its locomotive fleet by almost one third to 598 engines and cutting its wagon fleet by 12 per cent to 16,292 cars by fiscal 2018.
Aurizon also shed 262 jobs in the first half because of voluntary redundancies.
Aurizon’s underlying EBIT, which exclude the impairments and job cuts, rose 19 per cent to $423 million from $356 million in the year-earlier period.
The company lifted its full-year guidance for coal haulage volumes to 207 million -212 million tonnes from previous guidance of 200 million -205 million tonnes.
Aurizon reported healthy coal haulage volumes in both Queensland and NSW in the five months ended November 30, surpassing some analysts’ expectations.
The group remains on track to lower its operating ratio to 75 per cent in fiscal 2015.
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8:27am: Something really important is occurring for the first time in a decade, writes Perpetual’s head of investment market research, Matt Sherwood:
Growth in the advanced economies is solid and synchronised with the economic expansion accelerating in the US, Europe and Japan simultaneously for the first time since the last global recovery in the early 2000s.
Consequently, the resulting rise in global trade activity in 2014 suggests that the balance sheets issues that have plagued advanced economy markets in the past seven years, are likely to be less of a drag going forward.
With earnings likely to improve further and corporate balance sheets in great shape, global sharemarkets may be on the verge of a fresh wave of M&A activity as corporations look to deploy there vast amount of capital, with a rise in Capex spending likely for firms wanting to increase their return on capital.
Business investment growth has remained dormant for nearly seven years and needs to accelerate if global growth is to further improve and support upbeat earnings expectations.
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8:22am: Earthworks contractor Maca has requested a suspension from trading on the ASX to allow the Company sufficient time to prepare an announcement in relation to the weather event which has impacted MACA’s operations at the Duketon mining project, the company said in a statement.
Trading in the companys shares will be suspended until Friday or when the announcement is made. Upvotes:2 Downvotes:0 Copy Link
8:14am: The first cut of eurozone and its major economies’ December quarter GDP released Friday was reassuring, says the economics team at NAB.
Across the eurozone, growth came in at 0.3 per cent, the third quarter of growth and a tenth better than expected, including for Germany and France. The zones recovery is very gradual at this stage, but it’s continuing nevertheless.
Across the Atlantic, the US industrial sector under-performed in January, as some other recent indicators have, again suggestive of the severe weather effects that will likely hinder activity through February data as well.
As some reassurance, the first reading of US consumer sentiment in February was steady at 81.2, still a little below its long term average.
Released over the weekend, China credit data were very strong in January, much more than forecast. Aggregate financing was at a record. No sign of a credit crunch from these numbers; we do have to be especially careful about these early year numbers as they often start with a rush. That data is neutral to positive for the Aussie dollar this morning.
Also encompassing weekend activity, in Australia the latest RP Data-Rismark house prices showed capital city prices edging higher this latest week by 0.1%, though
Melbourne gave up some ground, down 0.4 per cent. Auction clearance rates remain high in Melbourne (70.9 per cent) and Sydney (80.4 per cent).
Speaking over the weekend, Bank of England Governor Mark Carney said that the forces keeping UK rates at record lows will persist for some time until more slack is eroded. The pound though is stronger this morning. Upvotes:0 Downvotes:1 Copy Link
8:07am: Local stocks are poised to open higher as global investors remain optimistic about the outlook. The gains last week lifted the S&P/ASX200 out of the red for the year; it’s now up 0.1 per cent in 2014.
Heres what you need2know:SPI futures up 44 points at 5352 at 6.05am Monday morningAUD at 90.63 US cents at 9am AESTOn Wall St, S&P500 +0.48%, Dow Jones +0.79%, Nasdaq +0.08%In Europe, Euro Stoxx 50 +0.68%, FTSE100 +0.06%, CAC +0.63%, DAX +0.68%Spot gold up $US15.74 to $US1318.66 an ounceBrent oil dips 52 US cents to $US108.08 per barrelIron ore up 1.2 % to $US123.20
What’s on today
January car sales data from the ABS
Stocks to watch
Interim results due: Bendigo and Adelaide Bank, UGL, Ansell, Ardent Leisure, Australand, Aurizon, Specialty Fashion, Lynas Corp, and Western Areas.
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8:07am: Good morning and welcome to the Markets Live blog for Monday.
Your editors today are Jens Meyer and Patrick Commins.
This blog is not intended as investment advice.
BusinessDay with wires.
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