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ASX 200 gains post budget; wages growth slows; BHP hails Anglo split; SCA rejects ARN; AACo profit down

SCA board rejects new ARN proposal. Wages growth slows. BHP insists Anglo bid ‘compelling’ after target’s split plans. Iress falls amid hack probe. AACo down as cattle prices dent profit. Mixed reaction to budget. 

Investors are parsing through budget details for winners and losers. Picture: Gaye Gerard
Investors are parsing through budget details for winners and losers. Picture: Gaye Gerard

Welcome to the Trading Day blog for Wednesday, May 15. The ASX 200 index closed 0.4 per cent higher at 7753.70 points, led by mining gains. Global investors await US inflation data.

The Aussie dollar is near US66.45c.

Updates

Bonza creditors committee formed

The administrators of failed budget carrier Bonza have named a proposed 14-member committee of inspection to act as a "sounding board" as the future of the airline is determined.

As well as officials from the Flight Attendants Association of Australia, Australian Federation of Air Pilots and Transport Workers Union, the committee is comprised of various creditors, Bonza director Lidia Valenzuela and 777 Partners' Adam Weiss.

Administrators Hall Chadwick said the proposed committee was "diverse and sufficiently representative of the entire body of creditors".

Employees, customers and others owed money by Bonza will now have until next Wednesday to vote on the make up of the committee.

Bonza appointed Hall Chadwick as voluntary administrators on April 30, after the leases on the airline's small fleet of Boeing 737 Max 8s were terminated by the lessor AIP Capital.

It was revealed to creditors last week that Bonza owed more than $115m, including almost $80m to US owner 777 Partners, and $5.3m to employees, most of whom have not been paid for the last month.

Despite extensive discussions with Hall Chadwick, AIP Capital would not be swayed on their planned removal of Bonza's aircraft from Australia.

On Wednesday a third 737 Max 8, named Malc, headed off from the Sunshine Coast to Kuala Lumpur. Two other aircraft Bruce and Bazza, were removed last week and flown to Calgary and Toulouse respectively.

Without any aircraft it was difficult to see how Bonza could restart operations. Employees have been stood down and flights cancelled up until May 29.

On Tuesday administrators told staff they were talking to more than 20 very interested parties, and were seeking formal offers for Bonza by Friday.

ASX 200 ends up 0.4pc but halves early rise

Australia's share market closed modestly higher after the Federal Budget but halved its intraday rise in cautious trading before US CPI data.

The S&P/ASX 200 index finished up 0.4 per cent at 7753.7 points after hitting a four-day high of 7784.8 in early trading. Trading value was light.

Eight of 11 sectors rose, led by materials, health care, communications, consumer staples and consumer discretionary stocks.

BHP rose 2.5 per cent as its target Anglo American looked to sell assets.

CSL rose 1.6 per cent on a positive readthrough from one of its partners.

IDP Education jumped 7.1 as it was set to be included in an MSCI index.

CBA closed up 0.3 per cent after hitting a six-week high.

But the other major banks and Macquarie Group lost ground.

ANZ fell 1.4 per cent to a three-month low.

SCA rejects new ARN approach

Southern Cross Media has rejected a new approach from rival media company ARN Media.

A takeover bid for SCA by ARN and Anchorage Capital Partners was withdrawn at the weekend after seven months of negotiations. ARN then put forward an alternative indicative proposal.

SCA says the alternative proposal would have meant a 'new ARN' held a metro radio network of 10 stations under the KIIS and Triple M brands and 100 per cent of ARN’s and SCA’s existing digital audio assets. the 'new SCA' would have held 44 radio stations, comprising 5 HIT and 3 Gold-branded metro stations and 36 regional radio stations, and SCA’s regional TV assets.

SCA says it does not consider it to be in its shareholders' interests to engage further with ARN on the alternative proposal.

"The alternative indicative proposal would involve incurring significant costs to break up SCA’s highly networked and integrated audio platform, and would reduce SCA shareholders’ exposure to this high quality platform while maintaining their exposure to regional television, which SCA has identified as non-core," it says in outlining several reasons for rejecting the approach.

SCA chair Heith Mackay-Cruise says the alternative proposal provides downside for SCA shareholders, even if the execution challenges could be overcome.

"Under the alternative proposal, SCA shareholders would be left with a minority interest in an expanded ARN business and full ownership of sub-scale commercial radio assets and declining regional television assets, with limited exposure to the fastest growing media sector of digital audio, and with no cash in return.

"Over seven months of engagement, the consortium was unable to deliver its original proposal in an executable form. The SCA board does not believe transferring that complexity, value and execution risk to SCA shareholders is in their best interests.”

Budget’s cost of living support crucial: NAB

NAB CEO Andrew Irvine says measures in this week’s federal budget to help ease the housing crisis and support small business are welcome.

Targeted measures to manage cost of living pressures are crucial, he said.

But he says this needs to be in balanced against tackling inflation as higher prices “continues to hurt every household and business”.

“Housing is one of Australia’s biggest issues, and one of our biggest opportunities," the NAB boss said.

"Measures that address the urgent need to increase housing supply, like build-to-rent, will help ease this crisis.

"There is no simple fix, but it’s pleasing to see positive steps."

Programs like the extension of the $20,000 cap on instant asset write off will help small business grow, he added.

Irvine also backs support for businesses to transition to net-zero as well as investment in energy and resources. The NAB chief executive remains optimistic about the outlook ahead for the Australian economy.

US EV tariffs: China eyes new roads

Chinese automakers will focus on global markets outside the US now that the Joe Biden administration has declared America off-limits to made-in-China electric cars.

The 100 per cent tariffs on Chinese EVs announced last week in Washington are more of a symbolic blow than a practical one for Chinese carmakers. They have almost no business in the US and already recognised that the political hurdles to entering the market were insurmountable.

The cold shoulder from Washington won’t change Chinese EV makers’ ambitions for global dominance, analysts said, but it will spur adjustments. The companies will emphasize emerging markets and localise production where possible, seeking to woo governments that are more open to Chinese EVs. And some companies might focus on supplying EV technology, an approach that could lessen the political backlash and offer an indirect path to US business.

After decades of chasing American, European, Japanese and South Korean carmakers, they have found a globally competitive product in their EVs. At home in China, more than 100 EV brands are battling for a slice of the pie, driving down prices and profitability. China’s capacity is running above domestic demand, and makers are looking abroad, where they believe margins will be higher and the competition less fierce.

China’s car exports have nearly quintupled over the past three years to about five million vehicles in 2023. While many are gasoline-powered cars shipped to Russia, others are EVs sent to Southeast Asia, Europe and elsewhere.

– The Wall Street Journal

Casinos risky business: Star counsel

The Bell inquiry into Star Entertainment has been told casinos are risky business where customers are not always able to be controlled.

Counsel for Star Entertainment, Bret Walker, said inquiry head Adam Bell SC could not be expected to have a "crystal ball and a calendar" to determine the suitability of the troubled casino operator to retain its Sydney licence given many aspects of a casino involved predicting the future.

Shares in Star are flat at 44.5c at 1.30pm AEST.

Rates at the mercy of household cash calls

Slower than expected wage growth during the March quarter will bring modest relief to the RBA, but it is likely to only partly offset some of the new inflationary concerns arising from the Federal Budget, Betashares chief economist David Bassanese says.

The WPI rose 0.8 per cent during the quarter, a bit lower than the 1 per cent market expectation, taking annual wage inflation down modestly to 4.1 per cent from 4.2 per cent, according to the data released by the Australian Bureau of Statistics.

"Assuming a further gradual easing in labour market tightness, there's a good chance that wage inflation has now peaked and could ease further over the coming year," he says. "That said, we now have a new injection of policy stimulus from last night’s Federal Budget to contend with."

Real household disposable income is forecast to rise by a solid 3.5 per cent over the coming financial year, yet real consumer spending by only 2 per cent as the government is counting on much of the lift in household income being saved not spent. "But if households decide instead to lift spending in a meaningful way, not only are rate cuts unlikely anytime soon there would be a very real risk of higher interest rates," he says.

Mr Bassanese sees a 40 per cent chance of a rate rise this side of the next Federal election – up from only 10 per cent before the budget. "It is not yet base case but, like the Treasurer, I'll be nervously awaiting what households decide to do with their extra cash over coming months."

Made in Aus plan faces political impasse

The centrepiece of Labor’s Future Made in Australia agenda – the $13.7bn in production tax credits for green hydrogen and critical minerals – faces a parliamentary impasse, with the Coalition signalling its opposition and the Greens refusing to extend their support.

Greens Leader Adam Bandt on Wednesday said the minor party would look at the legislation when it was introduced to parliament, but said there would be no free pass for Labor. He branded the government “climate frauds”.

Mr Bandt said the green hydrogen and critical minerals production tax credits – both of which will require legislation – could not be judged in isolation, but needed to be viewed as part of a broader package alongside Labor’s commitment to fossil fuels.

The comments come after Labor last week committed to keep gas as a key part of the energy mix beyond 2050 when Australia is due to meet its net zero climate target – an ambition which the Greens warned could put the government’s legislative agenda at risk.

“Labor’s Future Made in Australia is a future for more coal and gas,” Mr Bandt said. “Labor may put up in lights their plan to back green hydrogen – but what they are really doing in reality is backing gas and coal.”

IDP Education, Pro Medicus lift on MSCI changes

IDP Education shares surged on news that it will be included in MSCI's Global Small Cap indexes at the close of trading on May 31st.

MMA Offshore, SG Fleet, WA1 Resources and Zip will also be included.

Pro Medicus, along with Australian Clinical Labs and Tyro Payments, will be cut from the small cap index. But PME moves into the bigger MSCI ACWI.

IEL was last up 7.5 per cent at $17.07 after surging to $18.07.

PME is up 2.9 per cent at $116.39 after hitting $120.73.

Barrister warns of 'grave error' at Bell Inquiry

Bret Walker SC is making his closing submissions at the Bell II inquiry, representing Star Entertainment Group.

Mr Walker told the inquiry a "grave error" would be committed in accepting some of the evidence submitted to the inquiry.

More to come

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Original URL: https://www.theaustralian.com.au/business/trading-day/asx-200-to-rise-amid-budget-focus-bhp-hails-anglo-split/live-coverage/f72ed3f847a9daab6b056da34c25c4ec