ASX surges on Biden win, REA hits record high
Local shares closed at an eight-month high after the drawn out US presidential election’s resolution went in favour of Joe Biden.
- Village, BGH agree on takeover price
- NBN earnings soar on demand lift
- Bidders for Vital Harvest emerge
- BHP finalises Shenzi deal
That’s all from Trading Day for Monday 9 November. The ASX closed at an eight-month high after the drawn out US presidential election was resolved in favour of Joe Biden on the weekend.
8.30pm: Biden boosts markets
A euphoric reaction to Joe Biden’s narrow win in the US presidential election saw investors add $35bn of market value to the local stockmarket on Monday.
After breaking its October peak at 6248.3 points in early trading, the benchmark S&P/ASX 200 index closed up 1.8 per cent at an eight-month high of 6298.8 points.
After falling 39 per cent from a record high in February to a seven-year low of 4402.5 in March amid coronavirus lockdowns, the ASX 200 has now bounced 43 per cent amid unprecedented fiscal and monetary policy stimulus. As of Monday it was 14 per cent below its pre-COVID peak.
“The market has finally broken out of a six-month trading band to an eight-month high,” said Richard Coppleson, head of institutional sales and trading at Bell Potter.
“Many bears still don’t believe it can hold and are still waiting — a few remain heavily cashed up — despite them being wrong now for eight months.”
It came as Wall Street futures burst higher in anticipation of a further positive reaction to diminishing political uncertainty in the US and the prospect of moderate fiscal stimulus without the tax hikes and more radical policies feared under a clean sweep by the Democrats, despite record new US cases of COVID-19 and the threat of fresh lockdowns.
“For markets, the irony is that this rollercoaster of an election has meant relative tranquillity,” said Morgan Stanley’s chief cross-asset strategist, Andrew Sheets.
“Implied volatility has dropped sharply, and equities and credit have rallied back near local highs.”
Mr Sheets said markets were already braced for uncertainty, making it easier for them to follow the usual pattern of struggling ahead of an election and improving afterwards.
Nasdaq futures were up 2.6 per cent — later pared to 1.9 per cent — amid expectations that “reactive” rather than “proactive” fiscal policy in the US will keep Treasury bond yields in check and leave the onus on the Federal Reserve to stimulate by increasing its asset-buying program, helping support the valuation of high-flying tech stocks, many of which are also “COVID winners”.
Elsewhere in the region, Japan’s Nikkei 225 rose 2.1 per cent on Monday, China’s Shanghai Composite was up 1.9 per cent, the Hang Seng in Hong Kong rose 1 per cent, South Korea’s KOSPI rose 1.7 per cent and New Zealand’s NZX 50 gained 1.8 per cent.
The Australian dollar rose to US73c for the first time in six weeks despite interest rate cuts and the start of a major bond-buying program by the Reserve Bank last week.
“Markets were left with a scenario that suggests fewer legislative changes and thus fewer portfolio changes,” said Mr Sheets.
He also noted that with Democrats likely to control the White House but with congress set to remain divided, the chance of a larger and more proactive fiscal stimulus had fallen.
“Proactive is the operative word here, as our US public policy team sees divided power leading to increased risk that more fiscal help wouldn’t arrive until economic problems worsen,” he said.
“Reactive fiscal stimulus or none at all also means that developments relating to the pandemic become more critical for markets.
“We’ll be closely watching COVID-19 case numbers, which are rising again in the US and Europe, and announcements on a vaccine, which our biotechnology team expects later this month.
“While we’re hopeful on the latter, mounting case numbers and no new fiscal relief have created some downside risk to the economic data in the near term.”
Also reflecting the “risk-on” mood, industrial commodity prices rose despite worsening COVID trends in Europe and the US, with West Texas crude oil futures surging 2.6 per cent to $US38.12 a barrel and Comex copper futures up 0.6 per cent in Asian trading.
James Kirby 7.02pm: Gold or Bitcoin: this time it’s serious
Extended speculation over the nature of post-US election investment markets has fired up trading in gold while offering a potential second life to its much hyped digital counterpart, Bitcoin.
Gold, the traditional safe haven alternative when markets enter periods of exceptional uncertainty is nudging a key milestone of $US2000 - an event that is more than enough to trigger calls the yellow metal could soon breakout and rise to $US3000 or beyond.
But global concerns over stability in US markets has also spiked renewed interest in Bitcoin.
The alternative digital currency has bounced back from a dramatic price decline to lift 30 per cent since the US election was announced.
It is currently trading near $US15,400.
As both Bitcoin and gold garner new interest - gold often favoured among older investors and Bitcoin among Millennials - institutional investors are steadily accepting the leading cryptocurrency.
“Bitcoin is being used as a store of wealth so to call it a digital version of gold is a fair assessment,” says Arian Neiron, the managing director of the Van Eck investment group which offers the local market’s Gold Miners ETF.
Bitcoin’s potentially enlarged role in post-US election investment markets follows a string of key developments in recent months triggered initially by what looked like a change of heart among global banks to the digital currency.
Three years ago, New York investment bank JPMorgan led the charge against Bitcoin when its CEO Jamie Dimon tagged it as a “fraud”, but earlier this year a research note from the investment bank said Bitcoin could double in value.
In recent weeks the institutional acceptance has also accelerated after both PayPal and Square Payments said they would accept Bitcoin on their payment platforms.
Damon Kitney 6.50pm: US firm takes slice of Thorney Technologies
An investment group backed by the founder of multi-billion-dollar hedge fund, Tiger Global, has emerged as a substantial shareholder in Alex Waislitz’s Thorney Technologies group following a $37m capital raising.
New York-based investor Woodson Capital Management, which was seeded by billionaire Julian Robertson’s Tiger Management, has agreed to be a cornerstone investor in the raising which was completed at an 18 per cent discount to Thorney Technologies‘ most recent unaudited pre-tax NTA.
Woodson, which manages a global consumer and technology fund, has been a backer of buy now, pay later tech darling Afterpay, while Tiger Global has long-term investments in Facebook, Apple, Google and LinkedIn and its previous bets include Spotify, Ola and Flipkart.
Glenda Korporaal 6.32pm: Crown ‘needs remediation plan’
A detailed independent report is needed into Crown Resorts before it can be considered as a suitable party to hold a casino license in NSW, counsel assisting the inquiry into the casino has argued.
In closing submissions to the inquiry, counsel assisting Ms Naomi Sharp SC said on Monday that there was evidence before the inquiry to show that Crown had a culture which was “dysfunctional”, showed an “arrogant indifference to regulatory and compliance risk” and had “prioritised the pursuit of profit above all else”.
She said the company had also shown it had a “culture of denial and unwillingness to address past failings.”
Counsel assisting the inquiry is arguing that Crown is not a suitable person to hold a casino license in NSW.
This comes as the company is still planning to open its casino at Barangaroo on December 14 despite the fact that the inquiry is not due to complete its report until February 1.
In her closing submission Ms Sharp said the inquiry had shown that Crown had “fundamental problems” in terms of risk management, governance and culture which shaped the way the company set about achieving its objectives.
She said Crown Resorts had not conducted any “comprehensive review or root cause analysis” to ascertain the reasons for the failures which had been identified by the inquiry.
Richard Hemming 5.06pm: Reassess growth and value stocks
The US election result and the parallel rally on Wall Street indicates investors can expect a continuation of the status quo.
With the Republicans likely to take the US Senate, it is probable that for whoever wins the executive branch, the result will be gridlock; they won’t be able to substantially change anything.
In turn that means the positive conditions of monetary and fiscal stimulus will carry on. There is some questions about how things will play out in the medium term, but the assumption is that the handouts will continue at least early into 2021. The US Senate isn’t going to put up taxes and is going to be putting pressure on the executive (the President and the administration) and the congress to cut costs.
Clearly growth stocks such as small caps will continue to be favoured in the short to medium term, but long-term investors also need to be exposed to value — high-yielding stocks with low price-earning ratios, ideally coupled with stable earnings. Otherwise known as blue chips.
The importance of value is underlined by the attempted takeovers of two well-known market brands: AMP and Coca-Cola Amatil. Local investors are not the only ones looking for value!
Investors always need exposure to growth, which small cap stocks provide, because that is the way to build wealth. But you also need to be prepared to weather volatility, which is where earnings resilience and the resultant dividend income is important.
Randall Forsyth 4.53pm: Why Wall St likes US election outcome
After election results that ran mostly counter to prevailing expectations, last week major stock averages enjoyed their best week since April.
While Democrat Joe Biden appeared on the verge of winning the presidency, the vaunted blue wave failed to materialise. The Senate is likely to remain in the Republicans’ control, with Mitch McConnell, fresh off an easy re-election victory, probably continuing as majority leader. Meanwhile, Democrats lost, rather than gained, seats in the House.
Investors supposedly would have been cool with a blue wave, even though it would mean higher taxes, although this column suggested a few weeks ago they should be careful what they wished for.
But it turned out they like the purple mixture of an apparent narrow Biden win with a probable GOP Senate and a Democratic House even better, and responded by pushing up both the S&P 500 index and the Dow Jones Industrial Average by about 7 per cent and the Nasdaq Composite by 9 per cent on the week.
“The one thing to make investors confident is that there’s not going to be tax increases and that the costly progressive agenda is not in the cards,” says Julian Emanuel, chief strategist for BTIG.
“With the fog of the election lifting, the market likes the prospect of a divided government,” adds John Brady, managing director of global institutional sales at R.J. O’Brien.
4.28pm: ASX closes at 8-month high
Australian shares surged along with risk assets globally in a euphoric reaction to weekend confirmation of a narrow win by Democrats in the US election.
The S&P/ASX 200 closed up 1.8pc at an eight-month high of 6298.8, adding $35bn to its market capitalisation, after hitting an intraday high of 6303.1.
It came amid broad gains in financial risk assets with S&P 500 futures up 1.7pc, Nasdaq futures up 2.6pc, WTI crude oil futures up 2.5pc, Comex copper futures up 0.7pc, the Australian dollar up 0.5pc, the Nikkei up 1.4pc and the Shanghai Composite up 2pc.
Outperforming stocks included a mixture of growth and value stocks in the Communications, Materials, Tech, Consumer Discretionary and Industrials sectors.
REA Group jumped 9pc as brokers boosted their price targets after a better than expected update.
Fortescue Metals surged 6.4pc on hopes of stronger iron ore demand, while BHP rose 3.5pc, Afterpay gained 4pc and QBE rose 5.2pc.
Eli Greenblat 4.07pm: Wattle Health CEO resigns after 9 months
Wattle Health Australia, the infant milk producer whose shares have been suspended for a year, has announced the resignation of its chief executive of only nine months Tony McKenna.
The company said in a statement to the ASX on Monday afternoon that Dr McKenna joined the company in January in order to lead the execution of its vertically-integrated supply chain strategy and had provided valuable contribution to Wattle Health despite significant challenges faced by the company and its collapsed Corio Bay Dairy Group (CBDG).
“CBDG was placed into voluntary administration and as part of the process, all staff at CBDG were terminated on the 16 October 2020. As a result of this significant change Dr McKenna indicated to the board that his contribution and interests would be less aligned with the company’s future direction.”
Wattle Health said whilst his decision to resign was a disappointing outcome, the board thanked Dr McKenna for his contributions in the past 9 months and wished him success for his future professional endeavours.
The board has appointed George Karafotias as executive director. Mr Karafotias is currently the chief financial officer of Wattle Health. It said the board is continuing working with David Mutton, the administer for CBDG and will update the market in due course. Wattle Health shares last traded at 53 cents before it was suspended in late 2019.
3.46pm: Risk assets continue to surge on Biden win
Financial risk assets continue to surge amid lessening US political uncertainty after Joe Biden claimed a narrow win for Democrats.
Nasdaq futures lead with a 2.7pc rise and S&P 500 futures are up 1.8pc.
In Asia, the Nikkei is up 2.5pc, the Hang Seng is up 1.6pc, the Shanghai Composite is up 1.9pc and the KOSPI is up 1.5pc.
WTI crude oil futures are up 3pc at $US38.23.
Comex copper futures up are 0.9pc.
Spot gold is up 0.7pc at $US1964.3.
All of this gives upside risk for the Australian dollar and shares this afternoon.
AUD/USD just hit a fresh 6-week high, up 0.6pc at 0.7298.
But the S&P/ASX 200 is up “just” 1.6pc at 6290.90 after rising 1.8pc to an 8-month high of 6303.1 in early afternoon trade.
David Swan 3.17pm: GetSwift shareholders approve de-listing
GetSwift shareholders have overwhelmingly approved the company’s plans to de-list from the ASX, capping a tumultous four-year rollercoaster for the logistics software company and its investors.
On Monday two-thirds of present shareholders voted in favour of a proposed scheme of arrangement, which will see GetSwift leave Australia and redomicile in Canada. When taking proxies into account, 99.58 per cent of votes cast were in favour of the resolution.
The vote means the $140m tech company, which is facing an ongoing class action suit in Australia, will be acquired by GetSwift Technologies Limited, otherwise known as Holdco, located in British Columbia, Canada.
Chief executive Bane Hunter said US and Canadian customers made up the majority of its new customers and shareholders throughout the last financial year and that the move would better position GetSwift to take on its global ambitions.
The company intends to list on Canada’s NEO exchange, with Holdco to acquire GetSwift and its subsidiaries. GetSwift shareholders will receive one Holdco share for every seven GetSwift shares they hold.
“We have made no secret of the fact that our customers and shareholders across North America have supported our focus on the region with increased business and continued investor support,” CEO Bane Hunter said in announcing the move.
“Our focus on the world’s leading markets as we continue seeking growth in all regions is simply good business.”
The company’s class action, which stems from alleged breaches of continuous disclosure obligations, is ongoing.
Getswift was once a market darling, and was deemed the rising star of the ASX in 2017 when its shares climbed 300 per cent to $4.60, before it was hit with multiple lawsuits and action from the ASX in 2018.
On Monday its shares were up 1.59 per cent to 32 cents. Its shares have fallen by more than half since August, when the company sat at 82 cents per share.
Bridget Carter 2.42pm: CBA in talks with Lendi on Aussie sale
The Commonwealth Bank of Australia is understood to have been working with investment bank UBS for a potential sale of its Aussie Home Loans business to online home loan broker Lendi.
It comes as Lendi, which has been pursuing an initial public offering, has been in talks with the CBA about an acquisition of its Aussie Home Loans business for about a year.
Lendi, which is part owned by Macquarie Group, has been running a dual track process for a sale and an IPO.
Aussie Home Loans was founded by John Symond who has recently stepped down as chairman and CBA is known to have been a seller of the business for some time.
It is understood that CBA was asking Lendi to pay about $500m for the business.
Earlier estimates of the Aussie Home Loans business had been somewhere between $300m and $400m and it is understood that some Lendi investors are keen for the company to move forward with a listing without acquiring the Aussie Home Loans business with concerns about the price.
2.15pm: Synlait Milk halted for capital raise
Synlait Milk shares have been halted for a capital raising.
An announcement is due before the open on Wednesday.
1.55pm: Credit card debt trending lower
Australians have knocked $7.31bn off personal credit card debt accruing interest this year, according Canstar’s analysis of the latest RBA data.
The value of personal credit card balances accruing interest dropped by $563.3bn to $20.08bn for the month of September, compared to August.
Since January, personal credit card debt accruing interest has come down by $7.31bn.
“With fewer spending opportunities, Australians are pulling the plastic out of pockets less frequently and paying off credit card debt. The pandemic has been a time for saving,” said Canstar finance expert Steve Mickenbecker.
“Some of the debt reduction will have come from the COVID-19 superannuation release, a false economy in the long term if people allow themselves to fall back into credit card debt.
“Australians have made strong headway in 2020 when it comes to paying down debt and with tax cuts coming into play we could see debt fall even further and hopefully less people turning to cash advances as a last resort.”
Lilly Vitorovich 1.15pm: Nine gains on rugby deal
Nine shares up 1.1 per cent to $2.32 following its three-year rugby broadcast deal, which will see the matches split between its free-to-air TV network and subscription streaming service Stan.
The media group, which recorded a $590m annual net loss in August, will fork out $100m to broadcast rugby games from next year for three years, with an option to extend by a further two years.
Nine’s move to expand Stan’s proposition to include sport for the first time comes ahead of the loss of its key Showtime TV programs in January.
Stan, which had 2.2m active subscribers in August, is set to lose about 500 hours of library content, including shows such as Californication, Happyish, Nurse Jackie and Dexter.
It also won’t get any new Showtime programs. However, its current Showtime deal means it will continue to get new episodes of existing shows on its platform, such as Billions, for the entire run of the show.
Read more: Nine adds sport to Stan’s streaming slate
Lilly Vitorovich 1.10pm: Analysts raise target prices on News Corp
Credit Suisse has increased its target price on News Corp by $2.10 to $27.10 following the media group’s strong 1Q21 result, which beat its estimates.
The broker says the target price increase primarily reflects a higher valuation for property listing group REA, which is majority owned by News Corp, to $123.50 a share from $109 a share.
Credit Suisse says a number of divisions exceed expectations including Dow Jones, Books, Move, thanks to a combination of “better sales performance and margin improvement in a Covid-impacted environment”.
“And while investors are generally aware of the underlying value at Dow Jones and Harper Collins, the Move performance was a significant turnaround from the recent trend (12 per cent revenue growth in 1Q21 compared to a revenue decline of 10 per cent in 4Q20) and was ultimately the key driver behind the better earnings,” Credit Suisse says in a note to clients.
Credit Suisse retains an outperform rating on News Corp, publisher of The Australian.
Meanwhile, Macquarie upgraded News Corp’s earnings estimates and 12-month target price by 6 per cent to $25.55 after 1Q21 EBITDA came in well ahead of expectations.
Macquaried lifted its FY21 earnings forecast by 34 per cent and the next two years by 12 and 8 per cent, respectively.
Macquarie analsyts said the media group had been “successful at executing on cost out and business simplification”, which has offset revenue headwinds formed by COVID-19.
“Costs benefited from measures including the renegotiation of sports rights (NWS estimates around $180m savings over three years), lower marketing costs and lower print volumes in News Media,” broker says.
Macquarie says Covid-19 has accelerated structural decline across business units but management are using this as an opportunity to fast track cost cutting.
Macquarie retains an outperform rating on News Corp.
Goldman Sachs has raised its target price on News Corp by 6 per cent to $29.10 and earnings forecasts following the media group’s better-than-expected 1Q21 results last Friday.
Broker ups FY21-23 EPS forecasts by 5 to 12 per cent.
News Corp and REA, which is majority owned by the media group, remain Goldman’s top picks in the ANZ media sector.
Goldman says REA’s earnings are set to “benefit from a near-term listings recovery and a step change in earnings” as it introduces Premiere Plus, as well as long-term growth opportunities in the US, SE Asia and India.
“For News Corp, we continue to be constructive on the outlook for Move, Dow Jones (and REA) and see the current share price as a compelling opportunity to invest in these assets at a substantial discount, which we expect to be realized as the simplification agenda continues,” Goldman says in a research note.
Goldman has a buy rating on News Corp and REA.
News Corp shares last up 0.8 per cent at $21.81.
Bridget Carter 1.00pm: Top Shelf updates before IPO
Australian whiskey and vodka producer Top Shelf has updated investors on its sales forecasts ahead of the book build for its initial public offering.
The company locked in terms for its IPO, which was priced last week.
In a message sent to investors on Monday, Top Shelf’s advisers said that the book for its IPO was anchored by a large spread of tier one institutional investors.
Year-to-date trading is in line with its forecasts, with November sales ahead of budget, with continued momentum running into the Christmas trading period, the company said.
Working on the float is Ord Minnett and Wilsons.
Top Shelf will raise $47.2m. Shares will be sold at $2.21 each, with the company’s market value to be $109.9m. The value including debt of $90.5m equates to 4.5 times forecast revenue for the 2021 financial year. The company’s book build is due to close on Wednesday with the prospectus to be lodged on Thursday.
Top Shelf is expected to start trading on a normal basis on December 10.
Top Shelf is a Melbourne-based producer and marketer of high-quality Australian spirit-based beverage brands.
Bridget Carter 12.55pm: Brookfield wants more for Dalrymple Bay
Brookfield is believed to be seeking an additional $515 million from investors for the initial public offering of the Dalrymple Bay Coal Terminal after locking in the Queensland Investment Corporation’s Future Fund as a 10 per cent investor.
The Canadian private equity firm is expected to lodge a prospectus on Thursday or Friday for a float of the $1 billion-plus infrastructure asset, for which it will continue to own 49 per cent once listed.
Cornerstone investors are believed to be currently sought and shares are expected to be on offer at a price range of around $2 to $2.15 for the IPO.
It is understood that investors will be offered a yield of about 7 per cent for the asset.
Perry Williams 12.35pm: Concern over government’s energy plan
Big energy producers and users have raised concerns over a plan by the NSW government to underwrite investment in renewable and hydro generation as the state prepares for its ageing coal plants to exit.
The policy aims to lower household power prices by $130 a year and incentivise investment in renewable energy zones by providing low-cost financing options, independently assessed to prevent cost overruns.
But the Australian Energy Council - which represents AGL, Origin and EnergyAustralia - said it will detract from a national approach already underway.
“Any government underwriting of specific generation projects has the potential to distort market signals for private generators by protecting new projects from low prices. The market is designed to intentionally put risks on investors rather than consumers,” AEC chief executive Sarah McNamara said.
“The NSW-specific reliability target being imposed under this plan is excessive and along with the underwriting may lead to an over-build of energy assets in NSW. This would ultimately mean higher costs for households. Given the interconnectedness of the power system, energy reliability is best managed at a national level rather than state-by-state.”
The Victorian government has also broken away from a national approach after changing the state’s electricity act, adding more transmission and storage generation including a giant battery to ensure it doesn’t get caught short when coal plants close.
The Energy Users Association said it was worried about NSW following the same path.
“The EUAA has expressed concern that the NSW Electricity Infrastructure Roadmap is another example of a state government taking independent action instead of working to consolidate a nationally consistent approach to energy policy,” EUAA chief executive Andrew Richards said.
“We understand the pressure to keep the lights on, but we urge state governments to remain committed to building a nationally consistent energy policy that avoids unnecessary duplication of stakeholder effort and the introduction of competing policy and regulatory frameworks that may lead to increased costs and inefficient allocation of resources.”
12.05pm: ASX up 1.7pc on Biden euphoria
Australia’s share market rose throughout the morning amid a euphoric reaction by global markets to Joe Biden’s victory declaration in the US presidential election.
The S&P/ASX 200 was up 1.7pc at an 8-month high of 6298.
The break above the October peak at 6248.3 targets the March peak at 6524.3 and the record high at 7192.2. It comes as US index futures suggest Wall Street will resume its strong gains in the past week, even though a narrow win by Democrats was expected last week.
Nasdaq futures rose 2pc, S&P 500 futures rose 1.5pc and DJIA futures rose 1.2pc as the risk appetite improved, albeit moreso for growth than value stocks amid doubts about the extent of US fiscal stimulus that’s possible unless Democrats get control of the Senate after runoff elections in Georgia in January. In any case it now looks like the US market will melt-up to record highs despite worsening COVID trends in Europe and the US.
REA Group surged 8.3pc as brokers boosted their target prices after better than expected quarterly results. Iron ore miners also stood out with BHP up 3.2pc, Rio Tinto up 2.5pc and Fortescue up 4.1pc. Tech was also strong with Afterpay up 4pc and WiseTech up 4.3pc.
ANZ was down 1.1pc ex-dividend.
Perry Williams 12pm: China’s coal imports plummet
China’s coal imports for October fell by 47 per cent compared with a year earlier and declined 27 per cent on the September level reflecting the country’s strict import quotas, CBA said.
Policymakers are reportedly targeting total coal imports of ~270Mt in 2020, implying a 29 per cent fall in China’s coal imports is required in November and December.
“We knew policymakers were looking to curb imports after domestic thermal coal prices dropped below China’s target range of RMB 500‑570/t from mid‑April to mid‑May. However, prices are currently above RMB 600/t and have now been above the target range since mid‑September,” CBA commodities analyst Vivek Dhar said.
“While that would usually give pause to China’s coal import restrictions, we don’t think any policy relaxation is likely for the remainder of 2020.”
Australian coal miners could be forced to sell “distressed” cargoes at a discount as China looks to restrict imports of both thermal and coking coal, according to consulting major Wood Mackenzie.
China’s latest crackdown on Australian coal comes amid speculation ongoing trade tensions between Canberra and Beijing are to blame, after Chinese authorities slapped tariffs on Australian barley earlier this year.
Australia’s two other biggest commodity export earners remain in mixed shape with China’s iron ore imports rising by 15 per cent in October on the prior year and gas imports up 15 per cent on the prior year though down 13 per cent on September levels.
“China’s demand for iron ore has increased on the back of strong steel demand and positive steel mill margins,” Mr Dhar said.
Gas imports will also likely grow.
“China’s gas demand is expected to continue rising over the next few months due to a cold winter. That likely means there is room for China’s gas imports to grow alongside resilient Chinese production,” CBA said.
Adeshola Ore 11.56am: Vicinity’s CBD locations to remain challenging: Macq
Macquarie analysts have predicted that shopping centre landlord Vicinity Centres will see an improvment in rental collection, but they warn that CBD locations will remain a challenge for the group.
The comments come after Vicinity Centres released its quarterly update last week, with rental collection at 56 percent compared to 66 percent in the first half of the 2020 financial year.
“As Victoria re-opens (52 percent of total portfolio) we would expect cash collection to improve, with collections of 76 percent ex Victoria. We forecast 2Q21 cash collections of around 75 percent,” the analysts wrote in a note to clients.
They said sales would remain under pressure in NSW and Victoria due to subdued consumer confidence to return to large shopping malls.
Additionally, the analysts predicted the portfolio would require rental relief until the end of next year.
“The gradual return to office buildings and lack of tourism will impact CBD assets (16 percent of portfolio).”
In mid-morning trade Vicinity shares were up 2.9 percent at $1.44.
11.35am: Early super withdrawals top $34bn
Australians have now withdrawn $34.8bn from super funds as part of the government’s Early Release Super Scheme.
For the week through November 1, 24,000 applications were received, of which 16,000 were initial applications and 8,000 were repeat applications.
At least 1.3 million people have now double-dipped into their super as part of the scheme, which allows people who have had their income affected by the economic fallout from the coronavirus crisis to withdraw up to $20,000 from their super funds in two tranches, over two financial years.
According to the latest APRA data, the average payment made over the period since inception is $7,658 overall and $8,336 when considering repeat applications only.
11.30am: Tokyo opens up 1pc
Tokyo shares opened higher Monday following the election of Joe Biden as the next US president after a nail-biting, close contest resulted in the outcome that the market had expected.
The benchmark Nikkei 225 index gained 1.13 percent or 274.31 points to 24,599.54 in early trade while the broader Topix index added 0.90 percent or 14.95 points at 1,673.44.
AFP
Glynis Traill-Nash 11.21am: Covid crisis claims fashion label
Fashion label Alice McCall has entered voluntary administration.
The label, known for its rock-bohemian styles including ruffled minidresses and lace playsuits, put the blame in part at the economic downturn of COVID-19.
The label was launched by McCall 17 years ago and quickly gained a following among a young clientele.
In a statement, McCall said: “So it is with a heavy heart that due to the unprecedented effects that COVID-19 has had on our economy, as well as some unsustainable bricks and mortar rental obligations, I have had to make a necessary decision to edit down my business, with the objective of building a more sustainable business model for the future.”
McCall currently has 14 stores across Australia; a number of these are expected to close.
In September, the designer launched a dedicated ecommerce site for China, following the downturn in Chinese tourists to Australia following both the summer bushfires and pandemic.
McCall had long had a strong following within the Chinese market.
Read more: Alice McCall enters voluntary administration
11.14am: Nine launches new streaming service on rugby deal
Nine Entertainment has reached an agreement with Rugby Australia to broadcast all Wallablies and Wallaroos test matches, as well as domestic and trans-Tasman competitions.
The three-year deal is worth $100m and includes a two-year option for Nine to extend.
Nine has also announced a new on-demand streaming service on the back of the deal.
Nine shares last up 1 per cent at $2.32.
Read more: Nine adds sport to Stan’s streaming slate
Damon Kitney 11am: Crown shapes for Barangaroo fight
The James Packer-backed Crown Resorts has put itself on a collision course with the NSW gaming regulator, telling a public inquiry it will not conclude its submissions rebutting damning allegations against the company before a crucial meeting next week to consider delaying the opening of its Sydney casino.
Crown’s counsel Neil Young told an inquiry into the company by the NSW Independent Liquor and Gaming Authority on Monday morning that the gaming group would not be able to commence its final submissions until next Tuesday, and that they would take the remainder of the week to present.
This means Crown will be in the midst of presenting its case defending its suitability to retain the Sydney licence when a special meeting of ILGA is convened on November 18 to consider whether the planned opening of Crown Sydney in mid-December should be delayed or curtailed.
Crown has come under heavy pressure to delay the opening and NSW Premier Gladys Berejiklian has said she would not rule out taking action to push it back after the ILGA inquiry last week heard submissions that the company should be found unsuitable to retain the licence due to multiple failures of governance, risk management and compliance.
Angelica Snowden 10.48am: No trade hit yet Birmingham
The federal government remains concerned about trade tensions with China but anticipated stoppages of some exports has not yet materialised, trade minister Simon Birmingham says.
Senator Birmingham said he would raise concerns with the World Trade Organisation if Australian exports were unfairly stopped from entering China.
“In terms of the actual practicalities of trade flows into China we have been monitoring, as you would expect, very closely over recent days the flow of certain goods,” Senator Birmingham told the ABC.
“And some of the predictions that have been made about complete blanket stoppages occurring at China’s borders have not materialised,” he said.
“There remain points of concern, particularly in relation to the length of time of testing regimes for certain goods, such as the lobsters entering the China market where because of the time sensitive nature of that product it needs to be sped up.”
Despite concerns major Australian exports would be halted over the weekend, Senator Birmingham said there were “positive signs” for some seafoods and wine.
“We’re seeing other categories in relation to seafood (getting through customs),” he said.
“We’re seeing some positive signs in relation to the wine sector which had been talked about as well.
“Chinese authorities publicly and privately have denied that sort of application of a blanket ban, and we would hope that they are true to their word in that regard, and thus far, as I say, we’re seeing that there is movement at the border, if you like, in terms of goods still progressing.”
10.45am: ASX extends rise to 1.6%
Australia’s sharemarket continues to surge along with US futures after Joe Biden claimed a narrow win for Democrats in the US election.
The S&P/ASX 200 rose 1.6 per cent to an 8-month high of 6286.1 as S&P 500 futures rose 1 per cent, Nasdaq futures gained 1.3 per cent and WTI crude oil futures rose 1 per cent.
10.23am: ASX jumps on Biden win
Australia’s S&P/ASX 200 share index rose 1.2pc to an 8-month high of 6261.7 as global markets reacted positively to confirmation of the weekend of a narrow win for Democrats in the US election.
S&P 500 futures rose 0.65pc in early trading, adding to a 0.4pc gain in the Australian market that was expected based on Friday night futures.
There could be some additional buying because of today’s tentative break above the October peak.
The Materials, Communications, Tech and Consumer Staples sectors are outperforming while Energy, Utilities, Financials, Industrials, Real Estate and Health Care are underperforming.
In large caps, the iron ore miners stand out with Fortescue up 3.4pc, while Afterpay is up 3.1pc and REA up 7.3pc rise after target price increases from UBS and JPM.
Ben Wilmot 10.21am: Village Roadshow shareholders to get uplift from BGH
Private equity firm BGH Capital will pay part of a promised uplift in its takeover play for theme park and cinema operator Village Roadshow.
The $468.5m takeover bid is coming to a head and investors will vote on BGH’s two alternative but concurrent schemes of arrangement at a meeting this month.
The parties had agreed on a cash price of $2.32 per Village share under one structure and $2.22 per share under a second structure.
Warner Bros. Movie World and Sea World theme parks have been open to the public for some time and this meant an uplift for having the theme parks open would be triggered on November 13.
But BGH and Village agreed to lock in the 12c uplift per share on Monday.
But investors will miss out on two other potential price uplifts - one for the Queensland border bring open and the other for cinemas returning to a full slate of movies.
Village said given Queensland border restrictions as at November 1, and the deferral of major film releases, the parties had agreed that those uplifts will not be payable.
Village’s independent board committee has unanimously recommended the BGH takeover and the independent expert concluded the deal was in the best interests of shareholders.
John Stensholt 10.07am: Tabcorp outage causes $10m earnings hit
Tabcorp’s embarrassing weekend, during which its IT systems failed for much of Saturday and Sunday and denied punters the opportunity to bet on racing and sports online during the popular spring racing carnival, cost the company almost $10m EBITDA.
The wagering giant said on Monday morning that the outage, which it blamed on smoke and fire at a data centre, was “unacceptable” and that it commenced an urgent and comprehensive review into the event.
It also said that while services had largely been restored it was still working on ensuring the systems return to optimal levels in coming days.
“Tabcorp remains deeply sorry for this and acknowledges the significant disruption this caused our customers, the racing industry and venue partners,” chief executive David Attenborough said in a statement to the ASX.
“Our teams and technology partners are continuing to deploy all available resources into restoring the full Tabcorp gambling entertainment experience for our customers and partners.”
The company said there was no evidence of any potential cyber security issues or customer data breaches.
“Lost wagering turnover over the weekend is estimated to have impacted Tabcorp’s EBITDA by less than $10m,” Tabcorp’s statement said.
Tabcorp shares surged 16pc on Friday after The Australian revealed private equity firms were circling the company and had enlisted digital wagering pioneer Matthew Tripp as the boss of the wagering arm of the business should a takeover bid be attempted.
The Weekend Australian revealed keen interest from major shareholders for the Tabcorp board to demerge the company’s strongly-performing lotteries arm to move it away from the struggling wagering business.
Read more: Tabcorp outage shreds $100m in betting turnover as rivals eye licence
David Swan 9.57am: NBN earnings soar on demand uptick
The company building the National Broadband Network says the bumper demand from the COVID-19 pandemic has not subsided, with 80 per cent of Australians selecting superfast plans of 50 megabits-per-second and above.
In its first quarter results for FY2021, the company reported on Monday that 7.66m Australian premises were connected to the network, with 388,000 added in the three months to September 30. It said 11.82 million premises were deemed ‘ready to connect’.
NBN Co posted total revenue of $1.07bn, up 22 per cent on the same period a year earlier, and earnings before interest, tax, deprecation and amortisation (EBITDA) of $102m, compared to a $435m loss a year earlier.
The company’s capital expenditure came in at $772m, while the company also paid $2.4bn in so-called subscriber costs to Telstra and Optus, which it said would be the highest annual level of the payments.
“These costs will significantly reduce from FY21 with payments totalling approximately $1.5 billion due over FY21-24, until such payments cease,” a spokesman said.
9.50am: What’s impressing analysts?
Macquarie Group cut to Hold: Jefferies
Monadelphous cut to Hold: Morningstar
Seek raised to Positive: Evans & Partners
Vicinity Centres raised to Hold: Jefferies
Xero target price raised 48pc to $121.30: Citi
9.45am: ASX rally set to continue
Australia’s share market is set to extend last week’s strong rise amid early signs of a positive reaction to Joe Biden claiming a narrow win for Democrats in the US election.
Friday night futures relative to fair value suggested the S&P/ASX 200 would open up 0.4pc at 6215 but that gain could be extended if US index futures rise today.
AUD/USD and NZD/USD are up about 0.3pc this morning suggesting global risk assets may react positively to the weekend news.
On Friday, the risk appetite was encouraged by stronger than expected US jobs data and a further retreat in the VIX index to 25.4pc. But Wall Street was flat, as Tech and Health Care outperformed while Energy and Financials fell.
Charts still give scope for a 7pc fall in the major US indexes from resistance lines of potential symmetrical triangle patterns, although negative catalysts seem lacking now.
WTI crude oil fell 3.4pc to $37.46 on worsening COVID trends and Financials, Real Estate and Consumer Discretionary stocks also fell on expectations of restrained US fiscal stimulus.
However, it’s worth nothing that the US 10-year bond yield rose 6bps to 0.8185pc, regaining the 200-day moving average, as the market saw some chance of Democrats eventually getting a clean sweep. Thus, it’s not clear that Friday’s shift from value to growth stocks will continue early this week, except that Energy looks to stay weak in the absence of extended supply cuts or vaccines.
China’s increasing belligerence in regard to trade with Australia remains a concern albeit it hasn’t affected financial markets as yet.
The main focus domestically this week is the NAB business confidence survey on Tuesday and Wespac’s consumer confidence index on Wednesday.
ANZ is ex-dividend.
9.30am: Crown’s Melbourne casino to re-open
Crown will reopen parts of its Melbourne casino from Thursday, following the easing of restrictions in Victoria.
The casino will be restricted to ten designated VIP areas, each with a maximum capacity of ten patrons, while every second electronic gaming machine will be unavailable to ensure physical distancing. Patron activity will be restricted to 90 minutes a day.
“We have been working for some time with the Victorian Government and health authorities to determine how we can safely re-open Crown Melbourne and have developed extensive physical distancing and hygiene measures to allow re-opening in a safe manner,” chief executive Ken Barton said in a statement.
“We are pleased to be able to commence the process of welcoming back out employees and customers to Crown Melbourne.”
James Glynn 9.10am: Dollar set to rally on Biden win
AUD/USD looks set to lift modestly by 2-3pc over one to two months following Joe Biden’s election victory, says Commonwealth Bank of Australia.
The Australian dollar has already lifted by 1.5pc since Thursday.
However, President Trump’s legal challenges suggest volatility can remain elevated.
The local focus is on NAB’s October business survey due on Tuesday, and November consumer sentiment on Wednesday, which may influence AUD at the margin, CBA
says.
Business confidence may increase because of the roll-back of restrictions in Victoria. Consumer confidence will capture the reaction to last week’s RBA easing.
Over the past few years monetary policy easing has tended to damp confidence, CBA adds. The Aussie dollar is at 0.7279 early on Monday.
Bridget Carter 8.34am: Bidders for Vital Harvest emerge
Macquarie Infrastructure and Real Assets has made a $300 million bid for the listed horticultural land owner Vitalharvest Freehold Trust.
The offer of $1 per share is buy a scheme of arrangement for the landlord of listed fruit grower Costa Group.
Should a majority of the 75 per cent of shareholder votes cast not be in favour for the scheme, MIRA is offering to buy all of the Vitalharvest assets for $300m.
The offer is a 27.4 per cent premium to the company’s last closing share price of 78.5c.
Its market value is $145.2m.
The asset purchase offer represents a 7 per cent premium to the fair value of Vitalharvet’s properties at June 30 and an equivalent net asset value of $1 per unit and an 11.8 per cent premium to Vitalharvest’s current adjusted net asset value of 89.4c per unit.
MIRA intends to seek the support of Perpetual as Responsible Entity of Vitalharvest Freehold Trust for its offer.
8.28am: BHP finalises Shenzi deal
BHP says it has completed its acquisition of another 28 per cent of the Gulf of Mexico oil operation Shenzi. The $US505m deal takes BHP’s total stake in the venture to 72 per cent, with the remainder owned by Spain’s Repsol. BHP has the additional stake adds about 11,000 BOE per day in additional production./
7.45am: More US companies report
Walt Disney Co., Lyft and McDonald’s are among the major companies that will provide quarterly updates to investors this week, as Wall Street nears the end of another earnings season.
The coronavirus pandemic has hit the businesses of those three companies in different ways. Covid-19 has changed consumers’ dining-out habits, lowered demand for ride-shares and led to restrictions at theme parks and movie theatres -- while increasing the interest in streaming-video options at home.
The companies’ results come toward the end of earnings season, with 89% of the S&P 500 already having reported quarterly financials as of Friday, according to FactSet.
Disney is slated to reveal its fiscal fourth-quarter results on Thursday. The Wall Street Journal reported this month that Disney-owned ESPN was cutting its staff by about 10%. Disruptions from the Covid-19 pandemic have dinged the sporting-events industry as well as the theme-park business, a prominent revenue stream for Disney.
Investors will see how Disney’s year-old streaming business, Disney+, is performing during a time when people are staying at home more because of the pandemic. There were 57.5 million paid Disney+ subscribers as of June 27, but the pandemic has made producing new content for the platform difficult.
Alan Kohler 7.20am: Why the workers followed Trump
The two immediate implications for Australia of Joe Biden’s victory are obviously that the government will have to come up with a new plan for climate change and a new way to deal with China. But there is a bigger, more important one, related to the second of those. It’s about trade, and globalisation.
The world will soon be fully united around a target of net zero emissions by 2050. Scott Morrison will either have to join in or take a lump of coal into the UN General Assembly and hold it up while saying: “This is coal. Don’t be afraid, don’t be scared,” as he did in the Australian Parliament in February 2017. Not his finest moment.
On China, Morrison was able to persuade himself he wasn’t being as nasty to our biggest customer as Mr Trump as, which might have been true, so maybe it would be OK, and also he was aligning Australia with its most important ally.
Unfortunately for Morrison the US Trade Representative was doing a deal with Xi Jinping at the same time as Trump tweeted insults at him.
So part of the reason China is cancelling Australian exports, apart from being annoyed, is that they have to increase imports from the United States as part of the Phase One trade deal, and that means buying less from Australia. In other words, it seems Trump had a plan – bringing back jobs to Make America Great Again. Morrison did not.
It leads to a more fundamental lesson from the US election, and it is perhaps more an issue for the left of centre parties that embraced globalisation at the expense of their working-class roots.
Read more: Focus on Donald Trump’s votes, not Joe Biden’s
6.25am: Bitcoin rally reignites debate
Bitcoin’s rally above $15,000 has reignited debate over whether the cryptocurrency is so-called digital gold or a perilously risky bet as investors grapple with the coronavirus pandemic.
The world’s most popular virtual unit has gained over 30 percent in value in almost three weeks up to Friday, taking it close to its December 2017 peak when it reached nearly $20,000.
After a rollercoaster ride on markets since then, it began its latest meteoric rise on October 21, after US online payments provider PayPal announced that it would enable account holders to use cryptocurrency.
“It is the validation of a market which was still relatively uncertain a few years ago,” said Simon Polrot, president of Paris-based crypto-assets association ADAN.
Bitcoin was created in 2008 by the pseudonymous Satoshi Nakamoto, and marketed as an alternative to traditional currencies.
Unregulated by any central bank, it was sold as an attractive option for investors with an appetite for the exotic -- although criminals have also seen its under-the-radar appeal.
However, after bitcoin surpassed $1,000 for the first time in 2013, it has increasingly attracted the attention of financial institutions.
The more recent arrival of big players in the virtual market, such as PayPal and Mastercard, are “very important signals” solidifying that trend, according to Polrot.
5.20am: Berkshire Hathaway’s profit rises
Berkshire Hathaway Inc.’s third-quarter profit rose as investments rallied, though a loss for the company’s insurance underwriting pinched its operating profit.
Berkshire reported third-quarter net earnings of $30.1 billion, or $18,994 per Class A share equivalent, up from $16.5 billion, or $10,119 per Class A share equivalent, in the year-earlier period.
Operating earnings, which exclude some investment results, fell to $5.5 billion from $8.1 billion the year prior.
Warren Buffett’s sprawling Omaha, Neb., conglomerate owns a large insurance business as well as railroads, utilities, manufacturers and well-known American retail brands such as Fruit of the Loom, Dairy Queen and Oscar Meyer.
The company’s quarterly results were boosted by its vast investment portfolio. An accounting-rule change in recent years has meant that Berkshire’s earnings often reflect the larger performance of the stock market. Stocks rallied in the third quarter, with the S&P 500 up 8.5%.
Despite the improved bottom line, operating earnings fell at Berkshire as its insurance underwriting results swung to a loss from a profit. Several insurance companies posted their quarterly earnings this week with largely mixed results.
In some ways, the coronavirus pandemic has helped insurers as fewer miles driven has led to a significant decline in claims. Berkshire notably owns one of the largest car insurers in the country, Geico. In April, the car insurer joined many others in the industry in giving customers rebates, reporting to issue $2.5 billion in policy credits.
On the other hand, Covid-19 has upended so many parts of daily life beyond miles driven that have led to increased claims, from canceled events to travel insurance. Moreover, insurers have also felt a rush of claims thanks to hurricane season and wildfires on the West Coast.
The company, which for years shunned stock buybacks, bought back $9 billion in shares, bringing the total of stock buybacks to $16 billion for the year so far.
Dow Jones Newswires
5.14am: What Biden win means for business
President-elect Joe Biden will step into the White House as U.S. companies are coping with the challenges posed by the coronavirus pandemic and adapting to new ways of doing business. Here is a look at how the incoming administration might shape key industries and issues over the next four years.
Energy Mr. Biden has promised major changes for energy companies, though a Republican hold on the Senate, even a narrow one, could curb some of his biggest ambitions.
Mr. Biden will enter the White House with an aggressive climate agenda and has the power to use administrative agencies to follow through on several promises he has made for day one. Those actions include ordering the U.S. back into the Paris climate pact, withdrawing several Trump rollbacks that are now in legal limbo, starting negotiations for new climate rules on cars and trucks, and slowing or halting oil leasing on federal lands.
Harder to achieve under a split Congress will be the $2 trillion in spending Mr. Biden has proposed to kickstart dramatically reducing the country’s greenhouse-gas emissions. That plan calls for big improvements to the country’s electric-grid and mass-transit systems. Also needing congressional approval would be a Biden-backed package of financial incentives on renewable energy and efficiency aimed at meeting a goal of eliminating U.S. greenhouse-gas emissions by 2050.
Dow Jones Newswires
5.09am: Strong growth for China exports
China’s exports posted strong growth again last month, extending an upward trend on the back of a consumption rebound among its major trading partners, official data showed Saturday.
Inbound shipments, however, cooled after a surge in September -- with analysts expecting that a drop in import prices weighed on headline numbers.
Although the coronavirus pandemic has battered countries worldwide, foreign trade in the world’s second-largest economy fared better than expected, buoyed by healthcare shipments.
Exports rose 11.4 per cent on-year in October, customs data showed, better than the 8.9 per cent growth predicted by a Bloomberg poll of economists.
This marks the fastest pace since March last year, supporting China’s economic recovery after lockdowns this year to curb the spread of Covid-19.
Imports, meanwhile, grew 4.7 per cent, short of the 8.8 per cent on-year rise expected.
The customs administration said Saturday that China’s exports of mechanical and electrical products rose in the first 10 months, as did outbound shipments of textiles including face masks, which rose around 35 per cent from a year ago.
Tommy Xie, head of Greater China research at OCBC Bank, told AFP a key driver for October’s exports was shipments to the US, noting this could be due to “front-loading... partially because of concerns over a further escalation of tensions, and also ahead of the US elections”.
US-China ties have grown increasingly strained in recent years, under President Donald Trump.
Although imports were below expectations, Xie noted that shipments remained robust for iron ore and integrated circuits amid tensions with Australia -- a key exporter of the commodity.
Iris Pang, ING chief economist for Greater China, added that a long holiday in early October could also have weighed on imports.
Capital Economics cautioned in a report this week, however, that recent data pointed to a drop in new export orders in October, signalling that “foreign demand has started to soften following fresh lockdowns abroad”.
The resurgence of infections in key markets -- including the US and Europe -- could hit overseas demand, while China has made a renewed push this year for local consumption to underpin growth.
“Most measures suggest that domestic demand continued to strengthen and the infrastructure investment at the heart of the ongoing stimulus is particularly import-intensive,” said Capital Economics.
Meanwhile, China’s trade surplus with the US -- the core gripe in Washington in the bruising trade war -- rose around 19 per cent from last year to $31.4 billion in October.
This widened slightly from the $30.8 billion seen in the month before, marking one of the larger surpluses this year according to Chinese figures.
AFP
5.05am: Goldman’s Brexit shift
Goldman Sachs will shift between $US40 and $US60 billion in assets from London to Frankfurt in preparation for Britain’s divorce from the European Union, a financial source told AFP Friday.
The New York-based investment bank also plans to transfer about 100 employees from the British capital to the EU by the end of the year, the person added.
Britain formally left the bloc in January but remains bound by its rules during a post-Brexit transition period lasting until the end of this year.
Goldman’s decision comes as other financial giants undertake similar moves. JPMorgan Chase also plans shift around 200 billion euros through the end of the year, according to Bloomberg.
Brexit means financial institutions can no longer base staff for EU-wide financial services in London.
Britain still hopes to reach a new trade agreement with the EU, whose chief Ursula von der Leyen is to speak by phone on Saturday with British Prime Minister Boris Johnson, her spokesman said Friday
AFP
ASX treads water before US jobs data; CBA and Westpac hit highs
ASX ends flat as markets await key US jobs numbers. CBA and Westpac hit record highs and NAB an 18-year high. Domino's jumps 21 per cent, as Collins Foods and Nick Scali also gain. Amazon falls after earnings disappoint.
ASX ends up 0.5pc; Brookfield enters Insignia battle; former Star CEO cops ban
ASX 200 gains 0.5 per cent, led by resources, tech, property, industrials and communications. Macquarie weighs on financial sector. Google owner Alphabet's earnings disappoint. Brookfield lobs new offer to takeover target Insignia. Amcor lifts on reaffirmed guidance, estimates win. Former Star CFO cops ban.