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Australian shares snuck to a six-year high on Monday despite a mixed performance from the big banks and falls in the biggest miners.
Both the benchmark S&P/ASX 200 Index and the broader All Ordinaries Index added 0.2 per cent, on Monday, to 5539.9 points and 5528.7 points respectively, the benchmark’s highest close since June 2008.
Local shares took a positive lead after major equity markets in the United States and around Europe closed higher on Friday night despite concerns about increased geopolitical risk following the shooting down of a passenger jet over a region of Ukraine occupied by pro-Russian insurgents.
“Recalling how skittish the market was at the start of the year when Russia first moved to annexe Ukraine’s Crimean peninsula it has been surprising to see equities rise over the past couple of sessions,” Zurich Financial Services senior investment strategist Patrick Noble said.
“That the market is currently so easily dismissive of global risk events, such as the MH17 air disaster and recent unrest in Iraq, despite higher equity valuations is evidence of a low volatility malaise,” he said.
Consumer discretionary was the best-performing sector on Monday, up 0.8 per cent, led by a 1.3 per cent lift in Crown Resorts to $15.48. The casino operator has struck a deal with China’s Greenland Holdings Group to develop the Queen’s Wharf casino and resort project in Brisbane.
In other company news, property developer Australand dropped 0.2 per cent to $4.49 after showing first half net profit rose 49 per cent despite revenue dropping 15 per cent.
National Australia Bank added 0.2 per cent to $34.25, while Commonwealth Bank of Australia added 0.1 per cent to $81.36. Westpac Banking Corporation was unchanged at $33.90, and ANZ Banking Group fell 0.1 per cent to $33.39.
A strong day for the insurers helped boost the financial services sector. QBE Insurance Group did the most to lift the bourse, jumping 2 per cent to $11.82, Suncorp Group and Insurance Australia Group each added 1 per cent to $13.95 and $6 respectively.
The Sun King is dead. Long live the Sun King.
Australian-trained Shi Zhengrong rode to fleeting financial glory when his solar photovoltaic (PV) firm Suntech Power soared after listing on the New York Stock Exchange, valuing his stake at more than $3 billion in late 2007.
The Chinese company’s excessive expansion and poor investments, though, triggered a default on $US541 million ($576 million) in US debt in February 2013, a move that all but wiped out Suntech and Dr Shi’s holdings.
Despite the financial turmoil at home, Suntech maintained a research and development unit in Australia that is now working with the world-leading solar unit of the University of New South Wales on a range of ventures.
Commercially, the firm - now rebadged as Wuxi Suntech Power - is also rising from the ashes.
Behind the revivial is secretive Hong Kong-based billionaire, Cheng Kin Ming, also known in Mandarin as Zheng Jianming, with his Shunfeng group that has specialised in snapping up struggling solar firms such as bankrupt LDK.
“Last year we got into some trouble,” Wu Hui, director of global marketing for Wuxi Suntech, said. “The biggest problems were financial, and we expanded into the wrong projects.”
After being overtaken as the world’s largest PV firm, Wuxi Suntech has set itself an ambitious goal of tripling last year’s output of 800 megawatts to as much as 2.4 gigawatts to regain its place among the biggest producers. By comparison, Australia’s entire installed PV capacity ticked past 3 gigawatts late last year.
And here are today's best and worst performing stocks among the top 200 names.
Shares have managed to eke out a small gain, after an uninspiring day's trading in which an indifferent performance from the banks managed to just offset weakness among miners.
The ASX 200 inched 8 points, or 0.1 per cent, higher to 5539.9, while the All Ords added 10 points to finish at 5528.7.
That was enough to (just) push the benchmark index to its highest close this year, with the previous highest close now stretching back to June 2008.
Consumer discretionary was the best performing sector, with REA Group (up 2.2 per cent), Aristocrat Leisure (up 1.9 per cent) and Retail Food Group and Ten Network (1.8 pe cent each) the best names there.
Miners suffered from a fall in the iron ore price, with BHP and Rio leading the falls.
Banks were mixed; NAB and CBA were higher while Westpac was flat and ANZ eased.
QBE was the biggest single contributor to the market's gains, as it jumped 2 per cent, while Suncorp was 1 per cent higher.Back to top
Australia's markets regulator says it has censured the Royal Bank of Scotland Group after an investigation found that RBS traders had sought to influence the setting of the country's benchmark inter-bank interest rate.
The bank will make a $1.6 million donation toward promoting financial literacy after the internal RBS investigation found evidence that traders had tried to fix the Australian bank bill swap rate submission process, ASIC said.
Earlier this year, ASIC censured French lender BNP Paribas after revealing its traders had tried to influence the setting of inter-bank interest rates.
America’s shale gas boom has transformed the US economy and the world, and built untold fortunes.
But those chasing the dream today may be left with nothing more than empty holes and empty pockets, according to Chad Padowitz, the chief investment officer of Melbourne-based global equities fund Wingate.
Padowitz who has recently returned from a field trip to Texas says the US energy sector sees a “tipping point where production growth must slow, and the existing inventory of declining wells will exceed the growth rate of new wells and production”.
US energy firms targeting shale gas or “tight oil” have thrown every dollar of cash into drilling more holes in the pursuit of the production growth investors have craved.
But unconventional oil wells deplete at a faster rate than conventional wells and are all but obsolete within five years. Padowitz’ concern is that eventually, the drillers that are already spending aggressively to boost production, they will struggle to generate the cash required to deliver returns to investors as more of their wells run dry.
“Call it an ‘emperor has no clothes’ moment, but at this point it is difficult see earnings doing anything but declining, particularly with balance sheets in some cases already at relatively leveraged levels,” he says.
Padowitz said that after meeting with many of the companies and industry experts he said there is “no expectation or even desire to generate meaningful free cash flow any-time soon”.
The fund has identified two US energy stocks that are focused on generating positive cash flow rather than growth – Occidential Petroleum and Denbury Resources.
Print and digital may have found the ideal place to coexist: the comic book industry.
A report released last week estimates that North American sales of comics — whether single issues, collected editions or digital downloads — were $870 million for 2013, up from $635 million in 2012. Digital sales rose to $90 million from $70 million. That strong demand for digital is welcome news for the entrepreneurial writers and artists who are continuing to evolve their digital portfolios.
In April, Thrillbent, a website for free digital comics that began in 2012, rolled out a $3.99 per month subscription model. The site was developed by Mark Waid, a popular comic book writer, John Rogers, a television writer and producer, and Lori Matsumoto, the major-domo.
“We’ve been really good at doing what I’ve been wanting to do,” Mr. Waid said, “creating a situation where we can provide content and fans can pay a fair price for it.”
Thrillbent’s subscription model will help provide stability for its creators and consumers, Mr. Waid said, and help the site take its next step: moving beyond comics by him and his friends and bringing in writers like the science fiction author Seanan McGuire, who come with their own considerable audience.
Letting others into the comics sandbox is also a goal of the Panel Syndicate, a pay-what-you-want hub for original comics that was started last year by the writer Brian K. Vaughan and the artist Marcos Martin. Their first offering, “The Private Eye,” is a detective story set in a futuristic world where the Internet is no longer used. Last month “was the most successful yet in terms of downloads,” Mr. Vaughan said.
The competition regulator has launched its inquiry into Expedia’s proposed $703 million purchase of Wotif.com, seeking information from interested parties on whether the deal could hinder competition in the online accommodation booking sector.
The ACCC is accepting submissions until August 6, with a final decision on the deal provisionally expected on September 4.
The competition regulator has asked market participants about the substitutability and closeness of competition between online travel agencies like Expedia and Wotif and bricks and mortar agents like Flight Centre, Helloworld and STA Travel, along with direct bookings with airlines and hotels.
It has also asked how online travel agents compete to attract consumers and travel content owners, such as hoteliers and airlines.
Wotif has long charged lower commission rates to hotels than overseas rivals like Expedia and Priceline Group’s Bookings.com and Agoda websites.
Jerry Schwartz, who owns a portfolio of 12 hotels including five in Sydney, has previously said the Expedia “game plan” would be to lift commission rates as it did following past acquisitions.
Washington H. Soul Pattinson and Brickworks chairman Robert Millner says the tax implications of a push to break up the companies he chairs confirms there is “no golden rainbow” from the proposed split.
Fund manager Perpetual and activist investor Mark Carnegie have led a long-running fight to unwind the cross-shareholding between the two companies, saying there is $1 billion of shareholder value to be unlocked by the move.
In a major setback for the break-up activists The Australian Tax Office on Friday ruled that tax relief would not apply to a potential demerger of the nation’s largest brickmaker, Brickworks, and the Soul Patts investment group.
“We’ve said all along – and we’ve gone down the road of getting some of the best tax advice there is – that there is no golden rainbow that these guys are talking about,” Mr Millner said in an interview with The Australian Financial Review.
Perpetual owns 12 per cent of both Brickworks and Soul Patts and has granted Mr Carnegie, founder of private equity firm M.H. Carnegie, a $30 million option if he succeeds in agitating to break-up the two companies.
In a structure that is no longer permitted under corporate law, Brickworks owns about 43 per cent of Soul Patts and Soul Patts owns about 44 per cent of Brickworks.
Perpetual and Carnegie had requisitioned an extraordinary shareholder meeting to vote on a proposed cancellation of the cross-shares and an in specie distribution of Soul Patts 26.7 per cent stake in TPG Telecom to Soul Patts shareholders.
Mr Millner said the merits of the cross-shareholding have been “continually reviewed” since it came into being in 1969, and he has never come across a reason to unwind the arrangement that would benefit all shareholders.Back to top
Dark pools and high-frequency traders, two elements of the electronic US stock market whose rise has been decried in books and Congress, are finding little support among financial professionals.
At least half the respondents in the Bloomberg Global Poll professed a negative view of the anonymous equity markets and proprietary firms that buy and sell stocks in millionths of a second. The findings come four months after “Flash Boys” author Michael Lewis said markets are rigged and four weeks after the New York attorney general accused a dark pool owned by Barclays of lying to customers.
“I don’t like secret societies,” said Peter Nielsen, a senior investment analyst and poll respondent at Saturna Capital Corp. “I don’t like secret trading; it just runs against my personal disposition,” he added. “I’m a big believer in transparency - huge believer in transparency. Even the word ‘dark pool’ freaks me out.”
Growing unease among investors, traders and analysts who are Bloomberg subscribers may signal challenges for market defenders, who say electronic trading is misunderstood and a target of demagoguery. The US Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Bureau of Investigation and New York attorney general are investigating the industry.
Dark pools, private venues often owned by brokers that don’t publish bid and ask prices, received negative marks from 53 percent of respondents, versus 23 percent positive.
“It’s not an open market,” said Sriram Srinivasan, chief executive officer of Wall Street Investment Management. “People that do not have access to the dark pools are going to lose. And it is nine out of 10 investors that are losing.”
Russia’s ambassador to Australia Vladimir Morozov said Moscow would support an Australian sponsored UN Security Council resolution to set up an independent investigation and provide unfettered access to the Malaysian Airlines crash site in Eastern Ukraine.
In an interview with The Australian Financial Review, Mr Morozov said “provided the resolution is not aimed at Russia we will support it’’.
“This resolution is supported by Russia...so long as it does not blame somebody,’’ Mr Morozov said on Monday.
Mr Morozov appealed for the international community not to rush to judgment over who was responsible for downing the aircraft pointing out that Ukrainian government forces possessed the type of weapons which could down an airliner by mistake.
A copy of the draft resolution circulated by Australia condemns the “shooting down’’ of flight MH17 and “demands those responsible for this incident to be held to account and that all States cooperate fully with efforts to establish accountability’’.
But the cooperation includes Russian backed rebels who are in control of the crash site, refrain from all activity that would compromise the integrity of the site and “immediately provide safe, secure, full and unfettered access to the site and surrounding area’’.
Mr Morozov said Russian president Vladimir Putin had already supported a full independent commission of inquiry under the auspices of the United Nations Civil Aviation Organisation because “Russia is as keen to find out who is responsible as the rest of the international community’’.
“We can talk about blame after that,’’ Mr Morozov said.
Shares in oil and gas junior Antares Energy have jumped 9.3 per cent to 64.5c on its return to trading after the company confirmed it had received a bid, but declined to say who the would-be acquirer was, nor the value or terms of the bid.
The shares had been suspended from trading since Thursday.
“Having now received and reviewed the terms of the offer, the company has sought additional clarification of these terms and provided to the bidder an amended term sheet,” chairman and chief executive James Cruickshank said in a statement.
The takeover bid comes a day before shareholders are due to vote on a proposal from US investment fund Lone Star to sack two members of the Antares board and appoint five new directors.
Lone Star, which owns about 6 per cent of Antares, has been locked in a fight with Mr Cruickshank and the rest of the board for several months.
Antares has also received a $US300 million offer for the sale of its assets in the Permian Basin in Texas.
Australia has a three-tier economy with Western Australia, the Northern Territory and New South Wales outperforming the rest of the country, according to the quarterly Commsec State of the States report.
The report was released amid warnings from the Melbourne Economic Forum on Monday that Australia faced declining living standards unless it radically boosted its productivity.
In the Commsec report, the states were assessed using a number of key indicators including retail spending, equipment investment, employment, construction work, population growth, housing finance, dwelling starts, wages, inflation and home prices.
South Australia and Tasmania are the national underperformers, with the other states and the ACT in the middle.
Among the top tier, Western Australia ‘‘remains the best-performing economy in the nation, holding its position due to strength in home purchase and construction,’’ according to Commsec.
The state is ranked first for retail trade and housing finance, second for economic growth and construction work, and third for business investment, population growth and dwelling starts.
The Northern Territory is the second strongest economy, leading the way on economic growth, business investment, employment and construction work.
New South Wales remains the third strongest economy, underpinned by solid population growth and home building.
Among the middle tier economies, ‘‘there is little to separate Queensland, Victoria and the ACT’’, according to Commsec.
Steel and mining group Arrium has reported record quarterly iron ore sales but significantly lower sales prices as iron ore is battered by excess inventory and stricter credit standards in China.
For the three months ended June 30, Arrium sold a record 3.32 million tonnes of iron ore, up 0.13 million tonnes on the previous quarter.
The company, formerly known as OneSteel, said its average realised sales price collapsed $US25 a tonne from the previous quarter’s average price to $US85 a tonne.
The spot iron ore price has plunged almost 27 per cent to about $US96 a tonne over the past 12 months.
“Market prices were under pressure in the quarter due to factors including increased discounting related to additional supply, the tightening of credit in China and higher port stocks in China,” Arrium said in a statement to the ASX.
Lower-grade iron ore blends have attracted heavier discounting amid the weakening market dynamics.
Iron ore is used in steel-making and China has been the key driver of iron ore demand as the Asian powerhouse builds out its infrastructure base.
Arrium shares are down 3.2 per cent to 75.5¢. The stock is down 22 per cent over the past 12 months.Back to top
As many as half of all households are overpaying for their electricity as they subsidise the electricity bills of all other households.
Detailed research of electricity consumption patterns of Victoria's households by energy company AGL found that the existing electricity tariff is resulting in the distortion, with households in financial hardship the most adversely affected.
The research follows a paper released by the Grattan Institute earlier this month that argued the tariff structure does not truly charge consumers – especially heavier electricity users – the full cost associated with their usage.
As a result, some households, those without air conditioners for example, are typically subsidising those with the units installed. Similarly, households without solar panels are subsidising those with them.
"Most electricity customers pay network charges based on the volume of energy they use, regardless of what time of day it's used or how much it costs to supply," said John Bradley, the head of the Electricity Networks Association. "This creates unfair cross-subsidies.
"It's estimated a customer using an air conditioner without load control at peak times receives a hidden subsidy of $350 per year from other customers who don't."
Legendary investor Jeremy Grantham is predicting an explosion like no other in company takeovers, but Australia looks set to miss out on the action, according to an investment bank.
Mr Grantham's comments come amid a flurry of merger and acquisition activity in past months, including South African retail giant Woolworth's $2.2 billion takeover of David Jones, a $3 billion bid for Treasury Wine Estates from US private equity firm KKR, and News Corp's sister company 21st Century Fox launching an $80 billion swoop for Time Warner.
But Mr Grantham - the co-founder and chief investment strategist at the $US112 billion ($123 billion) Boston-based fund manager GMO - doesn't want to hear about what has already happened.
"Don't tell me there are already a lot of deals. I am talking about a veritable explosion to levels never seen before," he said about his prediction in a note to investors.
"I think it is likely that all previous deal records will be broken in the next year or two."
He based his forecast on three reasons - low cost of debt, profit margins at high levels and a recovering economy gaining traction.
Mr Grantham has an impeccable track record, having called both the internet bubble and then the US housing bubble. Last November he said he believed the US sharemarket could rise another 30 per cent, although he believed it was overvalued, before crashing again. And, in March, he forecast the next stock market bust to be "unlike any other".
He has continued to back that prediction.
"My recent forecast of a fully-fledged bubble, our definition of which requires at least 2250 on the S&P remains in effect."
The S&P last closed at 1978.22.
As education sector floats fill the pipeline, Macquarie analysts have come out in support of the already listed Intueri Education Group saying the shares should trade up to $NZ3.25 ($3.01) each.
Macquarie and UBS listed Intueri in Australia and New Zealand in May, and the shares have since traded up from $NZ2.35 to $NZ2.69 each.
But Macquarie analysts reckon the stock has further to run.
The broker released its initiation report this morning, which said Intueri should grow domestic student numbers by 1 per cent each year, while international enrolments should grow by 5 per cent.
The analysts said it was worth $NZ3.25 a share and started it with an “outperform” rating.
Intueri owns six private tertiary education providers in New Zealand and an online training school in Australia. The company was spun out of Arowana, which retained a substantial stake.
US fast food chains McDonald's and Yum! Brands said they will stop using products supplied by a local meat processor after a Shanghai regulator halted the firm's operations on Sunday over food safety concerns.
The move is a potential concern for the two brands, which are both now conducting their own investigation into the matter, since the pair were hit hard by a food safety scandal in China late in 2012. Yum, which apologized to Chinese consumers for any inconvenience caused in the latest case, suffered a sharp dive in profits early in 2013 after the safety concerns.
The Shanghai Food and Drug Administration (SFDA) halted the operations of Shanghai Husi Food, a meat supplier suspected of providing meat that had passed its expiration date to China branches of McDonald's restaurants and Yum's KFC and Pizza Hut outlets, the Xinhua news agency reported on Sunday.
The SFDA inspected Shanghai Husi on Sunday evening after a local television channel broadcast a program claiming an undercover reporter had seen the use of expired meat and poor hygiene practices in a local factory, local media said.
Yum and McDonald's both said they have stopped using meat products purchased from Shanghai Husi, according to statements posted on their official Weibo microblog sites.
Loss of confidence in banks after the global financial crisis and their links to financial planning scandals is aiding the grocery giants’ push into financial services, Coles finance director Rob Scott says.
“What happened with the GFC is that it led to a loss of public confidence in big financial institutions, [including] the quality of advice and disclosure and the need for taxpayer support,” Mr Scott told The Australian Financial Review.
Despite compliance costs soaring in banking and potentially crimping the big profits on offer, the explosion of digital technologies in the sector is slashing operating costs and giving a boost to Coles and many other challengers to financial services incumbents.
In addition, the amount of information available to consumers is undermining the brand power of large financial institutions.
“Technology will be a very important differentiator for financial services providers as regards to offering better services and reducing costs for consumers,” Mr Scott said. “Customers will have more information available to make decisions and therefore the value associated with some of the more traditional brands in financial services may not be as relevant.”
Mr Scott also said “disclosure and advice frameworks” were ineffective.
Half of the supermarket’s 350,000 insurance customers – a number which has more than tripled in two years – didn’t sign up online, but that’s changing fast. Three-quarters of customers for a new life insurance product Coles is offering have signed up online.
Last week Coles said it would offer personal loans in 2015, as well as credit cards, and launched its “mobile wallet” which achieved 5000 downloads in its first 48 hours, to which it will add new services.
It also moved to change its relationship with its credit card provider GE Capital from a “white labelling” of its products to a joint venture to get more control over what it offers.
“With the joint venture, we will become an issuer of the card; we will be responsible for the lending activity and we will have far more influence on the customer offer and the funding of that,” said Mr Scott, who was formerly the head of Wesfarmers Insurance which backs Coles’s Insurance.Back to top