ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Asia is off to a solid start to the week, with the stars starting to align for equities yet again. After a sharp pullback recently, investors appear to be regaining confidence that we may have seen a bottom for now. Sentiment is vastly improved from the carnage we saw last week and some positives are beginning to emerge. Bond markets showed signs of stability in the US, with the 10-year yield rising in treasuries and bunds. This helped prop up the US dollar, which had struggled through most of last week although the tightening...
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ANZ is wrong on bank capital

ScreenHunter_4572 Oct. 20 10.36 By Leith van Onselen ANZ Chief, Mike Smith, has warned that Australia's Big Four banks risk becoming “globally uncompetitive” if they are required to raise capital levels to withstand external shocks. From The Canberra Times: Mr Smith said despite concerns around the housing market, there was no need to raise the amount of capital banks were required to hold as has been suggested through the Murray Financial System Inquiry. "The Aussie banks are now holding twice as much capital as they did [in 2007] courtesy of regulation that has been implemented since the crisis. "The question is,...
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Privatising Medibank to raise up to $5.5 billion

ScreenHunter_4582 Oct. 20 13.41 By Leith van Onselen Coalition finance minister, Mathias Cormann, has today announced details of the float of Medibank Private, claiming that the sale would raise between $4.3 billion and $5.5 billion for the federal government. From The Guardian: Cormann said this would place the business among the top 100 companies on the ASX. About 2.7bn shares are expected to be sold in the float, to be finalised by December. The government intends to sell down its entire shareholding and use the funds on its asset recycling scheme aimed at encouraging infrastructure construction. More than 750,000...
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Iron ore miners miss rally

dsgfwe It's all good today in markets, exception for iron ore miners. Most are in the green but only just except BHP which has managed a little better. All opened strongly and have sold all day. All charts are going sideways:    Despite Chinese iron ore futures being up...
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Dodgy Chinese money already drying up at unis?

0 From Michael Sainsbury via Crikey on the suddenly pressing Chinese anti-corruption campaign: The economic effects of the campaign are very real. Tough new laws on entertaining have hurt the hotel and restaurants industries, as well as the karaoke and hostess bars that have relied on officials spending up. One former Australian diplomat who was recently entertained in China said that toasts, which would traditionally have been made with China’s vicious local firewater baijiu, were being made with, of all things, milk -- as a beverage all but unknown in many parts of China only a few decades...
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The east coast gas crisis is overblown

fgw4g From the Grattan Institute today: For some time the price of natural gas has been rising well above  the cost of living. As with electricity, rising network prices are the  main reason for a 36 per cent increase in average gas bills over  the past five years. But in the next few years, huge changes in the  gas market will push up prices even more sharply, adding more  than $300 a year to the average household gas bill in Melbourne  and over $100 a year in Sydney and Adelaide. The increases will  mean tough decisions for many households and businesses. Natural gas is one of Australia’s main...
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Moody’s warns of iron ore downgrades

imgres Nothing really new here expect the threatened downgrades from Moody's: The growing oversupply in the iron ore market is damaging for the sector and poses risks to the downside. We estimate over 300 million metric tons (MT) of new and expanded production will come on-stream over the next several years. In light of expectations for muted growth in global steel production for at least into 2016, the lack of equilibrium will continue to weigh negatively on prices and operating performance of iron ore producers. As a result, we have revised our price sensitivity for iron ore for the period...
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Police set to seize dodgy Chinese assets

chinese-corruption From Fairfax: The Australian Federal Police are poised to seize assets of corrupt Chinese officials within weeks, in an unprecedented joint operation with its Chinese counterparts. In an exclusive interview with Fairfax Media, Commander Bruce Hill, the manager of the AFP's operations in Asia, has confirmed Australia has agreed to assist China in the extradition and seizure of assets of corrupt officials who have fled to Australia with illicit funds running into the hundreds of millions of dollars. The joint operation will make their first forfeiture of assets within weeks, having agreed on a...
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Kouk stands alone on rate cuts

edit-cut-md From the SMH blog: ...27 economists surveyed by Bloomberg, 26 expect rate hikes next year. But bond markets are pricing in the chance of the opposite. And in the wake of this week’s turmoil economist, Guy Bruten at Alliance Bernstein lists four circumstances (aside from GFC II) that may prompt the RBA to cut, rather than, hike rates next year: Angst around the commodities downturn would have to rise further. Bruten gives this scenario a tick – recent falls in the iron ore price are driving down long-term forecasts “with the obvious consequences for capital spending, government...
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Population ageing and the Australian economy

ScreenHunter_08 Feb. 03 14.45 By Leith van Onselen Reserve Bank of Australia (RBA) deputy governor, Christopher Kent, has today given a speech to the Leading Age Services Australia National Congress on the impacts of population ageing on the Australian economy. Kent identifies three causes of population ageing: Population ageing is driven by three different forces. The first is the baby boom that followed the Second World War. The second is the drop in fertility rates thereafter. Combined, these two changes led to a ‘bulge’ in the age distribution of the population. The early part of this cohort began to retire from...
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Citi: Robust shale could drive oil much lower

fbgre Citi today offers some useful analysis of the trillion-dollar question. At what price can Saudi and/or OPEX dislodge US shale oil production? And, by extension, what price are we going to see for LNG contracts for the next few years? In a stand-off between OPEC and US shale, how low can shale go? In a bear scenario, $75 WTI may only be a soft floor  Brent and WTI have plummeted, and supply cuts are needed to support prices; with the Saudis and OPEC bracing for lower prices, shale is set for a showdown with the cartel.  At what price might US shale production growth be meaningfully...
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Morgan Stanley sees falling bank returns

dfgrw From Morgan Stanley: We are more concerned about the outlook for the major Australian banks because we think the EPS upgrade cycle is coming to an end and investors are under-estimating the downside risk to ROEs from the Murray Inquiry. Against this backdrop, elevated trading multiples are hard to justify. The EPS upgrade cycle is coming to an end EPS upgrades over the past 2 years were primarily driven by loan loss normalization, home loan standard variable rate re-pricing, lower funding costs and good cost discipline. Better than forecast outcomes now look unlikely. In fact, both revenue and...
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APEC shutdown to weigh on iron ore?

url From Mac Bank: Three weeks before the APEC conference in Beijing, the city has suffered another bout of “airpocalypse” with air quality measures reaching the “hazardous” level three days in a row. While at least part of the cause has been linked to agricultural fires following the autumn harvest, the response has reportedly been to order shutdowns and output restrictions of heavy industry in the surrounding area over 1-12 November. All steelmaking and coking plants within 100kms of Beijing will be required to close – a relatively small impact as there is limited capacity so close to...
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Margin squeezes junior iron ore miners

28755_300 In its Q3 production update, Arrium announced this morning: Record shipments of 3.45Mt (dmt), up 0.29Mt on prior quarter  Sales of 3.29Mt (dmt), down 0.03Mt on prior quarter  Achieved targeted annualised sales rate of 13Mtpa  Average Platts market index price (62% Fe CFR) US$90/dmt, down US$12/dmt on prior quarter  Average realised price ~US$73/t CFR (dmt), down US$12/t on prior quarter  Average realised price ~A$78/t CFR (dmt), down A$14/t on prior quarter  Average grade of shipments 59.9% Fe, average for prior quarter 59.6% Fe  Average cash cost loaded on ship...
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Pettis: Beware the “euroglut”

erfqe Exclusively from Michael Pettis's newsletter: In the June 11, 2013 issue of my newsletter I discussed a presentation by three economists from the EU, one based in Beijing and two visiting from Brussels, who had asked a few weeks earlier if they could come to my central bank seminar at Peking University and speak about the euro crisis. ...Needless to say the presentation was fascinating. There was one point, however, that drew a great deal of shocked comment from my students. The visitors presented a graph projecting Europe’s balance of payments out to 2014 as a way of illustrating how Europe...
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Desalination plants pump endless stupidity

ScreenHunter_16 May. 13 15.31 By Leith van Onselen The cost to Australian consumers from the construction of costly desalination plants continue to soar as rising dam levels make the investments redundant. From The Australian: ...the Victorian desalination plant, southeast of Melbourne, will have cost water users $1.2bn by the November 29 state election, rising to $2bn by the end of the next financial year. The cost has soared, despite no water having been drawn from the facility since its opening in 2012 and dams being more than 80 per cent full... Average yearly water-bill increases in Melbourne of about $200 have been...
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Keating backs macroprudential, SMSF curbs

ScreenHunter_4571 Oct. 20 08.11 By Leith van Onselen Former Treasurer, Prime Minister, and architect of Australia's compulsory superannuation system, Paul Keating, over the weekend called for curbs on self-managed superannuation funds (SMSFs) using leverage to invest in Australian residential property. From The AFR: [There has] been “a dramatic acceleration” in investor financing, said Mr Keating... “This is associated with the growth of self-managed super funds and their ability to borrow,” he said. “If I was treasurer today, I would be looking very hard at the whole entitlement or availability of debt to SMSFs....
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Auction clearances steady

ScreenHunter_19 Mar. 13 13.12 The national auction clearance rate was essentially steady over the weekend, with small falls in Sydney and Brisbane offset by a small rise in Melbourne. According to RP Data, the national weighted average preliminary auction clearance rate was 68.5% over the weekend, which was down 0.2% from the 68.7% preliminary clearance rate reported last weekend. Sydney’s clearance rate fell by 0.3% to 75.5%, whereas Melbourne’s rose to 68.0% (last weekend 67.2%). Brisbane, which typically only has a small number of auctions, experienced an 3.7% fall in its clearance rate to 50.5%. Overall auction...
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RP Data weekend property market update

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 19 October 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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China blowtorches dodgy money in Australia

url From The Australian comes more evidence of the clamp slowly being applied to Australia's new business model of laundering dodgy Chinese money through its property market: The Chinese Foreign Ministry confirmed it wanted Australia’s help in tracking corrupt officials as the Abbott government announced an expansion of a visa class that now allows millionaires to get permanent residency here. Corruption-busters running Operation Fox Hunt — China’s title for the new push to detain and repatriate corrupt officials — are reported to have also pressed other Western governments for help with their...
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More 457 visa rorts revealed

ScreenHunter_2531 May. 22 07.09 By Leith van Onselen Fairfax revealed further rorts of Australia's 457 visa system over the weekend, with an audit of 1,800 of the so-called 200,000 skilled foreign workers in Australia by the Fair Work Ombudsman showing that 40% of audited 457 visas potentially breached visa rules. From The Canberra Times: The Fair Work log suggests that certain cafes and restaurants in populated urban areas are almost entirely staffed by foreign workers. For example, a restaurant called Goa Indian Fusion on Queensland's Gold Coast has five staff on 457 visas. The Gold Coast has a youth unemployment rate of...
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Dour consumers going nowhere

3 From Westpac's excellent Red Book,the bible of consumer attitudes: ― The Westpac–Melbourne Institute Index of Consumer Sentiment rose by 0.9% from 94.0 in Sep to 94.8 in Oct, a slight improvement but still leaving the index stuck in a pessimistic range. ― The Oct result appears to reflect a mix of negatives from financial market developments (the ASX fell 6½% between the Sep and Oct surveys) and positives on ‘Budget and tax’ issues with the Government announcing it was setting aside controversial Budget measures. ― CSI±, our modified sentiment indicator...
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Daily iron ore price update (FMG desperation)

asa Find below the iron ore price charts for October 17, 2014: A better day Friday across the board suggesting that steel mills are prepared to step in and buy so long as prices hover around $80. Reuters has texture: "Some mills did replenish some stocks after the National Day holidays, but after that the buying interest has slowed," said an iron ore trader in Shanghai, referring to the Oct. 1-7 holidays. Some iron ore traders who have held off on offering cargoes to the market earlier this week on hopes of keeping prices high have resumed sales, the Shanghai-based trader said. "They...
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Joske: China to slow, iron ore to fall 20%…

imgres This pretty much sums up the MB view, from the AFR: AustralianSuper, which has $80 billion under management, believes asset prices in China will be hit when credit is eventually tightened and will stay on the sidelines until this adjustment is over, according to its senior manager for Asia, Stephen Joske. ...He believes over the next decade, China’s growth will be much less reliant on resources such as coal and iron ore. ...Mr Joske does not believe China will have a banking crisis, but says the inevitable tightening of credit will hit asset prices and cause a short-term downturn in the...
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China’s property correction bifurcates

Capture Cross-posted from Investing in Chinese Stocks. The Chinese media dub the lifting of buying restrictions as the first market rescue. The second rescue was the new mortgage policies. Now local officials are begging for a third bailout in Beijing. In the days before and after the national holiday, many local government officials traveled to Beijing and met with government officials, including the Ministry of Housing, as well as holding small meetings with central bank officials. They are asking for more policy easing. Local officials are saying that banks are constrained and the mortgage easing...
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