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Tourism could be the story of the next 10 years, so which stocks should you be watching?

The ASX is set to snap its losing streak as it heads for the first positive week in six.

• Telstra beefs up workforce
• Tourism: the next boom industry?
• Charter Hall slumps
• Stocks edge higher

Welcome to the BusinessNow blog for Friday, September 23. The Australian market looks set to snap a five-week losing streak as investors breath a sigh of relief following key meetings from the Federal Reserve and the Bank of Japan.

7.48pm:Brexit sooner, rather than later

British Foreign Secretary Boris Johnson said Thursday he expects the UK to formally begin its exit from the European Union in the early months of next year and doesn’t think the government will need the full two-year window to negotiate a new relationship with the bloc.

Mr Johnson, speaking in an interview with Sky News television in New York, said the UK government was liaising with its European partners in the “expectation that by the early part of next year, you will see an Article 50 letter.”

“We will invoke that, and in that letter, I’m sure we will be setting out some parameters for how we propose to take this forward,” he said. Read more.

7.20pm: Eurozone growth grinds lower

A closely watched survey is showing that economic growth across the 19-country eurozone has fallen to a 20-month low. Financial information company IHS Markit says Friday its purchasing managers index - a broad gauge of economic activity - across the single currency bloc fell in September to 52.6 from 52.9 the previous month. Anything above 50 indicates expansion.

A more detailed look shows the services sector is having a particularly disappointing month but that manufacturing expanded at its fastest pace since December. There was a similar discrepancy among the region’s top two economies -while German growth eased to a 16-month low, France’s output rose at its fastest pace since June 2015.

Rob Dobson, senior economist at IHS Markit, says the eurozone’s economic upturn is “failing to achieve any real traction.” AFP

6.49pm:Blackmores raises sector worries

James Kirby

It was meant to act as the vanguard of Australia’s great new export boom: consumer goods to China spearheaded by the ASX champion Blackmores, which sold everything from baby formula to vitamins.

But something has gone very wrong with the swag of stocks across the ASX representing the China consumer sector.

In the blink of an eye Blackmores has seen its share price almost cut in half, its peers in the milk exporter sector Bellamys and A2 have also been hit hard.

As for the late-to-the-party new listings of vitamins group Vitaco and China Dairy Corporation … well, Vitaco has disappeared. Shanghai Pharmaceuticals bought the stock, which had hit a high of $3.20, for $2.25 while CDC after an IPO at 20c just months ago is trading below its issue price near 16c. Read more.

6.20pm:Honeymoon over for China-listed ASX plays

Tim Boreham

Guess who? I’m a stock with a $400 million market valuation that last year made a $10m net profit on revenue of $20m.

I’m backed by $114m of cash, have no debt and am a market leader in my segment.

Give up? The answer, my old China, is not an Internet of Things play but loan guarantor DSX Finance (DXF), which operates 16 branches on China’s eastern seaboard.

“We would be an ASX300 company if we had more of a free float,’’ says chairman Winton Willessee.

DSX is the latest Middle Kingdom company to list on the ASX, mainly to improve street cred with offshore investors.

These stocks offer a direct entree to China’s still stellar growth at a time when commodities, as well as Chinese-oriented food stocks such as Blackmores and Bellamys, have faded (see story above).

At least that’s the theory. Read more.

6.09pm: Fruit growers forced to think ugly

Steve Lutz used to sell banged-up apples for a loss on the juice ­market. Until the day Wal-Mart called. Suddenly, his company was hauling unattractive apples, which had been pelted by hail, out of storage.

“We are not trying to produce ugly produce,” said Mr Lutz, vice- president of marketing at CMI Orchards, based in Wenatchee, Washington. But ever since Wal-Mart Stores started an ugly apple pilot project this northern summer at 300 Florida stores, he has fretted about keeping up with demand. “If you do have fruit that doesn’t make the grade cosmetically, you try to find another channel for it,” he said.

Another Wal-Mart pilot at 400 Texas, Arkansas and Oklahoma outlets this northern spring re­branded misshapen russet pot­atoes as Spuglies.

Foodies and environmentalists have long appreciated the beauty of three-legged carrots and plums with proboscises, and have created a quirky market niche. Now ugly produce is ­hoping to find an eager new ­audience in the last place it was ever welcome: the aisles of major supermarkets.

The speed at which the ­demand has taken root has left some growers befuddled. Read more.

5.46pm:Mega wealth and broken dreams

Andrew Burrell

With its long history of money fever, Perth has witnessed the rise and fall of many an ostentatious tycoon. Alan Bond, Laurie Connell and Warren Anderson were the archetypal 1980s entrepreneurs who acquired all the trappings of wealth before blowing the lot.

But few have generated such animosity, or spent money with such grandiosity, as Pankaj and Radhika Oswal, the Indian aristocrats whose ascent to the peak of Perth’s corporate world and A-list social scene coincided with the biggest boom to hit the west.

Yesterday’s legal settlement with ANZ Bank, which will involve the Oswals walking away with hundreds of millions of dollars after alleging racism and physical violence by senior bank executives, ends the couple’s largely unhappy time in Australia.

“They will be getting out — they won’t be doing business in Australia again,” says one person familiar with the couple, who were holed up in Melbourne yesterday and not speaking publicly.

But in the early 2000s, when the young Oswals slipped quietly into Perth after an arranged marriage a few years earlier, it was a different story. Read more.

5.21pm:MIRA ruled out in Ausgrid bid

Macquarie Infrastructure and Real Assets has been ruled out as a backer of IFM and AustralianSuper’s $10 billion-plus unsolicited bid for Ausgrid, sources confirmed this afternoon.

However, Macquarie Capital - the bank that advised China’s State Grid - is understood to be around the situation. Read more.

4.49pm:Stocks win for first week in six

The Australian sharemarket has rounded off its first positive week in six in fine style, surging into a higher close as the banks and big miners received a strong bid.

At the close, the benchmark S&P/ASX 200 index had jumped 56.8 points, or 1.06 per cent, to 5,431.3, while the broader All Ordinaries index leapt 52.3 points, or 0.96 per cent, to 5,518.6.

Stocks ended near their highs for the session, with the day rounding off a week interrupted by Monday’s outage with four straight gains and a return of around 2.6 per cent. Read more.

4.02pm:Don’t waste tears on London’s City

The Times

Do not weep for the City of London. Britain’s financial hub has withstood challenges far greater than Brexit. It has risen from the dead on many occasions.

Until 1914 the square mile was the global hub for the gold standard, the international system of fixed exchange rates. Then war broke out, the gold standard collapsed and London’s main source of business disappeared overnight. But in the following years the City reinvented itself as the leading destination for financiers to trade and hedge their newly floating currencies.

In the 1940s the US Treasury Secretary Henry Morgenthau pledged to “move the financial centre of the world” away from London. He failed to make even a dent.

In the 1950s and 1960s, politicians around the world slapped controls on capital flows. The City’s response was to invent the Eurodollar market, allowing banks to circumvent national regulations by funnelling their money through London. Read more.

3.26pm:Tabcorb, Tatts edge back towards dominance

John Durie

Eight years ago Tabcorp and Tatts lost their duopoly controlling poker machines in Victoria and ever since they have tried to re-create the empire including, of course, joining forces themselves.

The Australian Competition and Consumer Commission has flagged interest in Tabcorp’s $128 million deal to buy the old eBet, now trading as Intecq.

Among loyalty schemes and other jackpot services, Intecq handles the poker machine monitoring business in Queensland.

Tatts has that business in NSW and is now in talks with the Greek owners of Intralot to buy its business in Victoria for around $100 million. Read more.

3.06pm:Whitehaven to boost CEO pay

Whitehaven Coal chief executive Paul Flynn’s annual pay barely changed in the 2016 financial year, but the miner plans to increase his potential remuneration in the current year.

Mr Flynn earned $2.43 million in fiscal 2016, with a fixed salary of $1.33 million plus $770,000 in short term incentives, according to Whitehaven’s annual report, released on Friday. Read more.

2.22pm:Who’s in the Ausgrid bid?

Bridget Carter

IFM and Australian Super’s $10 billion-plus unsolicited bid for Ausgrid may involve Macquarie Infrastructure and Real Assets.

But there are questions surrounding whether Macquarie Capital is acting as an adviser to the consortium, given that the bank is not yet said to be released from its role advising China’s State Grid on the same transaction. Read more.

1.41pm:Ausgrid fields $10bn offer

Bridget Carter

IFM and Australian Super have lobbed an unsolicited bid for Ausgrid believed to be worth at least $10 billion.

Unconfirmed reports have suggested the consortium is working with Macquarie Capital as an adviser.

It comes after the NSW Government today announced it had received an unsolicited proposal for the partial long-term lease of Ausgrid from a consortium comprising AustralianSuper and IFM Investors.

Read more

1.43pm:Surprise Ausgrid proposal

Daniel Palmer

The New South Wales Government’s ongoing push to sell a partial long-term lease of electricity distributor Ausgrid has received a boost as two of the biggest infrastructure investors in Australia throw their hats in the ring.

In an update this afternoon, the Baird Government said it had received an unsolicited approach from a joint venture including IFM Investors and AustralianSuper.

The price offered was not disclosed, with Premier Mike Baird saying an analysis of the proposal was currently underway. Read more.

1.12pm:World Bank chief unopposed, not uncriticised

The way is now clear for a second term for the American president of the World Bank, Jim Yong Kim.

After a first term hailed by some Bank member states but marked by internal discord, Kim this month became the only candidate running for his own succession.

In keeping with an unbroken tradition, the US nominee will again fill the presidency at the World Bank, while the International Monetary Fund remains in European hands as Christine Lagarde, also unopposed, began a second term as managing director in July.

After nominations opened, no other country took the risk of trying to upset this established order — unlike in 2012, when the Nigerian Ngozi Okonjo-Iweala threw her hat in the ring to be leader of the development behemoth, which comprises 189 member states and employs 15,000 people.

Still, Kim’s record since taking office that year is not spotless. A medical doctor and former president of Dartmouth College, Kim won plaudits for mobilising the Bank against the 2014 ebola crisis in West Africa and taking action against climate change, as well as for setting a goal of eradicating extreme poverty by 2030 all while expanding World Bank lending.

But he also had to contend with a high degree of internal dissent, stemming from an unpopular reorganisation and a controversy in 2014 over bonuses granted to senior Bank officials.

The World Bank Staff Association last month denounced what it called a “crisis of leadership,” and in an open letter several former officials lamented what they said was the lack of a clear strategy. The Economist and Financial Times opposed automatically reappointing Kim and called for a more open process.

Despite all this, poor and developing countries still chose to support a second term for Kim, 56, who will sit for interviews with the Bank’s board before being formally crowned next month. His second five-year term is due to begin in July next year. AFP

12.35pm:Outage unacceptable, unprecedented: ASX

The ASX has provided more details on its “unacceptable” outage on Monday, noting it and its technology suppliers had never before seen the type of hardware malfunction that crippled the nation’s key stock exchange, Daniel Palmer writes.

The ASX has blamed hardware issues for Monday’s outage.

In the update the ASX noted hardware issues were not new, but very rarely disrupted the “proper functioning” of the market.

“This is because ASX maintains a full replication of its systems in a backup datacentre (DRS), and has automated processes (known as ‘failover’) that enable faulty hardware within the primary datacentre to be seamlessly replaced,” the ASX said in its report.

“On Monday an unprecedented hardware malfunction triggered a complete database failover to DRS and not all parts of ASX Trade successfully connected to the DRS database.”

The issues ultimately saw the local stock exchange completely shut down twice across the session, from 10am-11.30am and from 2.05pm-close.

12.20pm:BHP mulls ad blitz on iron tax

BHP Billiton will weigh up an advertising blitz similar to the one that helped destroy the first Rudd government as it seeks to counter the “red herrings and furphies” behind the West Australian Nationals’ $5 per tonne iron ore tax proposal.

With a WA election just months away, BHP’s Australia chief Mike Henry told The Australian that an advertising campaign was one option being considered to help explain the miner’s true tax position and counter the growing grassroots momentum behind the proposal.

The new Nationals leader Brendon Grylls wants to lift an obscure 25c per tonne production rental fee contained in the state agreements of BHP and fellow iron ore giant Rio Tinto to $5 per tonne, arguing that the fee hasn’t changed since it was first set in the 1960s. The policy would raise around $1.5 billion a year.
Paul Garvey
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11.50am:Telstra beefs up workforce

Telco giant Telstra says it will add 1000 extra communications technicians to its workforce over the next six months as it looks to meet NBN demand and reduce fault repair and install times for customers.

Telstra’s Executive Director Customer Service Delivery Brian Harcourt told The Australian the addition would come at a substantial cost and was somewhat of a tough decision.

“We looked at the demand, we looked at our focus on customer service, and it was a decision we had to make,” he said. “We missed our customer satisfaction bonus last year and while this is not directly linked to that, we do know from listening to our customers that cycle time is a major pain point. We needed to improve that.”
David Swan
Read more

11.27am:Tourism: the next boom industry?

If Australian investors had a time machine to take them back 10 years, what would they invest in?

Easy! Health care stocks are up around 250 per cent over the decade. Throwing money at powdered milk and vitamin companies would have worked out well, thanks to the insatiable demand from China. And don’t forget gold miners, which have rocketed on the back of safe-haven buying in volatile times … the list goes on. And we’re not even talking about overseas slam dunks like Facebook, Google and Apple!

Will tourism be the story of the next 10 years?

The problem, of course, is that none of that was obvious at the time. Hindsight is 20/20.

Investors will always be looking for broad themes that point them towards companies and sectors with decent growth potential and reasonable valuations.

Is tourism going to be the story of the next 10 years? MarketMatters analysts think so.

“One sector we are very bullish on is tourism, primarily due to the huge increasing volume of travellers coming from China. This theme is in its infancy and is a longer-term thematic however being positioned early on in the piece makes sense,” the analysts said.

Only 4 per cent of Chinese people hold a passport, according to the analysts, and as the Chinese middle class continues to expand, the appetite for travel will increase.

So, which Australian stocks are in the mix?

Sydney Airport

The nation’s business airport has seen a 9.5 per cent lift in international tourists over the last 12 months, which MarketMatters says is strongly supported by a growing Chinese middle class and an Australian dollar below US80c.

“We went negative on the stock when it was trading close to $7.50, but after its 16 per cent correction as the ‘yield play’ stocks were down, we are now neutral. The company is clearly positioned to benefit from the Chinese influx, but it remains expensive and will suffer as their cost of debt increases.”

Mantra Group

“The most recent weakness is a result of three main concerns: Change in management, concern about Airbnb and perception that the recent acquisition in Hawaii increases the company risk profile and implies they have fewer growth opportunities domestically,” MarketMatters said.

“We believe these concerns are overblown and the hotel operator looks appealing in the low $3.00 region, running stops below $2.80. We continue to believe a run up into the $4 region is a strong possibility. A current forward P/E of 16x is not a challenging valuation.

“We are buyers of MTR at current prices.”

Event Hospitality

“The stock has recently corrected 15 per cent from the $17 region. The current P/E of 16x forward earnings is not too demanding.

“We could be buyers at current levels with the plan to add to holdings under $13.”

Ardent Leisure

“This business offers exposure to both Australian and US tourism, which we think is appealing.

“AAD is again trading on a reasonable valuation of 17x. Technically, we can buy AAD targeting a test of $3.50 with stops under $2.25.”

11.02am:Shine facing class action

A second listed law firm, Shine Lawyers, faces the risk of a shareholder class action after the collapse of its share price, writes Chris Merritt.

Shine Lawyers is being targeted by a newly launched class action adviser over a series of announcements that preceded February’s 75 per cent decline in its share price.

That wiped more than $253 million from Shine’s market capitalisation.

Investor Claims Partner, which is being launched today, is assembling a register of institutional shareholders who bought Shine shares in the five months before February. ICP’s research shows that throughout that period Shine provided annual earnings guidance of between $52m and $56m before downgrading this on January 29 to between $24m and $28m.
Read more

10.28am:Charter Hall slumps after Gandel sale

Charter Hall shares tumbled as much as 8.5 per cent this morning as it rejoined ASX trade after billionaire John Gandel sold out of the listed landlord and funds manager.

The Gandel Group has completed its sale of 79.2 million shares, or 19.2 per cent of the company, at a price of $5 per share.

Charter Hall shares slumped to a four-and-a-half month low of $4.92 at the open, before recovering slightly to sit at $5 at 10:25am AEST.

The stock is now on track for its worst session since June 2011.

10.22am:Stocks edge higher in early trade

The Australian sharemarket is on track to end a week in the black for the first time in six weeks, with early trade on Friday showing gains in the wake of a jump in commodity prices and a rise on Wall Street.

At the 10.15am (AEST) official market open, the benchmark S&P/ASX 200 index edged up 6.1 points, or 0.11 per cent, to 5,380.6, while the broader All Ordinaries index tacked on 6.2 points, or 0.11 per cent, to 5,472.5.

The miners were again at the heart of the solid open after iron ore prices lifted 1.5 per cent and base metals on the London Metal Exchange surged, while a lift in crude prices failed to have as positive an impact on the energy sector.

The big banks were all higher, with strong rises among the big four.

Daniel Palmer
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10.12am:Buyers circle aged-care provider Estia

US-based nursing home real estate investment trust HCP, a Chinese insurer and possibly even New York private equity group Blackstone are said to be running the ruler over troubled aged-care provider Estia, which has seen its top executives depart, and more than half of its value disappear since its $1.4 billion peak after listing two years ago.

HCP is a fully integrated REIT serving the healthcare industry in the US where it has a $US23.5bn portfolio. Its suite of assets is diversified among five distinct sectors — senior housing, post-acute and skilled nursing, life science, medical office and hospital.

HCP has been named as a potential Estia suitor at a time it is believed to be already scouring the Australian market for opportunities. However, it is expected the group would need a local operator to run the operation.
Bridget Carter, Gretchen Friemann
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10.04am:The China risk to Aussie housing

Australia’s growth drivers may have shifted dramatically over the past five years but Westpac chief economist Bill Evans notes one constant: a reliance on China, writes Daniel Palmer.

The dependence drives “huge uncertainty”, with the prospect of a sudden halt to the housing market’s momentum looming large.

A reliance on China poses big risks for our housing market.

In a note assessing the evolving risks and opportunities confronting the Australian economy, Mr Evans said a “remarkably stable” growth rate had belied the precarious transition from a reliance on mining and energy to a focus on education, tourism and housing.

“Just as the mining and commodity cycles were heavily dependent on China, so are these latest sources of growth,” Mr Evans said.

“At some point, the Chinese authorities, who appear to have stabilised last year’s spectacular near $US1 trillion loss in foreign reserves, may decide to slow this leakage.”

Tighter capital controls could quickly flow through to Australia’s flourishing housing construction industry, with the stunning expansion in high rises dotting inner Sydney and Melbourne under threat.
Read more

9.33am:Investors ready to ride a rising tide

Blood will start to flow back into the pale faces of investors after this week’s central bank announcements offered encouragement to investors, who could find themselves riding a rising tide, according to Morgan Stanley.

Morgan Stanley expects investor sentiment to improve in the near term.

“BoJ and FOMC meetings over the past 24 hours delivered more market-friendly outcomes than feared during the curve-steepening of the past two months. The Fed managed to simultaneously deliver a ‘dovish pass’ while lowering the bar for a December hike,” analysts led by Chris Nicol said.

“With the market spooked by the shadows of hawks in August, we expect investor sentiment to improve in the near term, as they turned out, once again, to be doves. With regional growth dynamics resilient on the back of Chinese stimulus, we would expect the ASX 200 to stay biased towards our bull case target.”

The analysts take a positive view on miners as stability flows into the resources space and say investors and should ”buy any weakness” seen by offshore income earners.

“We retain our overweight positioning within the broader resources sector. Metals and Mining has outperformed the ASX 200 by 29.3ppt this calendar year. We expect further outperformance to be supported by a restrained supply outlook, stability in the price deck and continued operational execution by corporates,” Mr Nicol and the Morgan Stanley team said.

“Any weakness seen in the foreign earners basket as the AUD stays stubbornly high should be bought — given that in many cases these stocks offer superior growth profiles to domestic-focused peers, and the tailwinds of FX translation will pick up again next year.”

Key model portfolio picks here remain: Treasury Wine Estates, Cochlear, Sonic Healthcare, Westfield, Goodman Group, James Hardie, Orora and Brambles.

9.14am:Tinkler’s Brisbane bolthole sells for $3m

Receivers have finally sold the ­palatial Brisbane residential ­estate of fallen businessman Nathan Tinkler, but for considerably less than its purchase price eight years ago, Lisa Allen writes.

Mr Tinkler told The Australian last night he had “no idea’’ how much the seven-bedroom mansion at 421 Grandview Road in ­Pullenvale, on the western outskirts of Brisbane, sold for yesterday.

But sources said the sale price was probably about $3 million — considerably less than Mr Tink­ler’s now estranged wife Rebecca Jane Tinkler paid for it in mid-2007, when she purchased it for $5.2m from business coach Bradley John Sugars.
Read more

9.03am:Will the miner rally continue?

It’ll be interesting to see if local miners continue yesterday’s strong rally, with commodity prices showing strength on the back of a falling US dollar — thanks to the Fed.

The price of iron ore has gained 1.8 per cent in three days.

Gold miners stole the show on Thursday after the price of the precious metal jumped as much as 2 per cent to $US1343.

Newcrest, Northern Star, Resolute, and Evolution all rose more than 5.8 per cent.

Iron ore miners also surged, despite a more muted response from the price of the steelmaking commodity. After 11 straight falls the price of iron ore has now gained 1.8 per cent in three days.

BHP Billiton rose 2.7 per cent to $21.28 but is looking to open little changed today, according to its ADRs, while Rio Tinto jumped 3.3 per cent yesterday to $49.20.

8.36am:Stocks to snap five-week losing streak

Australian stocks look set to snap a five-week losing streak as investors continue to breathe a sigh of relief following unsurprising outcomes from both the Fed and BoJ this week.

The SPI200 is pointing to 0.5 per cent rise and fair value indicators don’t argue with that — investors will be thrilled to see a strong end to the week following five negative weekly results in a row.

The S&P/ASX 200 is currently 1.5 per cent higher for the week and if today sees another half a per cent piled on it’ll shape up as the best week since mid-July.

7.10am:Sharemarket set for further gains

The Australian share market looks set to open higher as global stocks continue to rally after the Bank of Japan and the US Federal Reserve left interest rates on hold.

At 6.55am (AEST), the share price index was up 28 points at 5,382.

Locally, in economic and equity news, the calendars are quiet with no major risk events.

In Australia, the market yesterday closed higher for a third straight session, led by the resource sector and the big banks, after global central banks left interest rates on hold.

The benchmark S & P/ASX 200 index ended up 34.9 points, or 0.65 per cent, to 5,374.5 points.

The broader All Ordinaries index closed 36.9 points, or 0.68 per cent, to 5,466.3 points.

AAP

7.05am:Miners jump as iron ore lifts

The iron ore price has risen as the US dollar weakened slightly after the Federal Reserve decided to keep interest rates on hold, Elizabeth Redman writes.

Iron ore added 1.6 per cent to $US56.30 overnight, according to The Steel Index, from $US55.40 the following day. Dalian iron ore futures also traded higher.

In London trade, BHP Billiton soared 4.1 per cent, while Rio Tinto jumped 3.3 per cent, and the upbeat leads could offer direction to the Australian share market this morning.

Read more

6.55am:Dollar down on profit taking

The Australian dollar has fallen against the greenback on profit taking by investors.

At 6.30am (AEST), the local unit was trading at US76.41 cents, down from US76.58 cents yesterday.

The Aussie extended a multi-day rally overnight before falling back.

AAP

6.45am:Yahoo breach hits 500 million

Yahoo on Thursday disclosed a massive security breach by a “state-sponsored actor” affecting at least 500 million users, the latest hurdle for the beaten-down internet company as it works through the sale of its core business.

At least 500 million have been affected by a massive security breach.

Yahoo said a copy of certain user account information — including names, email addresses, telephone numbers, dates of birth, hashed passwords and, in some cases, encrypted or unencrypted security questions and answers — was stolen from the company’s network in late 2014 by what it believes is a state-sponsored actor.

Dow Jones

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6.40am: Wall St extends gains

US stocks and bonds extended gains overnight, bolstered by reassurance that major central banks weren’t on the verge of pulling back their support.

The Dow Jones Industrial Average climbed 0.5 per cent to 18392.46 and the S & P 500 advanced 0.65 per cent. The Nasdaq Composite rose 0.8 per cent, finishing at a record for a second consecutive session.

Investors in Europe also cheered the accommodative central banks, while a commodity rally boosted miners in London.

Dow Jones

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