Here's what you need to know this afternoon:
- The ASX200 slipped 0.2 per cent, closing at the day's lows
- Most regional sharemarkets were closed for Chinese New Year
- The dollar is buying $US1.0297, 95.4 yen and 77 euro cents
- Wall Street futures are minimally higher, as is the FTSE100 future
- JB Hi-Fi shares soar on bright profit outlook
- ASX holds on to its clearing house monopoly
- Rio scores rail access win against Fortescue
- Home loans fall again despite rate cuts
- Spanish fourth-quarter GDP; est: 3% y/y
- French industrial production Dec; est: -0.3% m/m
- Housing Industry Association Trades Report for the December quarter
- National Australia Bank’s monthly business survey for January
- SAI Global first half results
- Bradken first half results
- Western Areas NL first half results
- Slater & Gordon first half results
The standout performer today was JB Hi-Fi, with the electronics retailer soaring 17.1 per cent to $12.89 after reporting that its first half net profit had risen three per cent to $82 million.
JB Hi-Fi, which was the best-performing stock on the S&P/ASX200, forecast a 7 per cent rise in full year net profit.
‘‘That’s an excellent performance by JB in a pretty inclement, overall, retail environment,’’ Lonsec private client adviser Michael Heffernan said.
Turns out todays move in JBH was the second biggest since it listed 9 years ago #ausbiz— Chris Weston (@ChrisWeston_IG) February 11, 2013
Among the other retailers, Harvey Norman advanced 5.9 per cent, Myer jumped 3.1 per cent and David Jones was up 2.7 per cent.
After all of last week's to and fro, Environment Minister Tony Burke has now given conditional approval to Whitehaven Coal's Maules Creek project.
Good news for Whitehaven, but alas, it came after the market closed.
In a statement, Burke said he was satisfied the Maules Creek and Boggabri coal mine projects could go ahead without unacceptable environmental impacts.
The decision comes four days after Whitehaven said it expected the government to delay a decision until late April. Burke said he brought the decision forward after the New South Wales state government released sensitive information about the project.
Traders reported very limited flows as much of Asia is shut for the Lunar New Year holidays.
Japan, China, Hong Kong, Singapore, South Korea and Taiwan are among the major centres in the region closed today.
Most sectors ended lower, with materials down 0.5 per cent, financials losing 0.3 per cent and industrials off 0.2 per cent. Consumer discretionary bucked the trend, buoyed by JB Hi-Fi, to rise 1. 5 per cent.
The market has closed at the day's lows. The benchmark S&P/ASX200 slipped 11.8 points, or 0.2 per cent, to 4959.5, while the broader All Ords lost 9.1 points, or 0.2 per cent, to 4980.3.
The superannuation industry has hit back at suggestions super tax breaks provided to Australians are too generous.
Treasury estimates that the budget misses out on more than $30 billion a year in tax revenue through super concessions, a figure it expects will hit $45 billion by 2015, overtaking the capital gains tax break on housing as the single biggest concession.
But financial consultancy Mercer said when compared against the world’s best retirement savings systems, super rules in Australia were not overly generous.
“Our research reveals when the Australian approach is compared to countries with world-class retirement income systems, the after tax retirement benefits provided to Australians are lower than five of the eight countries,” said David Knox, a senior partner at Mercer.
Mercer modelled its retirement systems against eight other countries, which are considered to have the best pension systems in the world.
The cost of recent floods and bushfires have reached up to $175 million for Insurance Australia Group, but analysts still expect profits in the industry to grow this financial year.
With assessors still in the field IAG’s costs could still rise, but its reinsurance program limits the impact of the first natural disaster of 2013 to $150 million.
Suncorp said last week its costs from floods would not exceed $220 million, leaving at least $103 million in provisions for the remainder of the 2012-13 financial year.
Analysts do not expect the recent floods and bushfires to have a major financial impact on insurers, with profits set to bounce back after the impact of the 2011 Queensland floods and New Zealand’s earthquakes.
Having said that, the market has just plumbed the day's lows, down 0.1 per cent. Falls are bing led by the miners.
The shorter analysis of today's market:
Been a rather lacklustre day. That photographer who was outside the ASX building to snap #XJO 5000 will have to wait a day— Austin Mitchum (@FP_markets) February 11, 2013
Growing anticipation that the market is due for a correction of sorts may apply the brakes to the performance of risk assets this week, writes CMC Markets trader Tim Waterer:
- While trade balance data from China last week was enough to keep markets feeling content with the state of play, I expect traders will become more discerning when assessing economic data given the elevated levels of benchmark indices around the globe.
- With the Chinese New Year period sapping Asian markets of much liquidity, the ASX200 spent much of today just going through the motions with traders awaiting further direction on the corporate earnings front as the week progresses.
- Narrow trading ranges and a general lack of buying conviction resulted in a listless performance from the local bourse, with any ASX200 aspirations of a move to the 5000 level postponed for the time being until new drivers of pro-risk sentiment arrive.
- Cue the corporate earnings results from some of the big players on the Australian market later in the week as being a potential catalyst in this regard.
Venezuelans lined up to purchase airline tickets and TVs this weekend in a bid to protect themselves from price increases after ailing President Hugo Chavez devalued the bolivar for a fifth time in nine years.
Chavez, who is recovering from cancer surgery in Havana, ordered his government to weaken the exchange rate by 32 per cent to 6.3 bolivars per US dollar starting Wednesday, Finance Minister Jorge Giordani told reporters on Friday.
Yesterday, a sign at an electronics store in southeastern Caracas restricted customers to one purchase each as Venezuelans rushed to buy flat-screen televisions.
Telstra's good run on the sharemarket was backed by impressive half-year results, writes Intelligent Investor's Nathan Bell.
Meanwhile, Vodafone continues to bleed customers and Optus recently mooted the end of mobile market growth. Telstra appears to have no such problem. More competitive pricing and a superior network are proving to be a winning combination.
Mobile internet also continues to grow, with Telstra adding 218,000 customers in the half and revenue growing 17 per cent to $576 million, largely due to increased tablet use.
Network applications and services revenue grew 11 per cent to $636 million as it sold more bundled communications services (such as cloud-based software) to business customers. In years to come, this too may be a multi-billion-dollar business.
Telstra should fare well over the next few years, thanks to a growing market share, organic growth and NBN revenues. But trouble looms beyond that.
Michael Pascoe's analysis of James Packer's Sunday Night interview is still garnering a lot of interest and some great comments.
The superannuation industry has hit back at suggestions super tax breaks provided to Australians are too generous.
Mooted changes to superannuation tax concessions worth billions of dollars have been high on the political agenda since November, when Treasury secretary Martin Parkinson questioned whether the tax breaks were too high and favoured the rich. He said the current super system risked becoming too much of a burden on the budget given the ageing population.
Treasury estimates that the budget misses out on more than $30 billion a year in tax revenue through super, a figure it expects will hit $45 billion by 2015, overtaking the capital gains tax break on housing as the single biggest concession.
But financial consultancy Mercer said when compared against the world’s best retirement savings systems, super rules in Australia were not overly generous.
“Our research reveals when the Australian approach is compared to countries with world-class retirement income systems, the after tax retirement benefits provided to Australians are lower than five of the eight countries,” said Dr David Knox, a senior partner at Mercer.
Here's an interesting graphic that has been put together by ANZ research, tracking housing finance over the last decade.
Shares in JB Hi-Fi have soared 16.2 per cent after the company announced it had lifted its first half profit by three per cent.
Shares are now at $12.77, their highest point since December 2011.
The company made a net profit of $82 million in the six months to December 31, up from $79.6 million during the previous corresponding period.
The ASX can use any help it can get, writes BusinessDay's Elizabeth Knight, and a reprieve from the prospect of competition in the settlement and clearance part of the business gave its share price another shot in the arm today.
While there are enormous structural issues facing stock exchanges, exacerbated by the introduction of competition in the large rump of the ASX business, the short to medium term prospects are viewed as positive because the stock market is now clearly on an upward trend.
When stocks move up volumes will follow - and if this is sustained new listings will also add some cream.
There is enough distractive upside around a ramp-up in share trading activity that investors would not have minded some competition in settlement and clearance. They already expected this outcome despite the relentless campaign by ASX chief executive, Elmer Funke Kupper, to protect what's left of his monopoly.
He just lucked in because treasurer Wayne Swan didn't have the stomach to rock this boat in the lead up to an election.
The Australian economy is caught in a debt pincer, MacroBusiness editor David Llewllyn-Smith writes in this article for BusinessDay:
Following last week's RBA growth downgrade, there is much hand-wringing today in the media about why Australian economic growth is not what it used to be.
Some blame the high dollar. Some blame high wages and declining competitiveness. Some blame stodgy planning approvals that slow housing construction. All are partly right but miss the real point.
The ASX200 is hovering half a per cent below the 5000-point mark. It last closed above that mark on April 15, 2010, at 5001.9, before stumbling to 4222.10 on May 5, 2010.
Before that, the ASX200 was last above 5000 on September 22, 2008, as it was falling to the post-GFC low of 3154.5.
As it stands now, the benchmark index needs about 25 points to get above the mark. Just one fair-to-good day, in other words.
Woodside shareholders haven't had much joy for some time, with the share price holding stubbornly around the $35 level, amid waxing and waning views on the outlook for the large Browse development, writes Brian Robins, noting there is ongoing speculation the partners are looking at lower cost options amid concern over the rising capital cost of large export gas projects.
Deutsche Bank reckons that there is the potential for capital management at the company, with the three drivers being the prospects of a decision to delay the proposed Browse development in favour of pursuing a floating LNG development, the potential sale of Shell's 24 per cent stake in Woodside and Woodside's $US3 billion plus of franking credits.
"A buyback of Shell shares would be the best outcome, however a special dividend is the most likely outcome," its analyst told clients in a note this morning. "We retain our Buy due to the discount to valuation, increased yield support, and capital management potential."
Complicating a buy-back of the Shell stake is the fact that Woodside shares are trading at a discount of around.17 per cent to the $42.23 a share price Shell sold a 10 per cent stake in Woodside in November 2010.
"On face value this discount makes a selective buyback of part of the Shell stake highly problematic," Deutsche Bank told clients. "We do not believe Woodside has sufficient liquidity to buy back the entire stake. However, we estimate if a buyback was 50 per cent a deemed dividend, the grossed-up value to Shell is broadly in line with the November 2010 price, assuming Shell could take advantage of Australian franking credits.
"Given challenges surrounding the Shell stake, we favour a special dividend as the most likely form of capital management. A special dividend is the most efficient way to distribute franking credits, and the least problematic option."
Any capital management hinges on a decision to defer the Browse development and no major M&A activity in 2013.
JB Hi-Fi shares are still rallying, up 14.8 per cent to its highest in 12 months after the electronics retailer reported a meagre 3 per cent rise in profits and gave an optimistic outlook - in an unfriendly retail climate.
Lonsec private client adviser Michael Heffernan says the market reacted positively to JB Hi-Fi’s profit growth considering the tough trading conditions.
‘‘That’s an excellent performance by JB in a pretty inclement, overall, retail environment."
The Australian dollar is hovering around $US1.032, appearing to recover after it hit three-month lows last week on the back of a series of bad economic data.
Easy Forex currency dealer Tony Darvall says the Australian dollar is staging a small relief rally after China reported a 7.7 per cent year-on-year rise in its trade surplus on Friday.
However, he says it's unclear whether the rally will continue or the currency resume its slump:
- We are expecting that, if we are going to rally, we will test the 103.50 US cents to 103.70 cents level.
- That level was the support level of the Australian dollar’s previous range.
- The Australian dollar is not getting the support it previously had from the Japanese yen.
- Without that underpinning, there is very little in the market to help the Aussie rally, because it is a very important cross rate.
- If that’s capped and there is not a lot of aggressive buying then it’ll be very hard to resume the up trend.
Apple and Microsoft have been ordered to appear before a parliamentary committee and explain why Australian consumers pay far more than those overseas for information technology goods.
The House of Representatives committee on infrastructure and communications has issued a summons to Apple, Microsoft and Adobe requiring them to appear before a public hearing on March 22 in Canberra.
The committee was established in May 2012 to investigate why local IT consumers pay higher prices for hardware and software.
It seems BusinessDay's Michael Pascoe has taken issue with James Packer's Sunday Night interview.
There's no point anyone else bothering to enter the Public Relations Institute of Australia's Golden Target awards this year – Team Packer blitzed all possible entries last night by taking over Channel 7's Sunday Night program, the pinnacle of a campaign to turn Crown's bid for a privileged Sydney casino licence into an act of philanthropy, a nation-building vision of something that means “more than money”.
A casino that's “more than money” – maybe only a billionaire can imagine that as the highest possible praise.
With both the O'Farrell government and what's left of the Labor Party already in the cheer squad with sections of the city's media for Crown avoiding a competitive tender, you might wonder why Packer is bothering. But a good PR machine leaves nothing to chance.
ASIC has banned two directors of rental company Zaam Rentals and cancelled the company’s credit licence for failing to comply with responsible lending obligations.
Last year it emerged Zaam Rentals was allegedly over-charging customers in indigenous communities around the Murray and Mallee regions – by up to $3,500 – and taking money directly from their Centrelink payments.
Director Akash Bhardwaj and former director, Amandeep Sabharwal have been banned from ‘‘credit activities’’ for 6 years and 4 years respectively.
An investigation by ASIC found that between December 2010 and September 2011 Zaam Rentals did not inquire about or check customers’ financial situation, or give them credit guides, or give them an honest rental contract.
RHG Ltd, the remnants of non-bank lender RAMS, has placed its shares in a trading halt this morning amid speculation the company is in talks with mortgage lender RESIMAC over a non-binding offer.
RHG today requested that its shares be kept in a halt until Wednesday because of ‘‘a possible transaction’’ involving the company.
“No transaction proposal is concluded, nor is there any assurance any transaction will proceed,” RHG said in an announcement to the Australian Securities Exchange.
The $143 million company was the target of a failed takeover bid in 2011 by former chairman and founder John Kinghorn, one of the country’s wealthiest men. He has since sold his stake in the business.
Before the halt, RHG shares were trading at 46.5 cents.
More on the housing figures, JP Morgan economist Ben Jarman said there is no evidence that the housing construction sector is turning around in a meaningful way, despite four interest rate cuts by the Reserve Bank of Australia in 2012.
‘‘You’re also seeing that from the RBA’s credit data,’’ he said.
‘‘While the RBA has been talking about getting preliminary signs that the economy is getting a bit of traction in the expected spots as rates come down, it doesn’t seem that anything really compelling is really happening.
‘‘Borrowers who are really sensitive to rate adjustments haven’t returned to the market in a meaningful way.’’
One bright spot in the housing finance figures was that loans approved to build new dwellings went up 1.9 per cent in December.
‘‘That’s what the RBA wants to see, they want to see people investing in new housing, rather than just turning over existing housing and running up house prices,’’ Mr Jarman said.
According to the AFR, RHG, formally RAMS home loans, could be aquired by non-bank lender RESIMAC.
The number of home loans approved in December fell 1.5 per cent to 45,335, official figures show.
That was from an downwardly revised 46,031 in November.
Economists had expected the number of housing finance commitments to be unchanged in December.
The Australian Bureau of Statistics said on Monday that total housing finance by value fell 2.6 per cent in December, seasonally adjusted, to $20.836 billion.
Wonder how those who shorted 0.2% of JB hifi's share register on Friday are feeling this morning... #ouch #ausbiz asx.com.au/data/shortsell… — David Scutt (@David_Scutt) February 11, 2013
ANZ is the only one of the big banks to start the week on a down note:
- CBA is 0.34% higher to $65.05
- ANZ is 0.71% lower to $27.92
- NAB is 0.93% higher to $29.29
- Westpac is 0.43% higher to $28.20
A quick look now at some of the blue chips, starting with the big miners:
- BHP is 0.5% lower to $37.76
- Rio is 0.42% lower to $69.31
- Fortescue is 1.11% higher to $4.99
Rio Tinto has applauded Australian Competition Tribunal’s decision that its Hamersley and Robe rail lines should not be opened up to other users. In a release to the ASX, Rio Tinto Iron Ore acting chief executive Paul Shannon said:
This is great news. Rio Tinto runs a highly efficient railway that is fully integrated with our port and mine operations. This would be severely hindered if third parties were allowed to run trains on our rail network, not to mention the knock-on negative effect on the Western Australian and national economies from creating such inefficiencies.
Local stocks will be acting without any regional feedback this week, with financial markets in Japan, Hong Kong, China, Singapore, South Korea, Malaysia, and Taiwan closed on Monday for public holidays.
Following that tweet about ANZ, here are some fresh, start-of-the-week analyst rating changes:
- Fletcher Building downgraded to neutral at Goldman Sachs
- ANZ cut to neutral from buy at Goldman Sachs
- ASX cut to underperform from neutral at CIMB
- Toll cut to neutral from buy at BofA-Merrill Lynch
- Super Retail cut to sell from neutral at Citigroup
It looks like the JB Hi-Fi result from earlier today is rubbing off on the other big retailers. Well, some of them:
- Woolworths: +0.21%
- Wesfarmers: -0.4%
- Harvey Norman: +5.0%
- DJs: +1.52%
- Myer: +1.35%
Goldman's cut ANZ to neutral from conviction buy. Says insto build-out and exposure to growing Asia priced in on P/BV of 1.8x v ROE of 15.3% — Chris Weston (@ChrisWeston_IG) February 10, 2013
Ric Spooner, chief market analyst at CMC Markets, has detected some nervousness among short terms traders about locking in recent gains. In a note this morning, he writes:
With the S&P/ASX index having gained 15% in an almost uninterrupted rally since November, short term traders are positioned to sell and lock in gains on the first signs of the market breaking below support levels.
In a tug of war between nervous traders looking to protect profits and investors rotating funds out of cash and into equities, the weight of new money continues to win out.
Trader caution about the possibility of a market correction is being heightened by the fact that the ASX 200 index is now at a technical resistance zone between about 4975 and 5020.
This consists of the upper border of a trend channel that has been intact since November as well as the April 2011 and April 2010 peaks. Near term support is provided by the lower border of the channel that currently intersects at around 4910 and below that, last week’s low at 4870. A breach of these levels could be a warning sign of a deeper correction to follow.
Brian Robbins reports that investors in Coffey International remain focussed on the turnaround prospects for the company following further disappointing progress in the December half, with a further slide in earnings.
The shares were marked up 2.5c to 39c in early trading.
Ongoing softness in mining services demand resulted in earnings a share diving to 1.5c from 2.5c for the December half, due to restructuring charges.
Overall revenues for the half rose to $359.8 million from $334.9 million a year earlier, but with the net profit falling to $3.8 million from $4.8 million after booking another $2.2 million of restructuring charges.
Now for the best-performed companies on the ASX200:
- JB Hi-Fi: +12.81%
- Alacer Gold Corp: +6.79%
- Coalspur: +3.95%
- Harvey Norman: +3.64%
- Discovery Metals: +2.63%
- Lynas: +2.44%
- Virgin: +2.33%
A quick look now at how the various sub indices on the ASX200 are travelling. In a flat market, consumer discretionary stocks are higher thanks to the JB hi-Fi gains.
- Consumer disc: +1.19%
- Telecoms: +0.3%
- Financials: +0.05%
- Info tech: -0.57%
- Health: -0.39%
- Industrials: -0.39%
- Materials: -0.3%
- Energy: -0.26%
Shares are dead flat early on.
The All Ordinaries index is 0.9 points higher, or 0.0 per cent, to 4988.5, while the benchmark S&P/ASX200 is 1.8 points lower, or 0.0 per cent, to 4969.5.
Shares in JB Hi-Fi have leapt higher in opening trade after the electronics retailer lifted its first half profit by three per cent and expects full year profit to grow by up to seven per cent.
Its shares added as much as 12.7 per cent, or $1.40, to $12.41.
Evan Lucas from IG Markets points out that this week is all about local stocks, with regional partners celebrating Chinese New Year. He says the ASX ‘‘will need to lead itself rather than relying on China and Japan’’.
He also notes that the ASX200 finished at 4971 points, ‘‘our highest level since April 2011 (the top of the bounce after the Japanese tsunami)’’:
This means the ASX has now retraced the full drop of the euro-mess, China’s hard-landing fears, and the impact of the second round take of the Federal Government’s mining tax. What is different from 2011 and 2013 is the reasoning for market to be at this level.
Over the last seven months the market has gained 986 points (or 24.75%) and as is well-known the main driver of this growth has come from seven or eight majors stocks, namely the big four banks, Wesfarmers, Woolworths and Telstra. The question that analysts and strategists alike are asking is; do the stock fundamentals match the movements in these stocks?
Insurance Australia Group has updated investors on the cost of insurance claims caused the summer of wild weather, which could hit up to $175 million.
The insurer said Tropical Cyclone Oswald, which hit Queensland and NSW, had sparked 13,700 claims worth between $120 million and $140 million. Claims from the bushfires that affected Tasmania, Victoria and Tasmania could total another $35 million, it said.
A further 600 claims have been lodged after bushfires in NSW, Victoria and Tasmania, with a cost of about $35 million, it said. IAG’s reinsurance program for calendar year 2013 limits the impact of a single natural disaster event to $150 million.
Here's a quick look at the week ahead. For the full calendar, click here:
- Tuesday: HIA Trades Report for December quarter, NAB monthly business survey for January. Results from: SAI Global, Bradken, Slater and Gordon
- Wednesday: ABS Lending finance for December, Westpac/Melbourne Institute Survey of Consumer Sentiment. Results for: Commonwealth Bank, Stockland, Goodman Group, Boral, Leighton, Ansell, CSL, Computershare, OZ Minerals
- Thursday: Results for Rio, David Jones Q2 sales, ASX Ltd, GrainCorp, Mirvac and Whitehaven
- Friday: ANZ group trading statement. Results for Pacific Brands, Sims Metal Management, Charter Hall Retail REIT.
Although local stocks look set to open weakly, the Aussie dollar is holding its ground and US stocks had a strong end to the week.
The S&P500 rose to a fresh five-year high and putting the Nasdaq within a hair of a 12-year intraday high, following a batch of encouraging domestic and international economic reports. Data showing stronger international trade in China and Germany, and a report indicating the US trade deficit had narrowed in December, pointed to improving global demand.
Locally, the focus for today will be upcoming earnings data this week for major listed companies, including the Commonwealth Bank of Australia, miner Rio Tinto and retailers Wesfarmers and David Jones.
‘‘We’ve seen pretty good gains for the sharemarket - we want to see the reasons for our rally being validated, not just earnings but the expectation of companies,’’ said CommSec's Craig James.
‘‘Perhaps the futures market is maybe a little bit negative,’’ he said. ‘‘But I think it will be flat rather than down.’’
In corporate news this morning, electronics retailer JB Hi-Fi reported it has lifted first half profit by three per cent and expected full year profit to grow by up to seven per cent.
The company made a net profit of $82 million in the six months to December 31, up from $79.6 million in the same period on the previous year.
Total sales grew by 2.3 per cent from the previous corresponding period, due to growth in the company’s number of stores. On a comparable store basis, sales were down 3.5 per cent from the previous corresponding period.
Chief executive Terry Smart on Monday said calendar 2013 had got off to a positive start, with comparable store sales up 4.2 per cent from the previous January.
For a comprehensive look at this morning’s business news, check today’s need2know. Here are this morning’s key markets numbers: