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Australian shares have closed at their highest since mid 2008, as fears of a military escalation between Ukraine and Russia eased and local economic growth came in stronger than expected.
The benchmark S&P/ASX 200 Index lifted 46 points, or 0.9 per cent, on Wednesday to 5446.2, the highest finish since June 2008 - although just pipping last October's high - while the broader All Ordinaries Index rose 0.8 per cent to 5457.3.
Local shares climbed at the open after equity markets in the United States and Europe rallied on Tuesday night.
Tensions between Russia and Ukraine appeared to ease, pushing the S&P 500 Index to an intraday record, and European stocks closed with strong gains after Russian President Vladimir Putin said in a news conference that there is “no need yet” to use military force in Ukraine.
Stocks remained buoyant after ABS data showed the gross domestic product rose 0.8 per cent in the December quarter.
“The economy grew faster than economists expected but we still think the Reserve Bank of Australia will keep rates on hold this year,” UBS interest rates strategist Matthew Johnson said.
Australian states have improved their rankings in a global survey of mining provinces, but are still considered less attractive places to invest than several Scandinavian countries.
Sweden and Finland were ranked by Canada’s Fraser Institute as the most attractive places for miners to invest, in the Institute’s most recent annual survey of mining executives.
The survey ranks 122 different mining jurisdictions across a range of measures, from geology and the availability of labour and infrastructure to the risks of political interference.
The jurisdictions were rated differently across different measures, but Sweden was rated the highest in a composite index published by the Institute this morning.
Western Australia was the highest ranked Australian jurisdiction, finishing sixth globally, with South Australia ranked 11th.
WA was ranked the world’s second most attractive location by geology behind Alaska, but slipped down a few notches on the back of frustrations about some environmental regulations, native title and policy matters.
Australia's two most populous states - New South Wales and Victoria - were the lowest ranked Australian jurisdictions, coming in at 39 and 33 respectively. Tasmania was ranked 27th, Queensland 24th and the Northern Territory in 13th position.
And here are the best and worst for the day.
Paladin shareholders continue their roller coaster ride this year, but can enjoy a 12 per cent rise for today, at least.
Most of the gains were made early, but the ASX 200 managed to add 46 points, or 0.9 per cent, to finish above the most recent peak in October and register its highest close since mid 2008.
The benchmark index ended the day at 5446.2, while the All Ords also gained 46 points to 5457.3.
IT was the best performing sector, up 2.1 per cent, led by a 3.1 per cent gain in Computershare. Consumer discretionary stocks and financials were also up strongly - Westpac jumped 1.7 per cent and was the best of the banks.
BHP was up 1.2 per cent.
Gold stocks finished down, as did listed property trusts and telcos, after Telstra eased 0.2 per cent lower.Back to top
Revealed: the incredible stock pickers at the SEC!
Serious question marks have been raised about insider trading by employees at the US Securities and Exchange Commission with academic research pointing to a long history of profitable deals ahead of off-limit trading periods.
A new report by academics in the US suggests that employees working at the SEC are trading on inside information relating to investigations and upcoming enforcement actions.
In the report titled “The Stock Picking Skills of SEC Employees,” researchers found that SEC employees’ stock purchases look harmless enough, but when they go to sell their stocks, they have an uncanny ability to beat the market.
“In short, it appears that SEC employees continue to take advantage of non-public information to trade profitably in stocks under their regulatory purview," write Shivaram Rajgopal, a professor of accounting at Emory University, and Roger M. White, a doctoral student in accounting at Georgia State University.
The Washington Post reported that a spokesperson for the SEC, which has made crackdowns on insider trading a priority in its enforcement division, declined to immediately comment.
A Chinese solar company said it may not be able to make an 89.8 million yuan ($14.6 million) interest payment in full by the March 7 deadline, in what may be the first default of an onshore bond.
Shanghai Chaori Solar Energy Science & Technology, a maker of cells to convert sunlight into power, plans to pay 4 million yuan to bondholders, the company said in a statement to the Shenzhen stock exchange yesterday.
A default would highlight strains in China’s financial system after a trust product issued by China Credit Trust was bailed out in January.
China’s renewable energy industry faces a record $7.7 billion in bonds maturing this year, testing the resolve of Premier Li Keqiang who needs to allow industry consolidation to slow a build-up of debt in the economy estimated by a state think tank to account for 215 percent of gross domestic product.
“This is the first onshore default,” said Yang Kun, a bond analyst at Guotai Junan Securities. “It shows regulators’ attitude toward defaults has changed and they’re silently permitting defaults. Risk appetite will slump substantially.”
Guosen Securities estimates Chinese non-financial companies’ debt ratios reached 93 per cent last year, while the average in Asia hasn’t surpassed 70 percent in the last 10 years.
Hong Kong investment firm Cheung Kong Infrastructure Holdings may block Australian gas transporter APA Group's $2.06 billion takeover of smaller rival Envestra.
In a statement to the ASX, Envestra said it recommended the takeover but added that two of its directors, CKI chief financial officer Dominic Chan and CKI chief planning and investment officer Ivan Chan, "do not consider the scheme to be in the best interests of Envestra shareholders".
The CKI executives did not say why they oppose the sale but they must explain their position in a scheme booklet Envestra plans to send to shareholders in the next three weeks, sources told Reuters.
The CKI executives may not oppose the sale outright and may demand a higher price, the sources said. CKI executives could not immediately be reached for comment.
An unravelling of the deal would be a surprise blow to APA, which distributes about half Australia's gas and wants to broaden its reach. In 2012, it paid $1.4 billion for Hastings Diversified Utilities Fund.
CKI holds a 17.46 per cent stake of Envestra. For the deal to go ahead, more than 75 per cent of non-APA shareholders must support the sale. CKI's holding amounts to about 26 per cent of non-APA shares, which means its approval is necessary.
Envestra shares are up 2.6 per cent at $1.18, while APA are flat at $6.57.
The house always wins, but some houses win more than others. As you can see from the chart, in a little over 10 years Macua has eclipsed Las Vegas as a source of gambling revenue.
Macau is one of two “special administrative regions” of China (the other is Hong Kong). China allowed foreign gaming companies into the region in 2002.
“VIPs account for about two-thirds of Macau’s casino revenue,” writes Bloomberg Businessweek:
“The majority are mainland Chinese who bet on credit because of the country’s currency controls. The laws restrict to 20,000 yuan ($US3,300) the amount a citizen may take across the border and a maximum of 10,000 yuan from a cash machine in a day.
“That’s not enough for a VIP, who by the industry’s definition bets at least $US1 million during every visit to the territory, the only place in China where casinos are legal.
“So most big spenders from the mainland play with chips loaned to them, at no interest.”
Listed casino companies operating in Macau include the Hong-Kong listed Galaxy Entertainment, the US-listed Wynn Macau and Melco Crown Entertainment, and Hong Kong’s SJM Holdings.
China will "accelerate" negotiations for a free trade agreement with Australia, Premier Li Keqiang has said in his opening speech to the National People's Congress.
Delivering his first government work report as Premier at the Great Hall of the People in Beijing on Wednesday, Mr Li said China would maintain its annual economic growth target at "about" 7.5 per cent, signalling an unwillingness to allow growth to slow - even as he warned of "great" downward pressure on his country's economy, and reiterated the urgent need for China to push through reforms to restructure its economy.
"We are at a critical juncture where our path upward is particularly steep," he said, adding that the global economic recovery remained unstable and uncertain.
Mr Li also flagged a move toward a wider trading range for the Chinese yuan, and to grant financial institutions greater power to set their interest rates.
"We will keep the renminbi exchange rate basically stable at an appropriate, balanced level, expand its floating range, and move toward renminbi convertibility under capital accounts," he said.
Economists expressed concern that China's failure to reduce its growth target may show a lack of determination in ramming home much-needed economic reforms as China rebalances its economy away from investment-led growth, and more toward consumer-led growth.Back to top
Supermarket chain Coles has unveiled plans to invest $1.1 billion over the next three years building 70 new supermarkets and creating more than 16,000 jobs.
The capital investment program - unveiled by outgoing Coles managing director Ian McLeod in Canberra - represents a significant step up in Coles's expansion plans and confirms the role of the retail sector as a significant source of jobs growth over the next few years.
Mr McLeod said Coles's new store expansion would create almost 8,500 full-time equivalent retail jobs as well as more than 8,200 construction jobs over the next three years.
Coles has also pledged to treble the number of indigenous staff from 1,000 to 3,000 before 2020.
Mr McLeod said the $1.1 billion investment in new stores reflected Coles's confidence in the future of the food retail sector.
Over the last five years Coles has opened about 20 new supermarkets a year but closed a similar number, so net new-store growth has been limited.
Glencore Xstrata, the world’s fourth-biggest mining company, is studying separate deals with Rio Tinto and BHP Billiton in Australia to reap cost savings at struggling coal and nickel operations.
The company is assessing a bid for BHP’s Nickel West assets in Western Australia, which are near a Glencore nickel project, chief executive Ivan Glasenberg said. The sale also has attracted rival Mick Davis, former CEO of Xstrata, whose X2 Resources has studied bidding, a person familiar with the matter told Bloomberg.
A combined Glencore-Rio coal business on the east coast of Australia would save more than $US500 million, Credit Suisse said last week. The price of power-station coal is trading near a four-year low.
“There’s a lot to be done where we can get substantial synergies,” Glasenberg, told analysts in London yesterday regarding the possible coal tie-up. “We’re talking to Rio Tinto, but it takes time for both sides to assess each other’s assets. We’ve been talking to them for a long time. How far we’ll get and how soon we can reach an agreement, I don’t know. But it’s something that clearly makes a lot of economic sense.”
Glasenberg also said Glencore remains in talks with China Minmetals for an asset that’s been valued at more than $US5 billion.
“There’s no roadblock in the talks,” the billionaire said, referring to a copper mine in Peru that Glencore offered for sale last year. “We are in discussions with a potential buyer and if we can get the right price we will go ahead and sell it.”
Bill Gross, the founder and boss of the world's biggest bond fund manager, PIMCO, says that this could be the last year that central banks' policies underpin high asset prices, which implies that 2014 could be another good period for riskier assets such as shares.
"As long as artificially low policy rates persist, then artificially high-priced risk assets are not necessarily mispriced," writes Gross in his latest regular investment outlook notes. "Low returning, yes, but mispriced? Not necessarily."
"It is reasonable to forecast at least a 12-month future where risk assets can outperform the safest assets. In plain English, stocks, bonds and other “carry”-sensitive assets would outperform cash."
"Continue to be mindful, however, of longer-term consequences. As quantitative easing ends in the US, liquidity in corporate bonds will be challenged."
"If inflation begins to appear as a result of five years of artificially low policy rates worldwide, then assets may indeed be mispriced."
Activity in China's services industry ticked up in February from a two-and-a-half year low the previous month, confirming other data showing a pick-up in services even as manufacturing activity slows.
The HSBC/Markit Services Purchasing Managers' Index (PMI) rose to 51.0 in February from January's 50.7, buoyed by new orders, remaining above the 50 line that separates expansion from contraction.
The rise tallied with the official non-manufacturing PMI, released earlier in the week, which showed activity at a three-month high, and contrasted with two surveys that showed manufacturing activity slowed in the month..
"February data signalled stronger expansions of business activity and new work at Chinese service-sector firms," HSBC/Markit said in a statement.
"That said, the rates of growth remained subdued in the context of historical data."
The data came as Premier Li Keqiang told China's annual parliament session that expanding domestic demand will be a major economic driver and an important structural adjustment as the country pushes ahead with reforms to promote consumer-led growth.
The PMI found that service-sector firms remained optimistic in February, generally expecting business activity to be higher than current levels in one year.
Carsales.com.au this morning announced it will pay $7.2 million for another 3 per cent stake in iCar Asia, bring its share to 22.9 per cent.
The purchase represents the "maximum permitted ‘creep’" under corporations law, the company said in an ASX announcement.
iCar Asia owns and operates a network of online automotive sites in ASEAN with operations in Thailand, Malaysia and Indonesia reaching more than 4.5 million unique visitors every month.
Carsales shares are down 1.9 per cent to $10.62.Back to top
While the RBA kept the cash rate steady yesterday, lenders continue to push down the price of fixed loans.
Westpac-owned St George is the latest bank to cut its fixed mortgage rates, lowering its three-year rate to 4.99 per cent from today.
The cut, which follows reductions from National Australia Bank’s on Monday, takes St George’s three-year fixed-rate offering to the lowest of the big four.
The offer is open to new customers and existing borrowers with the bank who want to fix part of their loan.
“We’re seeing many of our customers choosing to fix a large part, but not all, of their loan,’’ said Andy Fell, the general manager of retail banking.
‘‘This gives customers the peace of mind that comes from a set repayment each month, but with some flexibility of a variable loan.’’
The latest round of cuts in fixed rates have been affected by a slide in bond yields, which has pushed down the cost to banks of borrowing two and three years.
Time for a look around the region. Stocks are mostly higher after comments from Russian President Vladimir Putin signalled the Ukraine crisis won’t immediately escalate.
- Japan (Nikkei): +1.5%
- Hong Kong: +0.2%
- Shanghai: -0.6%
- Taiwan: +1.05%
- Korea: +0.9%
- ASX200: +0.6%
- Singapore: +0.2%
- New Zealand: +0.7%
‘‘My sense is that this isn’t going to be the thing that takes down the bull market,’’ says Mark Matthews, Singapore-based head of Asia research for Julius Baer. ‘‘At the margin you have positive developments in China. I don’t see a lot to complain about right now.’’
China set a growth target of 7.5 per cent today as an annual meeting of Communist Party officials begins.
Maintaining expansion close to last year’s 7.7 per cent would help sustain demand for oil and iron ore and support a global economy. At the same time, analysts from UBS to Societe Generale say a lower goal would’ve been more in keeping with the government’s pledge to move away from growth at all costs. The inflation target is 3.5 per cent.
‘‘I feel like an important decision has been made in China,’’ says Julius Baer’s Matthews. ‘‘They have chosen to focus on quality over quantity.’’
Some more on that Credit Suisse report on Chinese money pouring into Australian housing, which is gaining quite some traction on our sites.
Wealthy Chinese buyers have purchased $24 billion of Australia housing in the past seven years, and over the next seven years an additional $44 billion will be spent on residential property, the investment bank estimates.
But the figures might even understate the true picture of Chinese investment in Australian property.
That's because there are alternative means to do so which fall outside of readily trackable measures of this trend, such as when a Chinese national provides the money for an Australian-based family member, friend or solicitor to purchase a property.
"Or when an Australian citizen sells her apartment in Shanghai and switches into a Melbourne Docklands flat," the Credit Suisse strategists say.
The four measurable routes to the so-called "Quarter Acre Dream" are
- a Chinese citizen buying off-the-plan in Australia with FIRB approval
- a Chinese citizen with temporary residential needs buys a house through the Significant Investor Visa scheme ($5 million and higher)
- purchase of a property for redevelopment purposes by a Chinese citizen through FIRB approval
- Chinese settlers with permanent residential status who doesn't need purchase approval.
Qantas' embattled chief executive, Alan Joyce, insists his relationship with the Abbott government is "very good" despite suggestions it has become strained, pointing out that he has been talking to senior ministers as recently as today.
Days after the Abbott government dashed his hopes of a debt guarantee, Joyce told a business audience in Sydney that Qantas respected the decision.
"My focus now [is that] we have to implement a significant transformation of the business," he said. "We are facing significant challenges. It is up to the management team to focus on the change agenda."
Earlier this week Qantas made clear that it was riled about the government's decision to ditch the prospect of a guarantee - in the form of a standby debt facility - in favour of attempting to repeal a section of the Qantas Sale Act.
For households, the key takeaway today from the strong GDP data is that the savings rate dropped below 10 per cent for the first time since 2010, which may be a sign that consumers are feeling more confident, writes JP Morgan economist Stephen Walters.
“The fall in the savings rate helps to square decent spending outcomes against what has been pretty sluggish growth in household income,” he writes.
Indeed, the pick-up in consumer spending over the fourth quarter of 2013 came against a backdrop of continued pressure on household incomes, with the quarterly gain "funded" by lower household savings, points out Westpac economist Andrew Hanlan.
Household disposable income - which nets out interest and tax payments – was down 0.2% for the quarter in real terms (after inflation) with annual growth slowing to 1.1%, implying declining income in per capita terms.
“With wages growing at the slowest rate for more than a decade and the jobless rate rising, it will take further sustained falls in the savings rate to deliver decent household spending outcomes from here,” reckons Walters.Back to top