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Markets Live: Party over for banks?

Date

Patrick Commins, Jens Meyer

The key index has been caught in a broad sell-off and has plunged below 5500 after banks retreat from record highs, adding to losses in miners.

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That’s it for Markets Live today.

You can read a wrap-up of the action on the markets here.

Thanks for reading and your comments.

See you all again tomorrow morning from 9.

A sharp sell-off in the big banks and mining heavyweights weighed on the local sharemarket TODAY, ending a seven-day winning streak.

The benchmark S&P/ASX200 dropped 49.5 points, or 0.9 per cent, to 5486.6. The broader All Ordinaries slipped 49.2 points, or 0.9 per cent, to 5466.9.

The Australian market was by far the worst performer in the region, with Chinese and South Korean markets trading relatively flat, while the Japanese stockmarket was closed.

Resources and financials suffered heavy losses, down 1.1 per cent and 0.8 per cent respectively.

Iron ore slipped a further 2.2 per cent to $US108.40 per tonne overnight on Monday, adding to the 4.7 per cent fall last week. The metal fell on concerns of a crackdown on financing deals using iron ore as collateral.

Australian miners were hit by the news, as Rio Tinto fell 1.2 per cent to $61.30, BHP lost 0.7 per cent to $37.61 and Fortescue finished 2.3 per cent lower at $5.

After flirting with record highs, the big banks, which had been propping up the market in recent days, took a u-turn and finished down heavily. Some analysts believe that financials are fully priced, making it hard to justify levels above where they currently stand.

National Australia Bank and Westpac both fell 1.3 per cent, to $35.51 and $35.39 respectively. ANZ dropped 1 per cent to $34.60, while Commonwealth Bank of Australia slipped 0.6 per cent to $78.94.

Citi downgraded its recommendation for Westpac to 'neutral' and NAB to a 'sell'. Morgan Stanley said in a note to clients it sees a 70-80 per cent chance that NAB will fall in the next 60 days.

However, a generally improving economy and momentum slowly returning to corporate earnings growth will ultimately be beneficial to the banks, Macquarie Bank division director Martin Lakos said.

"You've got to take the banks, to some extent, as a proxy for the economy. If you're reasonably comfortable with the economy slowly turning up, then the banks will benefit from that," Mr Lakos said.

Read more.

And here are the best and worst for the day.

Goodman Fielder continued its run from yesterday - if at a slightly more sedate pace, up 5.5 per cent. The stock is at 67c per share - above yesterday's 65c takeover offer - suggesting investors expect a sweetened bid for the company. Trading volumes today were heavier than yesterday.

Best and worst performers in the ASX 200 today.

Best and worst performers in the ASX 200 today.

Banks turned from heroes to villains today, joining miners and leading a broad-based sell-off in the market that saw the benchmark index dip back below the hard-earned 5500 level.

The ASX 200 lost 50 points, or 0.9 per cent, to 5486.6 after starting the day in positive territory, while the All Ords fell by a similar amount to 5466.9.

Westpac and NAB both closed 1.3 per cent lower, while ANZ fell 1 per cent and CBA 0.6 per cent. The exception to the rule (as ever) was Macquarie, which jumped 1.2 per cent.

Wesfarmers also acted as an anchor on the market, sinking 2 per cent following an ill-received quarterly update. Woolies also dropped 1.2 per cent.

BHP finished 0.7 per cent lower, while Rio was down 1.2 per cent.

There was some good news in the energy space, as Oil Search closed 1 per cent higher, and Santos 0.2 per cent up, on news the PNG LNG project was to start production early.

Mistakes were made, earnings guidance was missed, but the past is the past and next financial year should be a good one for Treasury Wine Estates, reckon analysts at Bank of America/Merrill Lynch.

They expect a “V” shaped earnings recovery next financial year, and believe the market is significantly underestimating Treasury's EBIT for FY15.

As a result, the broker has a “buy” rating on the stock – only one of two such ratings among the 16 brokers surveyed by Bloomberg – with a 12-month price target of $5.50, against a price of $3.78 now.

Treasury shareholders have been put through the ringer. Take January 30: the stock dropped 20 per cent in a single day as the company downgraded earnings estimates.

At the end of the last June financial year, Treasury’s guidance was that its 2013-14 EBIT would be between $230m and $250m with an AUD/USD at 0.93 – “despite FY14 being a supply restricted year”, write the analysts.

Management errors led to a downgrade of that guidance to an EBIT of between $190m to $210m, even with the help of a a better than expected currency. (A 0.01 fall in the exchange rate increases EBIT by around $5 million, reckon the analysts.)

And the UBS team believes there is a high risk of the company not achieving that lower guidance for this financial year.

But the broker believes management won’t repeat the mistakes of last year, and that in fiscal 2015 the company has a “number of strong tailwinds to its earnings that were not present in FY14”:

“There is a material increase in the availability of high quality wine to be sold in FY15 – including (reportedly) some of the best wines TWE has ever made (of note the 2010 Grange); and TWE has some excellent wines (and relatively high quantities) of US luxury wines available in FY15 from the 2012 and 2013 US vintages.”

The upshot is the analysts expect EBIT of $280 million in the next financial year, more than 25 per cent higher than the consensus forecast of $220 million.

China’s economic growth may be slowing, but Changyong Rhee, director of the International Monetary Fund’s Asia and Pacific Department, believes the odds of China suffering a full-blown financial crisis remain low.

In an interview with the WSJ, Rhee outlines a number of reason not to sound the alarm bells:

  1. China’s owes most of its debt to itself. True, China’s debt – some tallies put the sum of private and government debt at double China’s gross domestic product – is scary. How companies and local governments will manage to service that debt as growth cools and interest rates rise is a puzzler. Rhee says China is bound to see a rising number of credit defaults. But unlike Thailand or South Korea before the Asian financial crisis erupted in 1997, China hasn’t borrowed heavily abroad in foreign currencies. That means that if China’s currency falls further (it has dropped roughly 3 per cent so far this year), it won’t necessarily cause a dramatic increase in borrowers’ debts in local-currency terms that then causes bankruptcies to snowball.
  2. China’s government debt is low. Like many governments in advanced economies, Beijing runs a budget deficit. But that deficit is relatively small – about 2.1 per cent of GDP. And total government debt, both those owed by the national government and China’s much more heavily indebted provinces, still add up to only about 53 per cent of GDP, according to Bank of America Merrill Lynch. That means China can afford to spend more to offset the economic slowdown if it becomes too painful to borrowers. It can even afford to bail out banks or borrowers it deems too big to fail.
  3. China’s slowdown, like its economy, is central planned. China’s economic mandarins have much wider latitude to implement policy without the say-so of China’s National People’s Congress. Most of the country’s banks are state-controlled and state-run companies still dominate the economy. China can instruct banks how to lend and to whom, and can even tell big companies how and where to invest. That’s a solution China’s leaders seem eager to avoid, but it remains an option.

Does that mean China can sit back and do nothing? Absolutely not, says Rhee. China needs to stay the course of overhauling its economy to reduce its reliance on exports and investment in property and heavy industry. China also needs to keep withdrawing cash from its economy to gradually push up interest rates and deflate its credit bubble, he says.

Defaults are inevitable. But rather than unleash a wave of new credit as China did in 2008 to offset a global slowdown, China should rely on small remedies – “micro-surgery” as Rhee puts it – to stem financial contagion.

Here's the full yarn

Almost all Chinese provinces failed to meet their growth targets in the first quarter even after scaling back their ambitions as the government instructs officials to focus on reining in debt and curbing pollution.

Thirty of 31 provinces and municipalities reported missing their goals, with the biggest shortfall in north-eastern Heilongjiang, where an expansion of 4.1 per cent compared with an 8.5 per cent target for the year. Most localities’ targets are lower than in 2013. The latest data were released by government websites and newspapers.

Premier Li Keqiang risks the nation sliding into a deeper slowdown as the government cracks down on overcapacity in the steel industry, wrestles with shadow banking risks and rolls out economic restructuring measures. While the government has supported expansion with steps such as reserve-ratio cuts for rural banks, it has so far avoided broader stimulus as Li chases a national growth target of about 7.5 per cent.

“The central government will continue to refrain from all-out stimulus and the slowdown pressure may continue to rise,” says Zhu Haibin, the chief China economist with JPMorgan Chase in Hong Kong. After a 7.4 per cent expansion in the first quarter, growth may sink closer to 7 per cent during the second half of this year, Zhu says.

He adds provincial goals remain “too high” and that all provinces except Beijing and Shanghai have targeted growth above 7.5 per cent.

“The GDP target is no longer the only thing that matters,” says Zhu. “But missing the targets too much will certainly put heavy pressure on local governments to stabilise growth.”

The latest numbers indicate that a divergence between local and national data is narrowing. The total of local numbers for nominal first-quarter gross domestic product was 3.7 per cent higher than the national figure. That compares with an excess of almost 11 per cent in 2013.

Investors have flocked to companies with the promise of some decent degree of earnings uplift, but despite their popularity, there’s no broad overvaluation in so-called “growth” stocks, according to UBS equity strategists.

A popular philosophy among investors is “growth at a reasonable price”, or GARP.

And stocks that look attractive on that basis, say the analysts, are Resmed, Crown and CSL.

Aristocrat Leisure, SAI Global, Super Retail Group, Henderson Group and Fleixigroup also look good, although the analysts “note higher earnings volatility” in this last group.

The chart below plots the “growth universe” and plots estimated P/Es against forecast annual compond EPS growth in the next three financial years.

The UBS team make the following points:

  • Cochlear, Ramsay Health Care, Carsales.com and Invocare look to be on challenging multiples for good but not remarkable growth. Cochlear in particular has been “growth challenged” of late and is in danger of slipping from their growth universe.
  • Companies such as James Hardie Industries, Seek Limited, Navitas, Sirtex Medical, REA Group and Domino's Pizza Enterprises are not clearly overvalued on their price-for-growth analysis, though they note that 1) P/Es have re-rated very significantly in the past year; and 2) maintaining P/Es of this magnitude has been empirically difficult.

“Growth stock” is not a well-defined term, but the UBS researchers say there needs to be some combination of sustainable above-market earnings growth, along with a relatively high return on invested capital, or ROE.

Another commonly sought-after characteristic, they say, includes above-average top-line growth.

“We find high ROE, high top-line growth companies have on average been outperforming in recent years,” they write.

Not that it is a full-proof approach: ALS Ltd, Monadelphous Group, Worley Parsons, Coca Cola Amatil and Wotif.com are all examples of stocks that have been de-rated as earnings growth stalls.

Searching for growth stocks at a reasonable price - UBS's growth universe.

Searching for growth stocks at a reasonable price - UBS's growth universe.

Charlie Aitken isn't the only one turning cautious on the big banks (see 11.48am), with Citi downgrading Westpac and NAB:

  • We are downgrading our recommendations for WBC to a 'neutral' and NAB to a 'sell' with no change in our target prices. Over the past 3 months, the sector has continued to outperform the broader market, with WBC being the standout performer.
  • NAB has performed more in line with the market; however, we are reducing to a sell due to poor expected H1 revenue and underlying profit growth and continuing lackluster demand for business lending.

 

Morgan Stanley went slightly further, saying in a research note that it sees a 70 per cent to 80 per cent chance that NAB will fall in the next 60 days. It reckons the first-half result on May 8 will '‘highlight revenue headwinds in business banking and an end to the era of positive cost surprise’'.

NAB is the leading the sector's falls today, dropping 1.5 per cent, while the other three are between 0.8 per cent and 1.1 per cent lower after briefly touching all-time highs this morning.

As the Ukraine crisis dominates headlines once again, Capital Economics has put together a useful Q&A on the potential economic and market impacts:

  1. Will the crisis escalate much further? Probably not, even though the risks of miscalculation are high. Neither Russia nor the West would want tensions to build from here. Despite the threats from the US  and EU, the pace at which Western sanctions are being tightened is glacial and their scope still limited. Russia seems content to force Ukraine’s new government into concessions on regional autonomy, rather than invade and annex more territory. That said, Russia may want to keep up the pressure on Kiev at least until Ukraine’s Presidential elections due on 25th May. In the meantime, violence could yet spiral out of control, prompting more overt Russian intervention and a stronger response from the West.
  2. Could a further escalation derail the recovery in Western Europe? Probably not on its own, although growth is already weak. Exports to Russia typically account for only a small share of GDP. What’s more, Europe is less dependent on Russian energy than the headlines suggest. Stocks of natural gas are high, and other producers, such as Norway and the MENA countries, would be able to increase supplies. Admittedly, prices might have to rise further, but alternative suppliers would have a strong incentive to keep their costs down to encourage customers of Russian gas to switch permanently.
  3. How big is the threat to the Russian economy? Greater than many think. The direct effect of targeted sanctions may be limited. But the fall-out from the slump in Russian financial markets will be significant, and the mere threat of further sanctions will be a long-lasting deterrence to foreign investment. The crisis has certainly damaged Russia’s reputation as an energy supplier and trade partner.
  4. What does it mean for commodity prices? The risk of disruptions to supply may put some further upward pressure on the costs of energy and a handful of other commodities of which Russia or Ukraine are important suppliers (including palladium, nickel and grains). But the upside, particularly for oil, could be limited by releases from strategic reserves. Over the longer term, the crisis may also accelerate the development of alternative energy supplies for Europe, including shale and imports from the US.
  5. Which assets are most vulnerable? So far, the main casualties have been Russian and Ukrainian equities, bonds and currencies, and an extended period of weakness here seems likely. In contrast, after some contagion in the early stages of the crisis, other potentially vulnerable markets appear to have decoupled again. This is consistent with the relatively sanguine views about the wider implications outlined above. But if the crisis does escalate further, we would expect to see some renewed falls in global equity markets too. The biggest losers would presumably be those with the greatest economic and financial exposure to Russia (so Germany’s DAX should fall further than the UK’s FTSE). But Japan’s Nikkei might also underperform due to renewed yen strength.
  6. Will there be any market “winners”? Increased geopolitical and economic risks are, of course, likely to boost demand for traditional safe-havens: US, German, Japanese and UK government bonds; gold, and the yen. In contrast, any support to oil prices may be short-lived, especially if reserves are released.
Will the Ukraine crisis escalate? Probably not, says Capital Economics.

Will the Ukraine crisis escalate? Probably not, says Capital Economics. Photo: Reuters

So what's weighing on the local market? For one, the drop in the iron ore price overnight is taking its toll on the miners.

Then, investors in banks seem to think it's best to take some profits after the recent surge in the shares, which took three of the big four to record highs as recently as this morning. The market is expecting another solid set of results when bank earnings season kicks off on Thursday.

 "Investors are going to wait to see what the results are," says Martin Lakos, division director at Macquarie Bank. "Seeing the upgrades by analysts in the sector, I think the banks are also viewed as a proxy to the recovery in the economy - there's good reason to hold onto the banks."

Investors are also cautious ahead of key US and Chinese economic data due for release over coming days, headed by the late April FOMC rates decision, “advance” March quarter US GDP and April US non-farm payrolls as well as the April “official” Chinese PMI numbers.

From a local angle, our market is hanging out for the Woolies March quarter sales data tomorrow (the Wesfarmers numbers which issued today were patchy) and the ANZ March half profit result, broker Patersons says in a note this afternoon.

Perth conglomerate Wesfarmers’ chief executive Richard Goyder is predicting further falls in coal prices for the June quarter, but says the group is in the commodity “for the long run”, after posting a strong March quarter production result for its two Australian coalmines.

“We would expect a reduction in metallurgical coal pricing,” Mr Goyder said, as the group was finalising its contract pricing for the June quarter.

“A majority of producers would find it very financially challenging at current pricing.”

He said some coal producers, both in Australia and globally, would not survive the current conditions. But Wesfarmers, as a low cost producer, could afford to “batten down the hatches”, and wait it out.

He said he was positive that at current coal prices the group could continue to export above cost. However, he said the supply into the domestic market was run at a loss for Wesfarmers.

Wesfarmers recorded a rise in coal production for the March quarter at both its Australian operations.

Read more ($).

The local market, which is trading at the day's lows, is the clear underperformer in the region:

  • Japan (Nikkei): closed
  • Hong Kong: +0.4%
  • Shanghai: +0.15%
  • Taiwan: +0.6%
  • Korea: -0.3%
  • ASX200: -1.1%
  • Singapore: -0.3%
  • New Zealand: +0.6%

Kerry Stokes' Seven is the only local television company to lodge an expression of interest with the International Olympic Committee for the rights to broadcast the next three Olympics.

Preliminary bids were due last week for the broadcast rights to the Rio de Janeiro 2016 Games, the 2018 Winter Games in Pyeongchang, South Korea, and the 2020 Tokyo Games.

The IOC is understood to have originally wanted about $230 million for the three Games but expectations have been tempered by the metropolitan free-to air networks, Seven, Nine Entertainment and Ten Network.

The eventual price could fall well below $200 million, given Nine is unlikely to bid and Ten would be reluctant to pay a hefty sum.

Industry sources say that for the networks, a price of more than $150 million would likely make the games broadcasts unprofitable, although premium sport offers the opportunityfor networks to promote the rest of their schedule.

Nine and Ten have not ruled themselves out of the process by not participating in the expressions of interest.

Pay-television service Foxtel also did not bid, but is likely to pick up parts of the Games from the successful free-to-air bidder.

Read more.

Swimmer James Magnussen at the 2012 London Olympics.

Swimmer James Magnussen at the 2012 London Olympics.

The health of online accommodation provider Wotif.com Holdings is being monitored very closely with some in the market suggesting a downgrade could be on the way.

As of the last publicly disclosed accounts, Wotif’s total transaction value for accommodation was $502 million, down 6 per cent on the $532 million in the previous corresponding period.

This decrease occurred while there has actually been overall growth in the online booking sector, which might mean that Wotif’s competitors are taking away market share.

The competitors include Expedia, which owns expedia.com, Priceline, which owns booking.com, and Trip Advisor, which owns tripadvisor.com.

All have massive marketing budgets which are being deployed in Australia. Wotif has increased its marketing costs to try and protect its market share.

Wotif, whose share price has dropped by more than half in just under a year, reported net profit after tax of $22.64 million for the half-year ended December 2013, down 18 per cent.

Bank of America Merrill Lynch analyst Mark Bryan said in a note to clients that “we continue to forecast three years of no underlying earnings per share growth” in the company.

Valuation is stretched and does not reflect the earnings risks. We see a further gradual de-rate occurring,” he said.

Recent reports have declared that Goldman Sachs was appointed as “defence adviser” to the company but market observers saw that as unusual given the two largest shareholders, including founder Graeme Wood, own next to 40 per cent of the company.

Indiscriminate selling across emerging markets has opened up a massive discount for Asian technology stocks making them look “cheap” relative to the higher multiples that global peers such as Apple and Google demand.

Kelvin Tay, UBS Wealth Management’s regional chief investment officer for Southern Asia-Pacific, has identified IT equities as one of the most compelling themes in the region right now:

  • I would actually be flogging Asian IT companies because I think there’s this huge interest in the IT sector now on a global basis.
  • We like Asian IT because on a valuation basis it’s quite attractive, it’s actually cheap compared to global IT.

Historically, Asian IT stocks have traded on comparable multiples with global IT but the emergence of a 21 per cent discount in favour of regional tech equities is attractive for long-term investors, Tay says.

Tay highlights the changing nature of the sector in Asia in the space of a few years and how it is no longer dependent on the number of iPhones Apple ships in any given quarter:

  • Previously it was always the hardware companies listed in Taiwan, these companies have very thin margins... since then it has changed quite significantly, now it’s a more higher-margin space to be in.

The biggest stocks in India, China, Korea and Taiwan are all technology companies, he says, pointing to Infosys, Tencent, Samsung and TSMC.

Money managers and hedge funds have mistimed the Australian dollar for a second time this year.

Commodity Futures Trading Commission data show the most-bullish six-week change to Aussie positions in more than 1 1/2 years over the period to April 22, just in time to catch a slump that made the local dollar the past week’s worst performer among 10 currencies tracked by Bloomberg Correlation Weighted Indexes.

Earlier this year, futures traders were forced to abandon near record bets on declines when the Aussie rallied from the 3 1/2-year low reached on January 24.

“The Aussie is in a steady range and, rather typically, short-term money is getting poorly positioned at both ends of the ranges,” says Hugh Killen, Westpac’s global head of foreign exchange. “The market has got itself long at relatively unattractive levels and we could see a further sell-off as a result.”

The local dollar slid 1.5 per cent in the past week against other major peers, after a report showing subdued inflation eroded bets the RBA will increase rates this year. The currency is currently fetching 92.43 US cents, down from its 2014 high of 94.61 US cents it hit earlier this month.

China’s continuing efforts to crack down on the country’s shadow banking sector have pushed the iron ore price to a seven-week low.

Overnight, the iron ore price, measured at China’s Tianjin Port, dropped 2.2 per cent, adding to last week’s 4.7 per cent slump. Iron ore is now trading at $US108.60 per tonne, its lowest point in seven weeks.

The raw metal has been heavily involved in financing deals in China, which has caused significant volatility in 2014, as the Chinese government attempts to curb the country’s shadow banking sector.

The China Banking Regulator Commission (CBRC) has argued for an investigation into iron ore financing deals. It is rumoured that banks are local regulators are due to hand in detailed reports on April 30, leading increased volatility over the last week.

It is believed that tighter financing regulation will cause borrowing costs for iron ore buyers to jump.

“Reports were that the regulator, the CRBC has requested banks to investigate iron ore financing deals to reduce ‘fake’ trades and improve risk management,” ANZ head of commodities Mark Pervan said.

“The order follows measures already introduced by Chinese banks to better secure trade finance deals, requesting mills provide higher deposits to issue letters of credit."

Trade sources said Chinese banks have started to tighten loan requirements for steel mills and trading firms seeking credit for iron ore imports.

"The thing we've been hearing from traders is the margin on the letters of credit has gone up quite sharply over the last week - it used to be 10-20 percent and now is 40-50 percent, and that seems seems to be forcing a bit of liquidation (to cover the margin call)," says Graeme Train, an analyst at Macquarie Commodities Research in Shanghai.

Celebrity chef Justin North has been banned from running companies for two years over the multi-million dollar collapse of his restaurant empire in 2012.

North's flagship restaurant, Becasse, at Westfield Sydney, had just 25 seats and offered a $190-a-head degustation menu, served on ostrich-skin tables.

Collapse left staff nearly $1 million out of pocket in unpaid super and creditors were owed $7 million.

Here's more

Fall from grace: Justin and Georgia North at Becasse.

Fall from grace: Justin and Georgia North at Becasse. Photo: Marco Del Grande

Cabcharge executive chairman Reg Kermode has announced his resignation from the top job on health grounds.

The 39-year company veteran will vacate the CEO job once an replacement is found.

Kermode has developed an “aggressive form of cancer” and will “make a further statement down the track,” said the ASX release.

Shares in the company fell 2 per cent on the announcement, now down 1.4 per cent at $3.89.

As bank reporting season heats up, Credit Suisse tips ANZ to be the standout performer, driven by underlying profit growth (superior revenue growth, cost discipline and housing & non-housing balance growth, although a softer net interest margin outcome).

Operational issues that the bank says it will focus on at an industry level include:

  • Shifting net interest margin dynamics, with on-going relief in relation to funding costs / improving deposit spreads being countered more clearly now by asset spread compression (mortgages and aspects of business lending, such as in institutional).
  • Rising amortisation charges accelerating cost growth, albeit in this period with the potential for this to be absorbed by cyclically buoyant financial market income (as was seen in the CBA 1H14 result).
  • Scope for further capital management (we assume DRP buy-backs for each of the majors as well as a $0.10 special divided for WBC).
  • The usual seasonal increase in consumer arrears.


The CS analysts rank the banks in order of preference: ANZ (outperform, NAB (outperform), CBA (underperform) and Westpac (underperform).

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Whitehaven Coal is tipping deeper declines in coal prices in the June quarter, after posting a slight fall in March quarter production.

The company downgraded full-year guidance last week. However, the miner continues to push on with its $760 million Maules Creek expansion amid the deep malaise in the sector.

Whitehaven remains at the whim of depressed coal prices and a high Australian dollar. Prices achieved for thermal coal – which account for the bulk of Whitehaven’s output – took a hit in the March quarter, averaging $US75.19 a tonne, down from $US82.28 per tonne in the previous quarter.

Factors weighing on the thermal coal price “included a well-supplied market with little disruption from weather related events and a lack of buying by China based coal customers from the seaborne market”.

And while we're on the topic of banks: Australian lenders are growing more fearful of how rising interest rates could reduce their customers’ ability to repay their loans, a comprehensive survey of global banks by PwC has shown.

The high exposure of Australian banks to mortgages – around half of their lending is made to residential housing – has seen interest rate risk jump from 30th in 2012 to 6th on a list of concerns for banks, according to a PwC biennial survey, which follows several analysts and fund managers raising the high indebtedness of Australian households as being an increasing risk for bank valuations.

The impact of tougher regulation since the crisis on growth is now the top worry in Australia and globally. The issue of regulation has been raised by the banks in their submission to the financial system inquiry. The survey also shows banks are increasingly paranoid about how their reputations could be damaged by social media.

Australian banks ranked poor “sales and business practices” and the “pricing of risk” second and third, much higher than their overseas counterparts.

Mortgage competition in Australia has increased in the past six months, putting pressure on lending standards, and the survey shows banks are aware of the risks of inappropriate lending and the potential for price competition to reduce margins.

Read more

 

Sky's not the limit: Barclays has concerns about Australia's housing market.

Sky's not the limit: Barclays has concerns about Australia's housing market. Photo: Nic Walker

Bell Potter director Charlie Aitken has downgraded his recommendation on the big banks to ''hold'', saying share prices are unlikely to continue rising faster than underlying dividend growth.

As CBA, Westpac and ANZ shares hit new record highs, the closely-watched broker says in a note that he's toning down two-and-a-half years of bullishness on the banks to ''a more neutral stance'':

  • I broadly think in the true sense Australian banking sector is now a 'hold' rather than the outright 'buy' we have recommended for that entire period.
  • I expect banks to track their physical dividend growth from here, not outpace it. This is particularly so as cash rates eventually rise.

One reason for the surge in bank stocks has been investors seeking out the attractive dividend yields in the sector, spurred on by record low interest rates. But Aitken argues this dynamic has reached its peak.

The ASX 200 bank index has jumped 50 per cent in the last two years, and Aitken notes that the yield on big bank stocks is now about 5 per cent.

He argues the share price surge has driven yields down as far as they'll go. Yields and share prices move inversely:

  • My point today is I don't expect the 5 per cent [fully-franked] prospective yield to be bid down any further.
  • At these share price levels and considering what large parts of portfolios banks have become, I simply believe I don't need to commit more fresh money to the sector or even reinvest dividends.
  • I don't want to sell the banks, I just don't think we need more of them up here.
Dividend yields (net) of the big banks: NAB offers the highest, ANZ the lowest.

Dividend yields (net) of the big banks: NAB offers the highest, ANZ the lowest.

Roc Oil and Horizon shares have resumed trading after earlier this morning announcing their ''merger of equals", but it looks like Horizon shareholders aren't happy.

The shares have fallen 9.5 per cent to 33.5 cents, while Roc are up 1.7 per cent at 46.25 cents.

Roc will offer stock to take over Horizon in a deal the pair are describing as an “all-scrip merger of equals”. Horizon shareholders will receive 0.724 shares in Roc for each Horizon share they hold.

Roc’s chairman Mike Harding will be chairman of the merged group, while Horizon chief executive Brent Emmett will be managing director.

Read more

Asciano has reiterated its full-year profits guidance after reporting rising coal haulage volumes at rail operator Pacific National and higher container lifts at Patrick ports for the third quarter.

Asciano chief executive John Mullen said the company continued to expected “low, single-digit growth” in underlying net profit after tax for fiscal 2014 after coal tonnages rose 22 per cent for the three months ending in March and container lifts at Patrick ports increased 6.8 per cent.

The company's shares are up 0.6 per cent o $5.43.

Beach Energy is on track to record full-year sales of about $1 billion after reporting a 48 per cent jump in year-on-year revenues for the March quarter.

Sales in the three months rose to $231.3 million from a year ago, but were down 19 per cent from the record December 2013 quarter due to a dip in sales volumes and lower prices, Beach said today.

Full-year production should be at the upper end of the guidance range of 9.2 million to 9.6 million barrels of oil equivalent, Beach said.

Beach shares gained as much as 5¢, or 2.8 per cent, to $1.81, before settling to $1.77 around 11am.

Record oil production from Beach’s operated fields in the Cooper Basin helped boost revenues, with full-year net oil production on track for 5 million barrels in 2013-14, Beach said.

Managing director Reg Nelson said Beach was applying the knowledge it had built up in its Western Flank oil business to new exploration areas, such as its Tookoonooka permit on the eastern side of the Cooper Basin in south-west Queensland.

Mr Nelson has spoken enthusiastically about the oil potential of the Tookoonooka permit where Beach is working with Bengal Energy. The 2600-square-kilometre licence includes a meteorite impact crater that could open up a new exploration play for conventional oil that Mr Nelson says could be rapidly brought to market.

The company also reported ongoing discussions with potential exploration partners for its Lake Tananyika venture in Africa, and the sale of non-core permits in the Surat and Maryborough basins in eastern Australia.

Three of the big banks have hit all-time highs this morning, ahead of reporting season which kicks off with ANZ on Thursday.

CBA is nudging $80, hitting a record of $79.95, which has taken the bank's market cap to $130 billion, while ANZ is getting closer to the $100 billion club. The bank's shares touched $35.04, putting a value of more than $95 billion on ANZ.

Westpac also hit a record high of $35.99 in early trade but has since drifted back into the red, down 0.2 per cent, while NAB is down 0.5 per cent at $35.71.

Cash Converters has reported revenue over the three months to March 31 grew by 29.4 per cent against the same period last year to $85.3 million, despite some softness in its UK operations.

Their personal loan as at March 31 stood at $100.3 million, from $80.6 million 12 months prior.

Investors reacted positively to the result, with the stock up 7.3 per cent to $1.11 following the announcement.

The company said that the third quarter result "reflects the continuing upward trend that commenced in the second quarter in Australia".

"As in previous years, the main profit driver of the group has been the financial services products."

Cash Converters managing director Mr Peter Cumins said in the statement: “We are very pleased with the improvement in the third quarter, particularly in the solid growth we are seeing in our online loan products. The UK market remains tough but now it seems we are emerging from the transitionary issues resulting from the new Australian regulatory requirements and our loan products are once again seeing good rates of growth. We expect this growth to continue.”

Here’s an interesting graph courtesy of Suncorp, showing the US jobs recovery is happening mostly in the lower income sector.

The new jobs are being created in retail, administration, and hospitality, Suncorp says. ‘‘These industries have lower wage growth, which is likely to be driven by underemployed individuals preferring any income to no income, and the supply of available labour.’’

<p>

Is this the quiet before the storm? The current lack of volatility in the markets is dangerous, according to Saxo Bank's bearish chief economist Steen Jakobsen, who says we need to know why the danger will be with us for some time.

In this video he warns, "...the world seems to think there is a stable permanent equilibrium which doesn't make sense if you think about it, unemployment is still rising, debt to GDPs are still rising, the Crimea situation is increasing in tension, not decreasing. The US still has a lot of stuff to do on social security and welfare spending … for two or three years down the road, with no activity, the world will fall into not only deflation, but also a recession."

Jakobsen predicts that, year on year, world growth will be "a big fat zero" and therefore the markets are drifting into dangerous territory.

Fund manager Allan Gray says it is not in the market to sell more Fairfax Media shares, though it might be do so if the share price continues to rise.

Allan Gray has trimmed its stake in Fairfax four times this year. Having started 2014 with an 11.43 per cent stake, it now owns just 6.77 per cent in the publisher of this website. But it remains Fairfax’s second-largest shareholder, behind Gina Rinehart’s Hancock Prospecting.

Allan Gray’s Simon Marais said the sales were triggered by Fairfax’s share-price rise.
After years in the doldrums, Fairfax’s shares have rallied 49 per cent this year, largely on hopes for its real estate classified division, Domain.

Fairfax shares have opened unchanged at 95.5 cents.

Shares have pushed higher, with energy stocks joining the big banks and top bluechips in recording gains, offsetting falls in miners.

The ASX 200 is 11 points higher in early trading, or up 0.2 per cent, to 5546.9, while the All Ords is 10 points higher at 5526.1.

Metals and mining stocks are 0.8 per cent down as a group, with BHP 0.5 per cent lower and Rio down 1.1 per cent. Gold miners have shed some of yesterday's gains, with Newcrest falling 1.9 per cent.

NAB is the only one of the Big Four to decline - by 0.1 per cent - while CBA is up 0.5 per cent.

Telstra has gained 0.5 per cent, while investors received Wesfarmers' quarterly sales report positively, bidding up the stock 0.4 per cent.

Oil Search is up 2.2 per cent and Santos 1 per cent on confirmation the PNG LNG project would be up and running sooner than expected.

Buying Goodman Fielder will not be easy for the Asian consortium, writes BusinessDay columnist Elizabeth Knight:

There are a few hurdles to overcome for the Asian consortium of Wilmar and First Pacific in its quest to buy one of Australia's oldest food manufacturers, Goodman Fielder, starting with price.

Goodman owns brands including Meadow Lea, Praise and White Wings and has been a chronic underperformer for many years, well before many other food companies hit troubles associated with high costs, low margins and the stubbornly high dollar.

Plenty of shareholders would welcome the opportunity to be taken out of Goodman at a reasonable price but many consumers will not like the local company falling into foreign hands.

Any public relations backlash might be enough for Treasurer Joe Hockey to take a more forensic look at the deal on public interest grounds. While plenty of Australian agribusiness and food processing groups have been acquired by overseas interests - including Wilmar's $2.3 billion purchase of CSR's sugar assets - the government's rejection of Archer Daniels Midland's bid for GrainCorp sets a more recent precedent.

At the time the bid was blocked Hockey talked about competition concerns but only last week revealed ADM's not being of good character was behind the decision. He suggested more would come out over time.

It's worth noting that ADM is a 16 per cent shareholder in Wilmar - a company that has extensive agribusiness interests around the world. Whether this has any influence on Foreign Investment Review Board approvals remains to be seen. Although it shouldn't.

Read more.

Illustration: John Spooner.

Illustration: John Spooner.

Roc and Horizon have announced their expected merger plan, saying it will "create a leading Asian exploration and production company".

Here are the details from the ASX statement this morning:

  • All scrip merger of equals
  • Horizon shareholders to receive 0.724 ROC shares for each Horizon share
  • Merger to be implemented by a Horizon scheme of arrangement
  • Mike Harding (current chairman of ROC) will be chairman of the merged group and Brent Emmett (current CEO of Horizon) will be CEO and managing director of the merged group
  • Fraser Ainsworth (current Chairman of Horizon) will be appointed as a Non-Executive Director of the merged group and Alan Linn (current CEO of ROC) will continue with the merged group in the role of President of ROC Oil Malaysia until April 2015
  • The proposed Merger has the unanimous support of both the ROC and Horizon Boards

 

More to come...

Bell Financial Group's online broking arm, Bell Direct, will double in size after the company entered an agreement with Macquarie Group to provide a back-end trading platform for its banking and financial services group.

The three-year agreement - for a white label offering - allows Macquarie to retain its branding, while the heavy lifting is conducted by Bell Direct. The company announced the contract in a statement to the Australian Securities Exchange this morning.

The online broking sector is dominated by the Commonwealth Bank's CommSec unit, but other large banks such as National Australia Bank are attempting to chip away at its rival's market share. Bell Direct signed a similar agreement to that with Macquarie with HSBC Australia in 2012, using Bell Direct's white label platform for HSBC Online Share Trading.

Wesfarmers has once again relied on its Coles supermarket, Bunnings hardware chain and Officeworks stores to do the heavy lifting in terms of sales with the company's retail focused businesses driving group performance for the third quarter.

Wesfarmers released this morning its third quarter sales results with the mix of trading performance across its divisions mirroring the results recorded during the first half, especially when considering the impacts of an earlier Easter in financial year 2013.

For the third quarter, Coles recorded total sales growth of 3.6 per cent, with its flagship food and liquor business within the supermarkets group up 3.9 per cent. Its Bunnings chain posted sales growth of 12.3 per cent, while Officeworks saw sales rise 6.7 per cent.

The performance by its leading merchandise and apparel chains was again hugely divergent. Kmart posted a 0.4 per cent lift in sales while Target, which is going through a restructure to improve its operations, continued to see sales go backwards, this time down 3.6 per cent.

FlexiGroup has engaged consultant Bain & Company to conduct a sweeping review of its operations and map out a six-year strategy to propel the financial services group to the ranks of Australia's 100 biggest companies.

Documents obtained by Fairfax Media showed FlexiGroup is aiming for $200 million in net profits by 2020, nearly triple the $73 million it netted in fiscal 2013.

The company is setting its sights on an aggressive acquisition strategy and growth from three existing pillars - consumer, business and international finance.

FlexiGroup, which is headed by former Telstra International's group managing director Tarek Robbiati, is also looking to expand the company's cards business and tapping ''adjacent'' services such as office technology, mobile phone plans and equipment services.

''Growth in these areas will be achieved by organic and inorganic capability development,'' according to the Bain & Co draft documents, which were understood to have been presented to FlexiGroup's board members this month.

''Given our aggressive growth targets, M&A [mergers and acquisitions] will form an integral component of our strategy; both our capabilities and capacity need to be deepened in this area.''

Read more.

ExxonMobil has reported the early start of production at its $US19 billion ($20.5 billion) liquefied natural gas project in Papua New Guinea, paving the way for early revenues for partners including Oil Search and Santos.

The first LNG cargo is now scheduled for delivery before the middle of 2014 as a result of the early commissioning, ExxonMobil said on Tuesday.

Exxon had originally scheduled the first cargo for later this year but moved that forward earlier this year to mid-2014. The latest announcement signals the work has progressed on, or ahead of that revised schedule.

"Completion of commissioning activities and the first LNG production ensures the project remains on target for its first LNG cargo before the middle of 2014," ExxonMobil PNG Ltd managing director Peter Graham said in a statement.

The PNG LNG project is the biggest single resources investment in PNG and will drive a major increase in revenues for the country.

Both Oil Search and Santos have flagged that the uplift in cash flows that they will see from the project should pave the way for increased dividends to shareholders.

Read more.

Contracts to purchase previously owned U.S. homes climbed in March by the most in almost three years, showing residential real estate was starting to stabilize entering the spring selling season.

Economists watch the pending sales report for clues to existing-home sales, which are tabulated when a contract closes a month or two after being signed.

The pending home sales index rose 3.4 per cent, the most since May 2011 and the first gain in nine months, after a 0.5 per cent drop in February that was smaller than initially reported, the National Association of Realtors said today in Washington.

Housing demand has weakened since the middle of last year as rising prices and borrowing costs put ownership out of reach for some prospective buyers. An improving employment outlook and easier access to credit would help entice more house hunters to sign purchase contracts.

“The backdrop in general for housing remains reasonably positive,” said Jim O’Sullivan, chief US economist at High Frequency Economics, who projected a 2.5 per cent gain. “The labour market is improving, confidence generally has been edging up and mortgage rates are still pretty low.”

“After a dismal winter, more buyers got an opportunity to look at homes last month and are beginning to make contract offers,” NAR chief economist Lawrence Yun said in a statement. “Sales activity is expected to steadily pick up as more inventory reaches the market, and from ongoing job creation.”

Sales of existing homes fell in March for a third consecutive month, dropping 0.2 per cent to a 4.59 million annual rate, the lowest level since July 2012, the Realtors association said last week. Purchases were down 8.5 per cent compared with the same month last year.

New-home sales also retreated as buyers balked at record prices. Sales dropped 14.5 per cent to a 384,000 annualized pace, the slowest in eight months, the Commerce Department reported last week. The median price of a new house climbed 12.6 per cent from a year earlier to a record $US290,000.

Mortgage rates have risen along with prices, reducing affordability. The average rate for a 30-year, fixed mortgage was 4.33 per cent in the week ended April 24, compared with 3.4 per cent a year earlier, according to Freddie Mac. Mortgage rates remain historically low, however. Since 1971, they’ve averaged 8.5 per cent, peaking at 18.6 per cent in 1981.

As mentioned, iron ore has come under pressure in recent days, with losses accelerating yesterday.

The spot price fell 2.2 per cent to $US108.60, and the metal is now 9 per cent off its recent peak of $US119.40 on April 9.

The economics team at NAB point to Chinese press reports that higher financing costs for iron ore buyers will apply from May 1 - this Thursday.

"Price weakness has come despite the lingering worry over supplies from Australia’s and the world’s largest iron ore shipping point Port Hedland from the possibility of tug boat strike action, now being considered by employee union members who will vote May 12 on whether to strike," they write.

Miners almost sank the benchmark index yesterday, and there may be more pressure on them today, leaving the heavy lifting to the banks and other favoured reliable blue-chip names.

The price of iron ore has taken a tumble in recent days.

The price of iron ore has taken a tumble in recent days.

Local stocks are poised to open higher after an afternoon rally on Wall St, despite a another drop in the price of iron ore overnight. Wesfarmers reports third quarter results.

Here's what you need2know:

  • SPI futures up 20 points to 5553
  • AUD at 92.58 US cents, 94.91 Japanese yen, 66.84 Euro cents and 55.08 British pence
  • On Wall St, S&P500 +0.3%, Dow Jones +0.5%, Nasdaq flat
  • In Europe, Euro Stoxx 50 +0.6%, FTSE100 +0.2%, CAC +0.4%, DAX +0.5%
  • Spot gold down 0.5% to $US1296.76 an ounce
  • Iron ore falls 2.2% to $US108.60 per metric tonne
  • LME three-month copper up 0.2% to $US6765 per tonne
  • Brent oil slips 1.4% to $US108.21 per barrel

 

What's on today:

  • US: Case Shiller home prices for February, consumer confidence for April, Federal Reserve meeting (day one)
  • Kiwi trade balance out this morning
  • Start of Golden Week festival in Japan today

 

Stocks to watch:

  • Wesfarmers reports third quarter results
  • Energy producers have quarterly reports: AWE, Beach Energy, Perseus, Senex, Whitehaven
  • Also PanAust and Alacer Gold report quarterly sales
  • Deutsche Bank is maintaining a “sell” recommendation on Newcrest Mining after “a reasonable quarter” was clouded by a weak outlook for the 2015-16 financial year. Its 12-month price target sits at $7.50 a share
  • Hartleys Research is maintaining a “speculative buy” on NRW Holdings and said its calendar year 2014 order book was now “very strong”
  • Stockland investors do not expect the company to sweeten its bid for Australand Property Group this week, but that doesn’t mean there may not be something in Wednesday’s third-quarter update, according to the Street Talk column in The Australian Financial Review
  • Caltex Australia downgraded to hold from buy at Bell Potter
  • Flexigroup hires Bani & Co to review operations, AFR reports
  • G8 Education holds its AGM in Gold Coast
  • Westpac has been cut to neutral from buy at Citi
  • WorleyParsons rated new neutral at HSBC with a price target of $17.50

 

Read more.

Good morning and welcome to the Markets Live blog for Tuesday.

Your editors today are Jens Meyer and Patrick Commins.

This blog is not intended as investment advice.

BusinessDay with wires.

Quotes Search

Sort comments by:
  • How about this:

    Director that contributes to company collapse, sends smiley face text to those
    affected, then shares in $3.8 million gain:

    http://www.innovationmentor.com.au/1/post/2014/04/directorsmileytext.html

    Commenter
    space_
    Location
    Date and time
    April 29, 2014, 4:06PM
  • Maybe the market has woken up to the fact that Tony Abbott is an economic dullard, who will likely drive us into recession. I mean, who gives belt-tightening lectures then spends $12bil on fighter jets and sits in the cockpit beaming? Ideology not responsible economic management is driving the government. Lower and middle Australia be doing all the heavy lifting for dumb promises and misdirected spending. Watch the rental and housing markets, the real drivers of this economy, buckle.

    Commenter
    PeteT
    Location
    Date and time
    April 29, 2014, 3:47PM
  • Buying SBM at 21c. Bargain. Wait until the dollar drops to 80c and cash in.

    Commenter
    Goldilocks
    Location
    Date and time
    April 29, 2014, 3:44PM
  • Looking a bit hairy for the bulls!

    Commenter
    Cousin IT
    Location
    Date and time
    April 29, 2014, 3:43PM
  • "Markets Live: Party over for banks?"
    love your work my friend.
    Yes...party over...about time too.

    Commenter
    no banks .. no party!
    Location
    Date and time
    April 29, 2014, 3:41PM
  • where the fark is allan when you need him?

    Commenter
    mork
    Location
    nannoo nannoo
    Date and time
    April 29, 2014, 3:38PM
  • Got QAN at 1.03. Go you good thang!

    Commenter
    Alan Joyce
    Location
    Date and time
    April 29, 2014, 3:30PM
  • Wow, those guys at Capital Economics aren't to be taken lightly, given the photo with the 2.59pm article. :-)

    Commenter
    I love a good caption
    Location
    Date and time
    April 29, 2014, 3:29PM
  • Party over for banks. Yeah right. They'll continue to make billions and billions each year. Slow down in government spending will impact on inflation and growth. Interest rates aren't going anywhere for a while, let alone increasing in the next 6-12 months. Banks will be fine. they are profit machines.

    Commenter
    Savyinvestor
    Location
    Date and time
    April 29, 2014, 3:29PM
  • LOL Allan upset quite a few here it seems. Get over it.

    Commenter
    Roger
    Location
    Date and time
    April 29, 2014, 3:28PM
  • Where are the iron ore bulls lately?

    Commenter
    Roger
    Location
    Date and time
    April 29, 2014, 3:27PM
    • Cleaning toilets.

      Commenter
      creep
      Location
      Date and time
      April 29, 2014, 3:33PM
    • Where have all the gold bulls gone?

      Commenter
      Iron ore
      Location
      Bull
      Date and time
      April 29, 2014, 3:43PM
  • which idiots are still buying the banks at these prices??

    Commenter
    no banks .. no party!
    Location
    Date and time
    April 29, 2014, 3:20PM
    • NAB in tremendous strife. Watch for a substantial price drop within the next few months....its the real reason CEO recently quit.

      Commenter
      creep
      Location
      Date and time
      April 29, 2014, 3:29PM
    • Probably the same people talking the banks down. Nothing like picking up a few extra for a little less to sell at a profit when the results are announced in the next week or so.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 3:39PM
  • Well when Alan gets back somebody let him know that SBM is at 21c should have enoough pocket money to have one last crack.

    Commenter
    Alan's
    Location
    Demons
    Date and time
    April 29, 2014, 2:48PM
  • The sell off is on in earnest, the doomsayers will be out of the woodwork now. If I am any judge there is an excellent chance Allan will be back tomorrow lol

    Commenter
    herman
    Location
    Date and time
    April 29, 2014, 2:43PM
    • Who cares, we're still making/scrapping a living...better than a normal job.

      Commenter
      HFT 01010101010101
      Location
      Sydney
      Date and time
      April 29, 2014, 3:16PM
  • Wow, the market is crashing!! It's been AGES since it was last this level...

    Well, a week.........!

    Commenter
    Life Is Good
    Location
    The Real World
    Date and time
    April 29, 2014, 2:42PM
    • yep we're all doomed, been tellin ya that all year!

      Commenter
      pessimistic pete
      Location
      Date and time
      April 29, 2014, 2:52PM
  • Who blew the whistle?
    When I went out at 11 this AM most of my stocks had a beautiful green tinge.I get home after a long lunch and bin GO .Nothing but red on everyone of them.
    Is there a central spot that informs a select few when to step back? Is it the control that lets all the petrol stations to hike their prices?
    I wonder if this will get thru the censor

    Commenter
    Pest
    Location
    WEST
    Date and time
    April 29, 2014, 2:42PM
    • I often imagine the stock market is like that scene in "Trading Places" where pork bellies were being bid up As soon as the market reaches a certain point the SELL button is hit and down she goes.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 3:00PM
    • An expensive lunch!

      Commenter
      Yin or yang
      Location
      Date and time
      April 29, 2014, 3:06PM
  • Boy oh boy, SBM continues to take a hammering. 21 cents, certainly not one for the faint hearted!

    Commenter
    herman
    Location
    Date and time
    April 29, 2014, 2:39PM
    • SBM is a good company, and I will ride this out without loosing any sleep.
      NEN is another matter entirely

      Commenter
      Pierre
      Location
      Date and time
      April 29, 2014, 2:48PM
  • I wrote last week that the overseas funds that don't get the franking credits will sell off the banks first before ex-div date. Then the chain-reaction of entire market falls...

    Then on ex-div date you will get a drop of the div + probably the franking too. Then $3-5 further drops in the months after.

    Always be ready to sell out before ex-div, especially at post-GFC record highs.

    Commenter
    GS
    Location
    Date and time
    April 29, 2014, 2:37PM
  • I know the iron ore price has taken a fall but quite a drop in MGX SP. I like MGX but I'll hope for sub 70c.

    Commenter
    Yin or yang
    Location
    Date and time
    April 29, 2014, 2:25PM
  • This might be a little late but did anyone notice the volume spike in GFF on April 24th BEFORE any announcement. Insider trading?

    Commenter
    BTFD
    Location
    Date and time
    April 29, 2014, 2:15PM
  • Wow, came back from lunch and the market has really hit the skids.

    Commenter
    Grinch
    Location
    Date and time
    April 29, 2014, 2:01PM
    • What the heck did you order?!?!

      Commenter
      Barry Wonder
      Location
      Date and time
      April 29, 2014, 2:55PM
  • Down down, prices are down!

    Commenter
    Coles
    Location
    Date and time
    April 29, 2014, 1:57PM
    • Nothing like a good old fashioned sell off to warm the cockles of your heart!

      Commenter
      colin
      Location
      Date and time
      April 29, 2014, 2:32PM
  • drop you good things

    Commenter
    no banks .. no party!
    Location
    Date and time
    April 29, 2014, 1:57PM
  • I think that the sharp downturn we're seeing is not a case of "sell in May". Rather, the world is slowly but surely waking up to the chilling conclusion that the "recovery" since the GFC in 2007/2008 is completely built on debt and increased money-supply.

    The US-China debt/stimulus bubble is reaching its zenith. The rich-world demographic death-trap is slowly ticking towards the point of no return. The number of workers in Japan, Germany, Italy, Russia, and even China is shrinking year on year in at an ever faster rate.

    Commenter
    Dr No
    Location
    Sydney
    Date and time
    April 29, 2014, 1:53PM
    • I kind of agree, but if so, why were overseas markets up overnight, and most of Asia today? This is an ASX sell-off only. What's the reason, folks?
      <<<<< These comments here

      Commenter
      PeteT
      Location
      Date and time
      April 29, 2014, 3:01PM
    • @Pete - ASX and AUD serve as proxies for belief in continued Chinese growth. You can see that with any movement in iron ore price the AUD will follow.

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      April 29, 2014, 3:57PM
  • to all those who bought ANZ at the top...what were you thinking and muhaha for not seeing it.down 1.2%
    SUN as an alternative anyone got a tilt?

    Commenter
    BearshapedBull
    Location
    Mugpunters Lounge
    Date and time
    April 29, 2014, 1:42PM
    • I sold my ANZ some time ago. The top? Who ever knows where that will fall? Resisting the big 4 because you thought they were too expensive has been a post GFC mistake. PS translation re muhaha?

      Commenter
      Yin or yang
      Location
      Date and time
      April 29, 2014, 2:13PM
    • top was a new high,just puzzled whos buying? when surely it'll be -7% to 10% cheaper [heres hoping] within 2 weeks.cant see adivd strategy that would pull some profit at these high SPs.
      muhaha = a laugh much like a vampire/horror type.

      Commenter
      BearshapedBull
      Location
      Mugpunters Lounge
      Date and time
      April 29, 2014, 2:37PM
  • May fast approaching!!!!
    the end if near...SELL SELL SELL good companies and bad ones ASAP!!!

    Commenter
    MAYDAY,MAYDAY
    Location
    Date and time
    April 29, 2014, 1:38PM
    • I don't like this.I'm seriously starting to panic..what if we have another bad day 2moro?

      Commenter
      warren
      Location
      buffett
      Date and time
      April 29, 2014, 1:46PM
  • As our market pulls back sharply here's an article giving a perspective on "sell in May".
    http://money.cnn.com/2014/04/28/investing/stocks-summer-slump/index.html

    Commenter
    mitch of ACT
    Location
    Date and time
    April 29, 2014, 1:21PM
  • The gov't has plans to stimulate spending on infrastructure by encouraging State gov'ts to sell their "brownfield" assets and spend the proceeds, plus a bonus from the gov't, on "greenfield" assets. Now that's a worthwhile endeavour as employment (provided 457s are prohibited) will be created in the process and the gov't will have a bigger revenue base. However there are implications for the ASX. The sale of those "brownfield" assets to local investors will be competing with ordinary share-market buying for funds. The laws of supply and demand will prevail with too much supply of assets for sale competing for limited funds to buy those assets, "Brownfield" assets will be sold for less than an orderly sale process would have obtained. At the same time demand for existing shares will decline as available funds are used to snap up "brownfield" bargains. The ASX could be in for a bleak few years as far as share-price growth is concerned. However when you consider how hungry Sate govt's are for funds you would think that any "brownfield" assets worth selling would have already been sold. What's left is the dregs, so buyer beware.

    Commenter
    mitch of ACT
    Location
    Date and time
    April 29, 2014, 1:13PM
    • I wouldn't call the ports dregs though other stuff might be. But I think the Canberra mandated fire sale of public assets. pushing down their sale price. is actually what the high flying financial types at the big end of town want from their government muppets, or am I getting too cynical as I get older?.

      Commenter
      Jim
      Location
      Date and time
      April 29, 2014, 2:50PM
  • See content @11:12am re Beach Energy. Yet the SP falls. Much further and I reckon a buying opportunity.

    Commenter
    Yin or yang
    Location
    Date and time
    April 29, 2014, 1:13PM
    • Yes BPT is a favourite stock of mine too @Yin

      Commenter
      craig
      Location
      Date and time
      April 29, 2014, 1:27PM
    • coming off a 1.82 high might be some more pullback yet. good buying round 1.60s me thinks.
      "Candlesticks warned us today to be on alert with a new bearish pattern. Market attention is now on the downside."

      Commenter
      BearshapedBull
      Location
      Mugpunters Lounge
      Date and time
      April 29, 2014, 1:54PM
  • "The country still houses massive stretches of unoccupied residential complexes, with three to six years of unsold supply left over outside of Beijing and Shanghai, Chanos said. Chinese growth figures don't account for sales, so the country's enviable growth rate includes construction projects left empty, Chanos said. China fueled its construction boom largely on credit.

    "Anybody who thinks that can't collapse because of too much lending has not looked at economic history," Chanos said. "

    A long way down for fmg now.

    Commenter
    Herman
    Location
    Date and time
    April 29, 2014, 1:12PM
    • welcome back mate,

      Iron ore very volatile at the moment

      Commenter
      Pig Iron Bob
      Location
      Pilbara WA
      Date and time
      April 29, 2014, 1:29PM
  • Iron ore rebar futures have crashed.

    Jim Chanos short at $6 on the money.

    Commenter
    Herman
    Location
    Date and time
    April 29, 2014, 1:08PM
    • Déjà vu...Allan?

      Commenter
      Gordon Gekko
      Location
      Greg Coffey World
      Date and time
      April 29, 2014, 2:56PM
  • Look at that beautiful run down. Keep it up, maybe a few solid drop offs and im happy. Alan must have used up all his pocket money..... where is he he.

    Commenter
    ASX
    Location
    Ski Champion
    Date and time
    April 29, 2014, 1:05PM
  • Glad I shorted FMG at $6.

    Bears winning, Again.

    Commenter
    Herman
    Location
    Date and time
    April 29, 2014, 1:04PM
  • here comes the pull back! happy little vegemite.

    Commenter
    Kraft
    Location
    Australian Owned
    Date and time
    April 29, 2014, 1:00PM
  • excuse me..... but where is all the ASX is doomed banter?

    Commenter
    Bear
    Location
    Hunter
    Date and time
    April 29, 2014, 12:43PM
    • Bulls had April, I suspect a dose of reality will mean Bears take May???

      Commenter
      Bull
      Location
      Hunter
      Date and time
      April 29, 2014, 1:10PM
  • who'd have guessed? shorting percentiles on ACR 28/04
    ACRUX LIMITED FPO 3,604,934 166,521,711 2.16%

    Commenter
    BearshapedBull
    Location
    Mugpunters Lounge
    Date and time
    April 29, 2014, 12:20PM
    • I see a chaotic Short Squeeze coming up soon –ouch.
      ACR’s Trials are relatively cheap and of short duration. Acrux is well funded, and has a high-quality board of directors.
      Plus their result yesterday wasn’t all that bad. The company has few other products on the market apart from Axiron. Not to mention the company still selling Axiron in the US and few other countries.
      Bought some ACR shares yesterday and will sleep on them for at least 4 years, lol.

      Commenter
      Long better then Short
      Location
      Date and time
      April 29, 2014, 1:39PM
    • Should be ok provided that extra testosterone doesn't bother you at night.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 2:23PM
    • @ Long etc. I agree - the results were OK and the FDA scare could easily resolve itself. Profits continue to be made. IMO, smells like a hiccup not a disaster. But I think sub $1 is likely.

      Commenter
      YIn or yang
      Location
      Date and time
      April 29, 2014, 2:32PM
  • Put the corks back in after the trading halts,[AZV & HZN] hoping for some solid takeover manoeuvres but got handed a definite maybe and a bunch of paper in a business i didn't have an interest in....proving again never count those windfalls until the winds stopped blowing and other chestnuts...bit disappointed but hey way o the world.

    Commenter
    BearshapedBull
    Location
    Mugpunters Lounge
    Date and time
    April 29, 2014, 12:08PM
  • @1038 comment yeah yeah and we've never heard any of this stuff before....always looking for a negative means you'll always find one,otherwise you'd give up looking.

    Commenter
    BearshapedBull
    Location
    Mugpunters Lounge
    Date and time
    April 29, 2014, 12:04PM
  • Wow SBM is my new favorite stock to watch...... go down. Shorters dream

    Commenter
    ASX
    Location
    Guardian
    Date and time
    April 29, 2014, 12:03PM
  • ANZ is doing so well as they have cut costs as they have outsourced many back and middle office operations and have more pencilled in ready to go, not so good for the workers here of course

    Commenter
    JB
    Location
    Boronia
    Date and time
    April 29, 2014, 11:55AM
    • Not just cut people/service costs, but also investment in IT infrastructure and product development. Will be interesting being a shareholder when the cuts hit home in X years. Someone will have to pay for the re-investment to maintain competitve, and it will be those future shareholders.

      Commenter
      ALittleToTheRight
      Location
      Date and time
      April 29, 2014, 12:17PM
    • yep - institutional banking will be just a skeleton in Melbourne in 12 months. Mike Smith just loves cheap Asian workers

      Commenter
      Jim
      Location
      Hawthorn
      Date and time
      April 29, 2014, 1:14PM
  • uh oh, the ASX is revisiting days gone by, down on positive leads. If you are not already out, get out now!

    Commenter
    brian
    Location
    tod me
    Date and time
    April 29, 2014, 11:39AM
  • EDs....11:01 NAB at 27.55 i will buy all day long

    EDs: Thanks WL. Not a flash crash! Fixed now, chrs

    Commenter
    Wwwish Lion
    Location
    Melbourne
    Date and time
    April 29, 2014, 11:05AM
  • I have had Woolworths for 3 years now and am up 40%~$2,000. What are peoples thoughts on selling them today/tomorrow and buying them towards the end of April? After the expected fall.

    Commenter
    tim_r
    Location
    Brisbane
    Date and time
    April 29, 2014, 10:56AM
    • You need to be careful about dividend washing rules and capital gains tax.

      Commenter
      James_F
      Location
      Melbourne
      Date and time
      April 29, 2014, 11:16AM
    • It is the end of April?

      Commenter
      DR
      Location
      syd
      Date and time
      April 29, 2014, 11:21AM
    • The strategy sounds good in theory. I know because i followed it myself. Unfortunately the WOW shareprice has gone up by more than $3 since i sold them. Even if they do drop in May i’ll be lucky to get them back for what i sold them for. Timing is everything and mine wasn’t the best i have to admit.

      Commenter
      Grinch
      Location
      Date and time
      April 29, 2014, 11:36AM
    • Echo @Grinch. I sold mine at $36.95. At some point there will be a fall back but how far and when, not quite as predictable as your strategy expects. But a reasonable plan nevertheless.

      Commenter
      Yin or yang
      Location
      Date and time
      April 29, 2014, 11:57AM
    • typo there, i meant end of May. Some good points there, thanks guys. Especially with the tax.

      Commenter
      tim_71
      Location
      Brisbane
      Date and time
      April 29, 2014, 1:16PM
  • Eds "while Wesfarmers is bouyed (sic) by a sales update". The market has changed its mind.

    Commenter
    Yin or yang
    Location
    Date and time
    April 29, 2014, 10:51AM
    • WES investors need that life buoy!

      Commenter
      Yin or yang
      Location
      Date and time
      April 29, 2014, 2:22PM
  • Hi All, I'd like to build up the financial part of my portfolio, but the prices of the big 4 banks scare me. What do you think of BEN and BOQ? They seem to offer more potential value inasmuch as they are not at all-time highs. Dividends are still good and fully franked.

    Commenter
    Uncertain
    Location
    Date and time
    April 29, 2014, 10:31AM
    • Maybe if you are unsure of what you are buying. You should wait for the prices to be in line with what you are willing to pay? Why do you want financials in your portfolio?

      Commenter
      DR
      Location
      syd
      Date and time
      April 29, 2014, 10:45AM
    • Some discussion of Countplus (CUP) on this blog. Might be an interesting small cap addition. Fairly priced and reliable solid dividends.

      Commenter
      Yin or yang
      Location
      Date and time
      April 29, 2014, 10:47AM
    • this time 2 yrs ago ANZ shares were half current value.
      been a mighty rise. almost too mighty

      Commenter
      brian
      Location
      Date and time
      April 29, 2014, 11:00AM
    • @DR. I’d like some Financials simply to balance my portfolio really. At the moment i’m heavily weighted towards consumer discretionary (WOW and WES) and Telcos (TLS and MTU) plus a few random others (BKN, ABC among others). I have no mining or financial representation. I have no interest at all in mining stocks, but financials are attractive in terms of yield.

      Commenter
      Uncertain
      Location
      Date and time
      April 29, 2014, 11:23AM
  • Good news today for my Cash Convertors shares....not so good on my Discovery Metals with trading halt. !!

    Commenter
    happy Hippy
    Location
    Date and time
    April 29, 2014, 10:29AM
    • CCV doing well. What does that say about the health of the economy, or rather how sick it really is. MNY is another pay-day lender.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 10:52AM
    • Mitch: doesn't have to say anything, perhaps they just found a gap in the market or have an innovative product?

      Commenter
      DR
      Location
      syd
      Date and time
      April 29, 2014, 11:22AM
    • That's right Mitch...certainly paying price for those years of hopeless Labor management.

      Commenter
      happy Hippy
      Location
      Date and time
      April 29, 2014, 12:14PM
    • @ Mitch, good to see you have finally conceded the ALP left the economy in a mess...well done!

      Commenter
      Captor
      Location
      Date and time
      April 29, 2014, 12:14PM
    • @Captor & Hippy The CCV report is for the March quarter. We have been lumbered with a Liberal gov't in that period and for the 4 months before that. I would say that CCV's results are more a reflection of economic management now than what went before. On that basis I expect CCV & MNY & debt collection companies to do very well over the next few years as the Libs push the economy towards recession by cutting gov't expenditure, particularly benefits paid to families.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 1:04PM
    • "But the costliest trait is what psychologists call confirmation bias. This is when you have a pre-conceived idea and subconsciously filter out any information that contradicts it."
      you know it

      Commenter
      BearshapedBull
      Location
      Mugpunters Lounge
      Date and time
      April 29, 2014, 1:57PM
    • These companies get hit as hard if not harder than any others in a downturn. Look at CCP when the GFC hit.

      Commenter
      Sticks
      Location
      Date and time
      April 29, 2014, 2:21PM
    • @BSB yes I find that everything I see confirms my opinion that the Libs pulled a massive confidence trick on the electorate. Now hear them squeal. But they were warned. When is a tax not a tax, why when it's a Liberal tax of course.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 2:32PM
    • @mitch i couldnt resist
      umm "when its a levy"

      Commenter
      BearshapedBull
      Location
      Mugpunters Lounge
      Date and time
      April 29, 2014, 2:44PM
  • Former senior official of the World Bank Karen Hudes reckons that the US has 175,000 TONNES of gold stacked away in Hawaii. If that's true, then that equates to 5.1 BILLION troy ounces of gold, and in value it's $US6.63542E12, or $US6,635,400,000,000. That's $6.63 TRILLION worth of gold.

    Whadd'ya reckon, time to sell and reduce debt? Let me know if it happens, so I can short the spot price. GG.

    Commenter
    Gordon Gekko
    Location
    Greg Coffey World
    Date and time
    April 29, 2014, 10:11AM
    • Not sure about the Hawaii stash, but Karen Hudes has previously claimed that US gold reserve has been "stolen by Jesuits and hidden in the Vatican" and that "Jesuits fed the fiat currency and swindled large amounts of gold". There is some truth to this. The NY Fed has not allowed Germany to view its gold reserve, which it "safe-keeps".

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      April 29, 2014, 11:07AM
    • Maybe Karen should give up the gold tops.....

      Commenter
      BearshapedBull
      Location
      Mugpunters Lounge
      Date and time
      April 29, 2014, 12:02PM
    • @BearshapedBull - ROFL!!! I think we know what those senior officials get up to in their spare time in Washington DC.

      On a more serious note I think she is really trying to tell the world something, albeit using Jesuits in place of the unsayable. The Vatican, as we all know, never administered the NY Fed or the Fort Knox gold reserve.

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      April 29, 2014, 12:13PM
  • Merger schmerger i wanted a takeover not script in a company i dont even know about...blah. [ROC>HZN]

    Commenter
    BearshapedBull
    Location
    Mugpunters Lounge
    Date and time
    April 29, 2014, 10:06AM
    • Tell me about it, very dissapointing. On current share prices I actually lose money in the merger, why would the Horizon board be supporting this. Will the share price of ROC change once the merger is completed?

      Commenter
      DJBB
      Location
      The Shire
      Date and time
      April 29, 2014, 11:07AM
  • Almost choked on my cornflakes this morning reading an article about how perma bull Charlie Aitken is bearish and is struggling to find any value in the market.

    Commenter
    Grizzly Adams
    Location
    Date and time
    April 29, 2014, 10:00AM
  • As predicted... AAPL doing well and AUD not looking as solid.

    Commenter
    willo
    Location
    syd
    Date and time
    April 29, 2014, 9:44AM
  • Got a good website here. Enjoy it! GG.

    http://www.usdebtclock.org/

    Commenter
    Gordon Gekko
    Location
    Greg Coffey World
    Date and time
    April 29, 2014, 9:28AM
    • Good for a laugh I guess. Much like the old hamburger phone from Home and Away. Looks impressive but as reliable as a mechanic with an arts degree.

      Commenter
      fu
      Location
      Sydney
      Date and time
      April 29, 2014, 9:44AM
    • Thanks Adelaide :)

      Commenter
      DR
      Location
      syd
      Date and time
      April 29, 2014, 9:51AM
    • And here's another great one:

      www.australiandebtclock.com.au/‎

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      April 29, 2014, 9:52AM
    • You don't seriously think anyone wants the US to pay off its debt do you. Diverting US consumption expenditure to paying off debt would send the whole world into a deep recession as its main consumer stops spending.

      Commenter
      mitch of ACT
      Location
      Date and time
      April 29, 2014, 10:00AM
    • Yep good one.
      Take a look at how Aussie compares under the "World Debt Clocks"tag

      Commenter
      Red Rooster
      Location
      Reality Room
      Date and time
      April 29, 2014, 10:12AM
    • Can I suggest a great big new deficit tax to our American friends?

      Commenter
      TA
      Location
      Canberra
      Date and time
      April 29, 2014, 10:18AM
    • Thanks, that's a good one indeed.

      Commenter
      Market Guru
      Location
      Sydney
      Date and time
      April 29, 2014, 10:38AM
    • @mitch - what colour is the sky in your little world? So you think the US should continue printing money, taking on debt and spend on entitlements and consumer products?

      I can tell you where it will lead. Servicing that debt is already the 4th biggest ticket in the US budget, when interest rates rise that will go through the roof forcing the US into default. No more exports to the US for anyone for a good while.

      On a more basic level such a scenario would cause the dollar to loose its reserve currency status. The dollar would sink and the US would no longer be able to afford its overseas bases. The Asia-Pacific military balance would be broken and China would implement hegemony over the East Asian hemisphere. And that includes us my dear mitch.

      Still not worried about that debt?

      Commenter
      Dr No
      Location
      Sydney
      Date and time
      April 29, 2014, 10:51AM
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