Banks, miners support ASX as Goldman warns second lockdown will hit harder

Fortescue hit a new record high as miners and banks helped the market up 1pc, while the litigation funding inquiry put fund interests under the microscope.

Goldman Sachs says the second coronavirus lockdown will hit firms harder than the first. Picture: NCA NewsWire / Daniel Pockett.

• Second lockdown worse than first: GS
• Oil Search flags $US300m writedown
• Sezzle returns after $79m placement
• Litigation funds prioritised profit: Mathias

That’s all from the Trading Day blog for Monday, July 13. Australian stocks finished higher by 1pc with gains led by banks after similar pockets of strength on Wall Street on Friday.

Locally, Afterpay slipped after an early jump while Sezzle soared 22pc after raising $79m in a placement and Oil Search warned of a $US300m writedown for the full year. The parliamentary inquiry into litigation funding heard firms prioritised profit over justice.

Richard Gluyas 8.57pm: Second lockdown to slow recovery: ANZ boss

The second COVID-19 lockdown in Victoria will slow the nation’s recovery from the global pandemic, according to ANZ chief executive Shayne Elliott.

Mr Elliott told broadcaster SBS in an interview on Monday that the state’s six-week lockdown, announced last week after a resurgence in the virus, would result in lower economic activity.

“And of course, Victoria is very important to the whole ­nation,” he said.

“But what’s more important and very hard to predict is how that will affect the psychology of everyone else.

“I imagine people are going to be a little more cautious, a bit worried about a second wave or a repeat, and I think they will be a little more cautious, as a result, in restarting their businesses or their attitude to getting back on their feet.”

Confidence, he said, was a significant driver of the economy.

While the Morrison government’s support programs were important, and the banks had agreed to an extension of loan deferrals, activity levels would be determined by decisions made in the business and household ­sectors.

“That all comes down to confidence and I can’t predict that,” Mr Elliott said.

“We’re just trying to give them capacity to make good decisions for the economy, but ultimately it’s up to them.”

As to the level of stimulus in the economy, Mr Elliott said it was sufficient to achieve its purpose. The problem was that circumstances were changing every day, although people were demonstrating flexibility and a preparedness to roll with the changes.

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Lisa Allen 8.15pm: Melbourne hoteliers lose revenue

In the lead-up to the latest COVID-19 lockdown Melbourne hoteliers lost more than 67 per cent of their revenues per room during June, compared with a year earlier, data house STR reports.

Revenues per available Melbourne hotel room were just $40.52 in June, with occupancies dropping 53.4 per cent from a year earlier to average just 34 per cent. Average daily room rates dropped nearly 30 per cent to $119 a night.

But JLL Hotels managing director and head of investment sales for Australasia, Peter Harper, said there was still more accommodation being built in Melbourne than in any other Australian capital city.

“Melbourne still has the biggest pipeline in terms of the number of hotels under construction and in the CBD and fringe suburbs, with some 22 under construction,” Mr Harper said.

“The one thing that does protect so many of the hotels that are under construction is that the owners were not forecasting to get a great deal of revenue for the next couple of years ... as these projects looked to establish themselves in the market.

“It is the existing hotels that will feel the largest impact on profitability.”

The hotels under construction range from three to five stars, but the pipeline for the 10 or so hotels that were mooted and had not advanced to construction stage has completely dried up.

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Nick Evans 7.56pm: Fortescue Metals record high

Fortescue Metals touched another record high on Monday as iron ore futures gained and investors sharpened their focus on iron ore stocks ahead of this year’s reporting season.

Iron ore miner Mineral Resources also touched new highs on Monday after port data released last week suggested iron ore miners in WA’s Pilbara region hit record iron ore exports in the June quarter, a bright spot for Australia’s exports amid a grim outlook elsewhere in the economy.

With dividend stocks at a premium after the coronavirus devastated the outlook for shareholder payouts for usually reliable yield stocks among the big banks and other blue-chip companies, the expectation is the strong export performance of Australia’s iron ore miners, as well as strong prices, could make them among the few to maintain or lift dividend payouts.

Fortescue hit a record $15.41 before softening slightly to close at $15.36 a share, up 51c or 3.4 per cent for the day. MinRes touched $23.37 and closed the day at $23.30, up 61c. BHP gained 78c to $36.97 and Rio is again pushing at the threshold of the $100-a-share mark, closing up $1.85 at $99.84.

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Jared Lynch 7.37pm: Health stocks on edge with virus rise

The Victorian coronavirus surge has put health stocks on edge, with Goldman Sachs analysts singling out Australia’s biggest private hospital, Ramsay, as the most exposed, given 20 per cent of its revenue comes from Victoria.

Melbourne’s spike in coronavirus infections is continuing unabated almost a week after Premier Daniel Andrews enforced a strict lockdown, with 13 elderly residents in a nursing home run by listed aged-care provider Estia among the latest victims.

Estia confirmed the infections — all at its home in Ardeer, about 9km north of Victoria’s previous coronavirus epicentre, Cedar Meats — in a day of high drama that included a writedown of up to $148m.

Estia initially reported that while two of its staff working across three of its homes in Melbourne had tested positive, its residents remained COVID-19-free. It quickly then requested a trading halt before confirming around midday that 13 of its residents had been infected with the coronavirus.

Another aged-care home, Menarock LIFE in Essendon, also reported that 14 of its residents and 17 staff members had tested positive to COVID-19 and had been transferred to hospital. Estia and Menarock’s infections raised the number of new cases in Victoria on Monday to 177.

Despite the fresh spike in coronavirus cases, and most people following government advice in avoiding high-risk settings such as hospitals and nursing homes, Australia’s second-biggest private hospital operator Healthscope urged people not to delay urgent medical treatment after it reported a sharp fall in emergency department presentations.

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Joyce Moullakis, Ben Wilmot 7.04pm: Wirecard appoints voluntary administrator

Wirecard Australia has buckled under the strain of a global fraud scandal and appointed accounting firm BDO as voluntary administrator.

Documents lodged with the corporate regulator show BDO partners Andrew Fielding and Nicholas Martin were appointed on Monday.

Sources told The Australian Wirecard’s local staff were briefed on the administration process on Monday afternoon, after a sale process failed to find a buyer for the operations.

The Australian last week revealed that Wirecard’s Australian and NZ entities could be tipped into voluntary administration if a buyer wasn’t secured. The preference at the time was to offload the three entities as a group, although Wirecard left the option of selling the Australian and NZ operations in pieces if required.

The about 70 Wirecard staff across Australia and NZ had also expressed concerns to management about the payment of their salaries after its parent entity German payments group Wirecard started insolvency proceedings for a spate of entities last month.

The Wirecard saga which has led to arrests of executives offshore was largely due to alleged fraud and a missing 1.9 billion euros which was meant to be in trust accounts. Wirecard’s global chief executive Markus Braun was arrested and released on bail, and last week the head of a Dubai-based Wirecard subsidiary faced questioning and arrest by German authorities.

The global insolvency proceedings did not include three entities across Australia and New Zealand.

Wirecard’s Australia and New Zealand boss Karl Mohan resigned earlier this month, but is staying on to serve a three-month notice period. Mr Mohan joined the group just a year ago and became head of Australia and NZ in January.

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James Kirby 6.42pm: Deals show home space innovation

Banks are ready to chase a reviving first home buyer market with St George Bank moving to cut the need for mortgage insurance.

Aiming to capitalise on changing dynamics in the property sector, the bank - a subsidiary of Westpac - found a third of Australians said the crisis has prompted them to “save for their first home quicker”.

St George is a minor player in the home lending market, but the move to lure first home buyers with $1 mortgage insurance might well be followed by rival banks as the investment sector is expected to offer slim pickings in the months ahead.

In contrast, the first home buyer market is expecting an early resurgence thanks to a blizzard of incentives across the country.

With home lending already declining nationwide, the proportion of buyers who are “first time” has jumped to more than one in five.

Under the terms of the St George deal, the bank will not impose mortgage lending insurance charges on first home loan buyers with a loan to value ratio up to 85 per cent. (Banks generally insist on mortgage insurance being paid if the value of a loan is more than 80 per cent of the value of the house being purchased).

The SGB offer is only open to principal and interest home loans with a maximum loan size of $850,000 on a $1m property.

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David Ross 6.03pm: Debt collector Credit Corp profit warning

Debt collector Credit Corp Group has warned it could take a $65m hit to its profit after the coronavirus economic downturn smashed repayments.

Profit has been revised down from $75m-$80m to $10m-$15mn after accounting for ledger impairments and additional provisioning arising from the pandemic.

Credit Corp said it expected to incur a 13.5 per cent reduction in the carrying value of existing debt ledgers.

This is expected to average out to an 18 per cent reduction in collections over the next two years before recovering.

The debt collector noted a key cause of its pain was customers declining to commit to debt repayment plans amid widespread uncertainty about post-JobKeeper economic conditions.

Credit Corp collects 80 per cent of its income from repayment plans, collecting on average $8000 per customer.

“This experience is consistent with reported unemployment rates in excess of 10 per cent, after adjusting for changes in workforce participation and the temporary offsetting impact of government support, stimulus measures and private sector forbearance,” the company said in its update.

Short-term repayments to Credit Corp have been boosted by JobKeeper and JobSeeker but the sugar hit of the repayments has masked the cost of the downturn to the debt collector.

4.49pm: Platinum leads, Tech One lags

Platinum Asset Management was the best performer on Monday, even after reporting a blow out in outflows, while health care stocks led the laggards.

As the broader market jumped by 1pc, Platinum shares rose 6.8pc, beating out Virgin Money and Netwealth for the market’s biggest gains.

On the flip side, Technology One took a hit after a short report from GMT Research, while Mesoblast, Clinuvel and PolyNovo all clocked a daily loss as investors shifted from defensives to value.

Here’s the biggest movers at the close:

Lachlan Moffet Gray 4.36pm: No profit, justice conflict: Omni

Mr Saker goes on to tell the inquiry that he would also approve of alternative legislation to regulate the industry as opposed to the current management investment scheme.

“As long as it achieves the same outcome, which is regulation of the industry in Australia … we would be in favour of that,” Mr Saker said.

When questioned by Senator Celia Hammond on who Omni Bridgeway owes primary responsibility, Mr Saker said it was the shareholders but noted that:

“There is no doubt Omni Bridgeway is a for profit business but it is also to provide access to justice, and there is no conflict between the two.”

When prompted by Senator Deborah O’Neill on why the US Chamber of Commerce would make a submission to an Australian inquiry on litigation funding, Mr Saker said:

“I suspect they are not very favourable towards class actions and if they can make it uneconomic here in Australia maybe they would export it back to the US and crunch it in other jurisdictions.”

Lachlan Moffet Gray 4.24pm: Existing litigation checks are sufficient

Omni Bridgeway chief Andrew Saker says he disagrees with claims from law firm King & Wood Mallesons made to the joint Parliamentary inquiry into litigation funding that Australia needs a certification process for class actions, saying existing checks and balances are sufficient.

“We have a classification, a certification process here of some sorts. It’s called a declassing process which is where a defendant can apply to declass a class action,” Mr Saker said, adding that the court can also engage a “split bar” which involves an independent barrister group.

Mr Saker said that claims from the law firm that litigation funding gives way to speculative claims is incorrect due to the existence of adverse cost orders, which render such litigation

“economically irrational, and I would say legally improbable”.

“If we invest in a piece of speculative litigation that loses, we not only lose but we are exposed to adverse cost risks,” he said.

“Not a single class action (from our firm) has been struck out for (being) frivolous or vexatious.”

Mr Saker also said that returns such as the 502 per cent return on costs Omni Bridgeway achieved through the Murray Goulburn class action has to be “considered in a portfolio of returns,” which equates to a gross return of 30 per cent per annum, with investors receiving about 20 per cent.

Despite admitting that the firm had a presence in the Cayman Islands, Mr Saker said that Omni Bridgeway paid Australian taxes on income generated in Australia.

4.11pm: Bank boost sends ASX up 1pc

The local market clawed back a 1pc gain at the close, fuelled by a rally in the major banks and miners.

By the close, the ASX200 was higher by 61 points or 1.03 per cent to 5980.1 – slipping from highs as much as 6007.

The big four drove the market recovery – Commonwealth Bank added 2.1pc as NAB rose 1.7pc, ANZ added 1.9pc and Westpac gained 1.8pc.

Fortescue Metals $FMG hit a record high on Monday, with the iron ore miner reaching $15.30 per share. $FMG +43% Year-to-Date as the iron ore price remains above US$100/t #ausbiz

— CommSec (@CommSec) July 13, 2020

Lachlan Moffet Gray 4.04pm: Omni Bridgeway opposes Vic model

Managing Director and CEO of listed litigation funder Omni Bridgeway Limited Andrew Saker has told a joint Parliamentary inquiry that he is opposed to the Victorian contingency fee model on the basis it creates a “conflict of interest” between the lawyer’s “duty to their client and their duties to the court”.

Under new laws passed by the Victorian parliament, lawyers will be able to provide security for a plaintiff in a class action in the state’s Supreme Court.

“In our view, the difficulty that’s created by the model that’s been enacted in Victoria is that it crosses the line between a contingency fee lawyer and a funder,” Mr Saker said.

Lachlan Moffet Gray 3.31pm: Omni Bridgeway defends fee structure

Managing Director and CEO of listed litigation funder Omni Bridgeway Limited Andrew Saker tells the joint Parliamentary committee into litigation funding that he supports plans to make funders take up an AFSL on the basis it “improves transparency”.

Still, he says the managed investment scheme regime should be “made fit for purpose”.

In addition, Mr Saker said that Omni Bridgeway supports a minimum 50 per cent return of gross proceeds to class action members and the removal of common fund orders, which allow respondents to be added to a class action on an opt-out basis.

He hit back at earlier claims made by the Menzies Research Centre about the company, calling the submission “just ill-founded analysis”.

Mr Saker said a figure contained in the Menzies Research Centre obtained from Herbert Smith Freehills that claimed that last year the average amount of settlement paid to plaintiffs was 39 per cent “isn’t correct” and “incomplete”.

Instead, he reported that Omni Bridgeway returned “approximately” 60 per cent of settlement to plaintiffs, with their funder fee comprising 25 per cent of settlement and legal costs, 15 per cent.

OBL last traded down 1.8pc to $4.91.

David Ross 3.27pm: Credit Corp warns of profit slide

Debt collector Credit Corp Group has warned it will only eke out a $10m-$15m profit after shortfalls in debt repayments caused by the coronavirus downturn.

This profit has been revised down from $75m-$80m after accounting for ledger impairments and additional provisioning arising from the pandemic.

Credit Corp said it expected to incur a 13.5 per cent reduction in the carrying value of existing purchased debt ledgers, which would average out to an 18 per cent reduction in collections over the next two years before any recovery.

The debt collector noted a key cause of its pain was the declining propensity for customers to commit to debt repayment plans amid widespread uncertainty about post JobKeeper economic conditions.

Credit Corp collects 80 per cent of its income from repayment plans and the average amount outstanding that they collect on is $8000.

“This experience is consistent with reported unemployment rates in excess of 10 per cent, after adjusting for changes in workforce participation and the temporarily offsetting impact of government support, stimulus measures and private sector forbearance,” the company said in its update.

Chief Thomas Beregi said the people from whom they collected from were disproportionately affected in an economic downturn.

CCP shares last traded up 0.1pc to $15.28.

Lachlan Moffet Gray 3.06pm: KWM suggests disclosure law change

King & Wood Mallesons partner Alexander Morris has told the joint Parliamentary inquiry into litigation that continuous disclosure laws should be changed because it would “materially change the possibility for some class actions” and provide shareholders with the same safe harbour protections afforded to directors.

“On continuous disclosure is what we are actually larger suggesting is a return of the continuous disclosure law in the form it was substantially in until it was amended, perhaps unintentionally, during the Howard government,” he said.

“I should note that here and now today, the sort of safe harbour I am talking about for the company, is the safe harbour we offer officers and directors of companies.”

Company heads are only personally liable for reckless or negligent conduct, not unintentional conduct.

“All we are saying is that the poor shareholders should have the same protection,” Mr Morris said.

Mr Morris also said that although he didn’t have “perfect visibility” on the issue, one benefit of the government making litigation funders taking up a financial services licence is that it would compel the ones based overseas to use a company structure requiring the payment of domestic taxes.

“If someone is running out of a business out of funding Australian class actions, that should be paying Australian income or company tax on that,” he said.

3.05pm: Asian markets rising

Asian markets rose Monday, recovering some of the losses at the end of last week, as investors followed a strong performance on Wall Street fuelled by hopes for a coronavirus vaccine, though a spike in infections around the world capped gains.

Trillions of dollars in government support is keeping equities well supported but confidence is being strangled by the spread of the disease, with an explosion of cases forcing some countries to reimpose containment measures just weeks after easing lockdowns.

Traders are also looking ahead to the corporate earnings season, which will reveal how companies fared during the second quarter, when economy-sapping lockdowns were imposed around the planet.

Tokyo led the gains, adding 1.7 per cent in the morning session, while Hong Kong added 0.6 per cent and Shanghai put on 0.5 per cent, with Seoul also climbing more than one per cent.

AFP

Lachlan Moffet Gray 2.14pm: Class actions play important role: KWM

King & Wood Mallesons partner Alexander Morris has told the joint Parliamentary inquiry into litigation funding that “class actions play an important role” in Australia but the increasing number of suits is leading to a “commercial environment”.

He said money is being moved from current to former securityholders, creating a situation that risks the competitiveness of Australian capital markets in providing public equity to finances.

King & Wood Mallesons partner Justin McDonell told the inquiry that Australia should examine regulatory schemes in other countries, like in the UK and Hong Kong, where funders must “cede control” to the class.

Mr McDonell raised the earlier discussed case of the Murray Goulburn class action where the funder was last week was confirmed to have been awarded a 25 per cent commission of the settlement sum, down from 32 per cent, which worked out to a return on costs of 502 per cent.

“If Australian Super was getting a return of 502 per cent based on your investment, you’d be interested to know that,” Mr McDonell told Senator Patrick Gorman when he questioned the logic of focusing on the return of one particular case.

2.04pm: Tech sell-off dents daily rise

Australia’s share market has pared much of a strong intraday rise as Technology One leads a sell-off in Technology and value stocks pull back.

After rising 1.5pc to a 3-day high of 6007.4 in early trading, the S&P/ASX 200 is losing more than two-thirds of its intraday gain as it fades to 5943.4.

Technology One fell 7.7pc, leading a broadbased sell-off in Tech after a GMT Research short seller report from late June got more airplay.

Other Tech favourites including Afterpay, WiseTech and Appen fell more than 2pc, EML Payments fell 5pc.

Healthcare continued to lag after investors switched out of defensive and growth sectors on Wall Street but a switch to value in Financials, Real Estate and Energy is fading as fast as it started.

Westpac was up 1.2pc after rising 3.7pc, while Oil Search fell 2.2pc after rising 2pc and Scentre was up 0.9pc after rising 4.7pc.

It comes amid signs that Victoria’s – and possibly Australia’s – second wave of COVID-19 is worsening, even after VIC cases fell yesterday.

The Materials sector is one of the few that has picked up through the day, with Fortescue up 2.5pc as Dalian iron ore futures surge 4.8pc to a multi-year high of $US118 a tonne.

Index last up 0.6pc at 5956.

1.51pm: Lockdowns worse second-time around: GS

The decision to lockdown Melbourne for six weeks will have a more negative effect on firms than the first time around, according to Goldman Sachs.

Analysts led by Matthew Ross note several reasons for the greatest risk profile, including higher levels of community transmission, lower adherence to the restrictions, less ‘silver linings’ and slower business restarts.

They note that the higher rate of Victorian infections means the risk to other states, especially NSW, has increased but that it most likely will prompt an extension of government stimulus.

While fast food and home improvement had some upside in the first lockdowns, they caution that the same effects may not be felt second time around, and add that banks with more Victorian mortgage exposure may be hit harder.

“As a sector, Banks are effectively overweight Melbourne (and Sydney) relative to the size of their economies given their higher levels of house prices to income ratios,” the broker notes.

“Using mortgage exposures as a guide, BEN (38pc of mortgage book in Victoria when last disclosed), ANZ (33pc) and NAB (>30pc) likely have the largest exposures to the impact of the Melbourne lockdown.”

Read more: Victoria records 177 cases, Sydney cluster grows

Bridget Carter 1.28pm: Laybuy raising $10m for pre-IPO

DataRoom | Laybuy is hoping to capitalise on the strong demand in the buy now pay later space, with the pre-IPO round for a listing around September due to close Tuesday.

As part of the pre-IPO raise, Laybuy will secure $10m and the formal IPO is expected to start towards the end of this month.

It comes as shares in the larger operator in the space, Afterpay, has seen its shares soar past $70m in the past week, taking its market value to about $20bn, and its recent $800m raising was met with overwhelming demand.

The hope for Laybuy is that it can list with a market value of between $220m and $260m.

Already, a pre-IPO raising was carried out earlier in the year through a convertible note structure.

The current owners will retain their interest.

Laybuy was founded in 2016 by managing director Gary Rohloff and his son Alex.

David Ross 1.11pm: Star casino patron tests positive

Sydney’s Star casino in Pyrmont said it has been informed by NSW Health that a patron who visited The Star Sydney on the evening of Saturday, July 4 has returned a positive test for COVID-19.

“The Star is working closely with NSW Health to respond to this information, including the conduct of contact tracing (which includes staff members),” Star said in a statement to ASX.

The Star said since its reopening on June 1 it has continued to operate in accordance with its COVID-Safe Plan, including distancing measures and hygiene and cleaning measures across the property and extensive intraday cleaning and a daily comprehensive clean during a property shutdown between 6am and 10am.

SGR last traded up 0.7pc at $2.72.

1.01pm: Banks, miners send ASX higher

Heavyweight banks and miners are guiding the benchmark higher in lunch trade, though the index is still shy of the key 6000 level.

Shares touched as much as 6007 in early trade, but are up by 48 points or 0.8pc to 5967.3 in afternoon trade, led by a 1.8pc lift in financials.

Westpac is higher by 2pc, Commonwealth Bank by 2.4pc, ANZ by 2.4pc and NAB the laggard with a 1.9pc gain.

BHP, Rio and Fortescue are each adding around 2pc also, adding to the rally.

On the downside, Afterpay is slipping by 2.4pc and Telstra down by 1pc while Oil Search slips 2.3pc after its earlier profit warning.

12.47pm: More Platinum outflows to come: CS

Credit Suisse analyst James Cordukes warns that Platinum Asset Management’s weak fund performance is likely to see continued outflows despite a better performance from its Asia Fund.

“The silver lining was institutional flows appear to have neutralised in June and may have even attracted modest inflows potentially indicating early signs of traction with offshore investors,” he says after FUM data late Friday.

But he keeps an Underperform rating and $3.15 price target, noting that despite modest performance fees, fund performance “remains weak”, with the International Fund remaining below benchmark over the medium term.

And Platinum is trading on a 17.2x 12-month forward PE multiple, which is about 14pc above peers, giving “little valuation protection from ongoing outflows and minimal EPS growth”.

“Weak fund performance is likely to see ongoing outflows in the International Fund,” Mr Cordukes warns.

“While performance in the Asia Fund has improved we expect flows into this product to be restricted by risk appetite in the near term. The 15 per cent of FUM through outflows and cash distributions in FY20E is illustrative of the magnitude of PTM’s potential headwinds.”

PTM last traded up 3pc to $3.81.

Read more: Funds flee Platinum as shorts flop

12.40pm: 13 Estia residents test positive

Nursing home operator Estia says 13 residents at one of its Victorian homes have tested positive for coronavirus.

Following an earlier market update this morning noting 3 staff had tested positive for COVID-19, Estia has this afternoon confirmed residents at its Ardeer home have also tested positive.

“The Company has activated its COVID-19 positive test response plan and is working with the Victorian Department of Health and Human Services Public Health Unit and the Commonwealth Department of Health to manage and monitor the situation,” it said.

Read more: Positive tests at Estia nursing homes

12.30pm: Saracen halted for ‘serious incident’

Gold miner Saracen Minerals has advised the market of a ‘serious incident’ involving an underground worker at its Western Australian Dervish mine.

The miner said it appears the underground worker fell from a height, and a full investigation had been launched.

Operations at the company’s Carosue Dam Operations, including the Dervish underground mine, have been suspended.

Saracen also noted the WA Department of Mines, Industry Regulation and Safety had been advised of the incident and was sending representatives to the site.

SAR last traded at $6.15.

Lachlan Moffet Gray 12.28pm: A warning on stifling litigation competition

Dr Warren Mundy, former chair of the Productivity Commission’s Inquiry into access to civil justice has told a joint Parliamentary inquiry into litigation funding that he believes litigation funders should be licensed, but the government should be cautious not to stifle competition in the market with regulation.

If you were to cap those fees in some way and you found that everyone was charging up to the cap, you would probably form the view that the market is not very efficient,” he said, adding that the existence of litigation funding is important.

“I think we can reasonably assume Senator that absent litigation funding, some of the matters that have been before the courts in Australia, would not have proceeded.”

UNSW Law Professor Michael Legg has told the inquiry that common fund orders, although “generally a very effective way” for opt-out class actions to proceed, are often used to “rush to the courts”.

“The common fund order – the reason that I put it forward – was that it was meant to overcome closed classes which limited people getting access to justice, and to avoid multiple class actions,” Professor Legg said.

“The problem with the common fund order is you do have situations where … they are commenced very quickly.”

Lachlan Moffet Gray 12.21pm: ACCC may have place in litigation funding

Principal of SSC advisory Mr Stuart Clark has expressed his surprise over the government’s intent to have litigation funders hold an Australian Financial Services Licence, noting that it would provide more protection for parties who seek an adverse costs claim for offshore funders.

Mr Clark also raised his concerns over contingency lawyers in class actions “double dipping”.

Dr Warren Mundy, former chair of the Productivity Commission’s Inquiry into access to justice concurred with fellow witness UNSW law professor Michael Legg in the need for the ability of judges to set fees, but noted the difficulty in establishing a clear framework for doing so and suggested it could be a matter for the ACCC.

“I think it would be profoundly helpful if an independent piece of work could be taken … to provide some guidance to judges about what may or may not be appropriate,” he said.

Dr Mundy suggested a possible framework for the setting of fees, noting that some academic analysis on the costs of litigation funding states that “around 25 per cent of the proceeds of the litigation would be consumed in any event by solicitors, experts, court fees, whatever.”

“It naturally flows that where that risk for the adverse cost order, but also that risk of the matter being unsuccessful, that the receipts of the litigation funder … will be higher than that amount,” he added.

“I reject the proposition that this whole discussion is about generating earnings for evil foreign shareholders.”

12.16pm: Who’s next on short seller lists?

It’s interesting to see share price weakness in other “stinky” stocks where Technology One’s accounting policies – like capitalising operating expenditure and recognising revenues earlier – could be practised.

Despite a vehement denial by TechnologyOne this morning, its shares fell more than 7pc after a GMT Research report from late June got some more airplay.

Meanwhile Bingo fell 5pc, Downer fell 2.4pc, CIMIC fell 3pc, WiseTech fell 2.9pc and Afterpay fell 4.6pc despite a rise in the broader market.

But to be fair, the “stinky issue” around Afterpay has been its business model and capital intensity, while its accounting policies have not really struck alarm bells with investors.

Lachlan Moffet Gray 11.49am: Judge should set litigation fees

Dr Warren Mundy, former chair of the Productivity Commission’s Inquiry into access to justice has told the joint Parliamentary inquiry into litigation funding that there are other factors behind the growth in class action suits beyond the prospect of large financial returns.

“One expects over time the number of actions that are bought somehow reflect the growth in the economy,” Dr Mundy told Liberal MP Jason Falinski.

“Whenever a product is introduced, the use of that product, if attractive to consumers, will grow over time, and I suspect grow at a rate more rapidly than economic activity – to a point.”

UNSW Professor Michael Legg joined the inquiry late, offering his expertise as a legal researcher in the area and suggesting that the government should look at the high costs of bringing class actions in order to bolster plaintiff returns.

Liberal MP Celia Hammond asked Professor Legg and Stuart Clark as to whether they support the use of class action litigation funding in Australia.

Mr Clark said: “Yes, absolutely I support the use of class actions in Australia,” but highlighted the need for government reform in the area and stressed the need for a limit on the returns litigation funders can receive, noting that private equity usually makes a return of “14 -15 per cent with a hurdle rate of 8 per cent.”

“This is an opaque industry run by companies that are managers of funds with funds sitting offshore in foreign jurisdictions,” he said.

Professor Legg said he supported class action but said a Federal judge should have the power to regulate and set fees in class actions clearly set out in legislation.

“The goal, or the objective for the judge, is not clear. We need an amendment to the legislation that gives the judge that power (to set fees), but also tells them what the objective is,” he said.

“The fee that is charged needs to be fair and reasonable but it also needs to be proportionate.”

11.45am: Goldman raises Afterpay target 172pc

Goldman Sachs raised its 12-month price target on Afterpay 172pc to $70.15 from $25.75, while keeping a Neutral rating.

GS analyst Ashwini Chandra says Afterpay’s fourth quarter trading update was “materially ahead of our forecasts”.

He adds its capital raising (co-underwritten by GS) “positions it to support current momentum and potential new market opportunities”.

“We upgrade our forecasts to capture stronger consumer growth, frequency of use and operating leverage,” Mr Chandra says.

He expects Afterpay to have $151bn in gross merchandise value by FY30, driven by 47.8 million users across its three key regions transacting 20 times per annum, noting that AU-NZ is already at 14.5x in FY20 and grew 22pc year-on-year.

APT shares were down 3pc at $70.06 after rising 3.7pc to $75.00 this morning.

Read the latest on Afterpay here

Lachlan Moffet Gray 11.30am: Class action system has been ‘hijacked’

Principal of SSC advisory Mr Stuart Clark has told the joint parliamentary inquiry into litigation funding that despite being a class action lawyer of some 30 years, “the class action system has been hijacked by some well-funded large funders and corporatised law firms”.

“There have been repeated calls for the regulation of the litigation funding system … until the recent changes by the federal government, it has not been properly regulated,” he said, highlighting last week’s Murray-Goulburn class action returned 502 per cent for the funder.

“In my opinion, that return does not meet community expectations,” he said.

Mr Clark also lashed the practice of contingency of lawyers, saying: “We are lawyers, we are not real estate agents, we are not mortgage brokers.”

Dr Warren Mundy, chair of the Productivity Commission into access to justice has taken a contrary view on litigation funding.

“This is no more a flood than the drizzle I experienced coming to the parliament today,” he said. “These actions account for point one per cent of claims lodged in the federal court.”

Dr Mundy said that the report from the commission found no issue with the funding model for litigation and class actions in 2014.

11.24am: 6000 level evades ASX

Australia’s share market is having trouble with a key resistance level today.

Despite strong offshore leads, the S&P/ASX 200 has been unable to stay above 6000 points.

The index was last up 48 points or 0.8pc to 5966.9 after rising 1.5pc to 6007.4 in early trading – hit by Melbourne’s announcement of 177 new coronavirus cases and further spread of Sydney’s outbreak.

Banks have pared gains with Westpac up 2.2pc after rising 3.6pc. Afterpay is down 4.1pc at $69.06 after rising 4.2pc to $75.00.

Technology One is down 5pc after falling 7.7pc despite denying GMT Research claims of accounting irregularity.

Follow the latest coronavirus updates at our live blog

11.13am: Technology One dives to 3-month low

Technology One shares dived 7.7pc to a 3-month low of $8.04 amid focus on a short-seller report from GMT Research.

While this report has actually been around since June 26, it wasn’t getting much traction until highlighted by weekend press.

The company’s rejection of the claims of accounting irregularities made by GMT Research only seem to have drawn attention.

Shares renewed their slide after bouncing from $8.38 to $5.59 when trading resumed after the statement from the company.

TNE last down 5.7pc at $8.26.

Read more: Tech bubble a worrying complication

Lachlan Moffet Gray 11.06am: Contingency fees adverse to ‘fair price’

Chief of staff for the Liberal-aligned think tank Menzies Research Centre James Mathias has used his remaining time in front of the joint Parliamentary inquiry into litigation funding to criticise the use of common fund orders and contingency fees for lawyers.

“The advent of common fund orders is a massive distortion,” he said.

“Common fund orders mean a class action can be established in your name, without your knowledge, on the basis you need to actively opt out of it.

“If a law firm seeks to run a class action, they should go through the process, don’t you think, where they book-build … rather than the other way around where you are in it unless you opt out of it.”

Mr Mathias said that the practice of lawyers charging contingency fees was one that was adverse to the “200 year-old” tradition of lawyers charging a “fair price” for their work.

“What you do when you allow the law firm to take a percentage of the damages pool, you incentivise them to increase that damage pool or settle early, and it flies in the face of duty to the client,” he said.

Mr Mathias said that the industry should be regulated with further consumer disclosure requirements.

“If you have an arrangement where litigation funders are providing more information to consumers on what they are seeking, then consumers are free to shop around,” he said.

Mr Mathias also said that returns need to be limited to “ensure that you enshrine a certain percentage that goes towards the victims” and that most actions should proceed through the federal court to ensure that jurisdiction shopping stops.

Richard Ferguson 10.53am: New stimulus ‘demand-driven’, nationwide

Josh Frydenberg says the post-JobKeeper phase of income support will be “demand-driven” and will be rolled out across the nation, and not just in states hit hard by COVID-19 second waves.

As Victoria’s cases continue to balloon and more community transmission is detected in NSW, the Treasurer said the next phase – to be outlined next week – will be targeted but not state-specific.

“It will be governed by the same principles that have defined our economic measures to date, namely that our support will be targeted, it will be temporary,” he said.

“it will be designed based on existing systems and it will also be demand driven.

“We’ve gone for a national approach as opposed to state-specific approaches and that continues to be the pathway that we have set and we will follow on.”

Read more at our live coronavirus blog

Lachlan Moffet Gray 10.48am: Aus class actions most lucrative: Mathias

Chief of staff for the liberal think tank Menzies Research Centre James Mathias has told the parliamentary inquiry into litigation that Australia is becoming one of the most attractive countries to conduct a class-action suit, behind the US due to low barriers to entry and potential for return.

“In the beginning, and this is not in any way a dig at the system, in the beginning there were very low barriers for litigation in this country – you must have a feeling you have been wrong, and that there are seven other people in that class.,” Mr Mathias said, adding that litigation funders have made a return 17 times greater than the ASX200 in recent years.

Mr Mathias accused the ALP of having a “vested interest” in preventing the government’s regulatory changes to class actions, noting that firms Maurice Blackburn and Slater and Gordon have made hundreds of thousands of dollars worth of donations to the Labor Party over the past two decades.

Mr Mathias and Labor Senator Deborah O’Neill had a stoush over the Menzies Research Centre’s submission to the inquiry, which contained a quote from federal judge Michael Lee during the settlement of the PFAS class action that reflected negatively on the litigation funding industry.

Senator O’Neil accused Mr Mathias of “misrepresenting” and “misquoting” the judge and not reading the full judgment, which contained quotes to the effect that the class action system was “working, and working well”.

The Senator also called into question some statistics in the submission and suggested it could be contemptuous, accusing Mr Mathias of lying to the Australian public and calling the submission an “undergraduate essay that would fail on plagiarism and is incorrect”.

"There are some 33 litigation funders acting in Australia & a majority of those litigation funders are foreign & ... pay little to no tax due to overseas treaties & complex funding structures," @MenziesRC's James Mathias tells the joint committee on litigation funding.

— Australian Banking Daily (@BankingDailyAU) July 13, 2020

10.37am: ASX up 1.5pc in shift to value

Australia’s S&P/ASX 200 jumped 1.5pc to a 3-day high of 6007.4 amid a rotation to value amid similar moves in the US.

Financials, Energy, Real Estate and Consumer Discretionary stocks outperformed while Health Care, Tech and Materials lagged behind.

Westpac led banks with a 3.6pc rise while Woodside rose 2.3pc and Scentre gained 2.8pc. Afterpay rose 1.8pc but most tech stocks fell, with Altium down 1.5pc.

Health Care stocks were mostly down with Ansell down 0.8pc.

Technology One slipped by 2.1pc after a short attack from GMT Research, which it says is false and misleading.

Gold stocks restrained the Materials sector with Newcrest down 1.3pc but iron ore miners rose with BHP up 1.2pc.

ASX200 +78pts in mid morning trade. +ve overseas leads. Banks boosting, Energy and materials strong. Gold tarnished and IT/Hcare also lagging. A few confessions (impairments) coming through - OSH, EHE pic.twitter.com/z7YEv3yKVE

— Fiona Clark (@feeclark) July 13, 2020

Nick Evans 10.28am: Dacian slumps after further downgrades

Dacian Gold shares slumped on opening today after the miner flagged yet another downgrade to production from its WA gold mining hub.

Shares in the company were down 4c, or 10 per cent in early trading to 35.5c after Dacian released a preview of its June quarter production on Monday, saying output of 31,883oz from its Mt Morgans hub was below previous guidance of 33,000 to 36,000oz.

The latest production miss and downgrade comes only two months after Dacian raised $98m at 30c, after a complete overhaul of its mining plans at the Mt Morgans gold hub.

The company blamed the miss on slower-than-expected mining rates at its open pit in the quarter, preventing the company from accessing higher-grade material.

It said annual financial year production was 138,814oz, just within its earlier guidance of 138,000 to 144,000oz. But, in a familiar tale for long-term holders, the one-time market darling also dropped its medium term outlook, slashing 10,000oz from its expected 2021 output, to 110,00 to 120,000oz.

Dacian also lifted its expected costs to reflect lower production, saying it now expected all-in sustaining costs of $1400 to $1550 an ounce for the current financial year, up from $1250 to 1350/oz.

It said the reduced outlook flowed from a decision to close its Westralia underground operation in August, four months ahead of previous expectations.

When the company was looking ahead to building its Mt Morgans underground and open pit mining hub, it was flagging average production of 200,000 ounces a year over a 10 year mine life.

Read more: Gold shines amid year of megadeals and batterings

Lachlan Moffet Gray 10.25am: Litigation funds prioritised profit: Mathias

Chief of Staff for the liberal think tank Menzies Research Centre James Mathias has appeared before the parliamentary inquiry into litigation funding to argue in favour of the government’s regulatory changes to the industry.

In his opening statement, Mr Mathias said that since litigation funding was exempted from certain regulations in the corporations act in 2013, the industry has become a profit-spinner “for a small group of vested interests” that are more concerned with profit than natural justice.

“Vulnerable Australians are victimised not only at the cause of the class action, but at their vindication,” he said.

Mr Mathias stated that the average amount of damage payouts as funding commission in 2016 was 15 per cent but by 2019 increased to 24 per cent and criticised the structure of Australia’s 33 litigation funders after a question on their organisation from Liberal MP Celia Hammond.

“The majority of those litigation funders are foreign … many of them pay little or no tax due to overseas treaties and very complex structures,” he said.

Jared Lynch 10.21am: Estia shares halted after profit warning

Estia shares have been halted at the open, pending a further statement from the company later today.

It comes just hours after the group warned of a dramatic writedown of between $124m and $148m and confirmed two staff working across three of its nursing homes had tested positive to COVID-19.

The staff coronavirus cases come as Estia secured $5.8m from the federal government in June to help cover the extra costs of caring for vulnerable residents during the pandemic.

While it confirmed the employee infections the company said it has “had no known instance of COVID-19 infection among its past or current residents at the present time”.

EHE last traded at $1.50.

10.11am: Shares lift 1.3pc

Shares have jumped by 80 points or 1.3 per cent at the open, with outperformance in real estate, financial and energy names.

In early trade, shares are just shy of the key 6000 level, at 5999.8.

The major banks are driving the boost – all up between 2.3pc and 2.8pc.

Afterpay is headed higher by 1.9pc as Sezzle soars 20pc on its return to trade after raising $79.1m.

10.04am: Cromwell plotting data centre fund

Property fund Cromwell says its in the preliminary stages of planning a data centre fund, to hold facilities in Europe and the Asia Pacific.

Responding to speculation, Cromwell said the fund was “consistent with Cromwell’s business centre strategy announced to the ASX on June 4 where Cromwell identified demand for data centres as an opportunity it was examining”.

“Cromwell will keep the market informed as required.”

CMW last traded at 90c.

Lachlan Moffet Gray 9.53am: Litigation funding probe begins

The Parliamentary Joint Committee on Corporations and Financial Services is underway, with chair Senator James Paterson declaring that the purpose of the committee is to ascertain “whether the regulation of litigation funding and the class actions industry in Australia is adequate”.

“It is up to witnesses to this inquiry to persuade the committee firstly whether or not they think there are problems with class actions and how they are funded in Australia, secondly if there are issues, to what extent could they be remedied by a different regulatory approach, and thirdly, what the costs and benefits of a new regime would be,” Senator Paterson said.

“The task of the committee in this inquiry is to identify the public interest, in this case ensuring that our legal system delivers just outcomes for all participants.”

Under changes announced by Treasurer Josh Frydenberg in May, litigation funders will from August be required to hold an Australian financial services licence and comply with managed investment scheme rules as the government removes exemptions to the Corporations Act the industry has enjoyed since 2013.

The inquiry will today hear from parties in favour of the proposed changes like the Menzies Research Centre, and parties who are against the changes such as listed litigation funder Omni Bridgeway.

Read more: Litigation funding is a lawyers’ picnic that must end

Joint Committee inquiry into litigation funding and the regulation of the class action industry will hear from @MenziesRC, Canberra 9:30am. Tune in at https://t.co/Kw2nV2pJSX #auspol #auslaw pic.twitter.com/HXOmd76RAR

— Capital Monitor (@capitalmonitor) July 12, 2020

9.44am: Bad debts a drag on Credit Corp profit

Debt collector Credit Corp has set out expectations of full year profit between $10m and $15m as it warns of rising impairments from its purchased debt ledger assets and additional provisions from COVID-19.

The group said that while collections had rebounded from a trough in March, continued weakness in the labour market was likely to weigh on its collections and pressure its loan book arrears.

It flagged a 13.5pc reduction in the carrying value of its existing purchased debt ledger assets, representing an average reduction of 18pc in forecast cash collections against pre-COVID expectations for the next two years.

Further, its loan loss provisions were expected to increase from 19pc of its gross loan book to 24pc.

The group will hand down its final results on July 28, and expects to provide full year guidance at that time.

CCP last traded at $15.26.

9.35am: Shares primed for 2pc early jump

Australia’s share market looks set to open up more than 2pc as a solid rise in US stock index futures in early Asian trading has added to strong offshore leads from Friday night.

S&P/ASX 200 futures relative to fair value had suggested the index would open up 1.9pc at a 4-day high of 6032 after vaccine optimism offset the worsening coronavirus pandemic.

But S&P 500 futures are up 0.4pc after rising as much as 0.6pc in early trading despite the worsening coronavirus pandemic in the US, where cases hit a daily record in Florida, although deaths more than halved.

A 2.4pc rise in WTI crude saw the US Energy sector lead S&P 500 as it jumped 1.1pc to a 4-week high of 3185 on Friday. The US Materials sector benefited from a 1.6pc rise in the LME metals index and a 1.8pc rise in spot iron ore, and a 5.3pc rise in the KBW Banks index boosted the Financials sector ahead of bank reports this week.

US defensive and growth sectors including Staples, Communications, Health Care and Tech lagged behind on Friday and a similar rotation to value may be in store for the Australian market.

But there remains a risk of rising volatility hitting equities this week as high-frequency data start to reflect the second-wave of coronavirus and the US earnings season gets underway.

Importantly, the VIX volatility index remains near its rising 200-day moving average at 26.3pc at a time when share market valuations are stretched and economic uncertainty is high.

China’s share market also bears watching today after the Shanghai Composite fell 2pc on Friday, ending an 8-day rise to a 2.5-year high.

9.31am: What’s on the broker radar?

• Abacus reinstated at Outperform – Macquarie
• Platinum price target raised 13pc to $3 – Citi

9.24am: Sezzle returns after $79m placement

Buy now, pay later platform Sezzle will return to trade this morning after raising $79.1m via an institutional placement, to accelerate its growth strategy and strengthen its balance sheet.

Shares were offered at $5.30, up from a floor price of $5 apiece, representing a 23.7pc discount to its last traded price of $6.95.

Chief Charlie Youakim thanked existing institutional shareholders who continued their support, along with new investors who joined the placement, and “their embracing of Sezzle management’s long term vision and strategy to deliver returns over the coming years”.

The group will offer a further $7.2m of shares to retail holders in a share purchase plan at the same placement price.

Read more: Sezzle rises in buy now, pay later land grab

9.15am: Oil Search flags $US300m writedown

Oil Search says it expects a $US250m – $US300m impairment charge of assets, as the global economy slips into recession and oil and natural gas prices remain well below year-ago levels.

Oil Search said the post-tax impairments mostly relate to exploration licenses in Papua New Guinea, and would be recognised in its half-year result due for release on August 25.

The company said it had reviewed the licenses as part of its ongoing strategic review and several were identified “as being of reduced priority due to lower prospectivity or sub-optimal economics”.

“As there is no current intention to pursue activities on these assets, the full value of these exploration assets is expected to be written down,” said managing director Keiran Wulff.

Oil Search said it would also recognise a small impairment charge against exploration leases in Alaska that it expects to relinquish.

“Given the ongoing gas supply uncertainties resulting from the recent suspension of mining activities at the Porgera Project, the carrying value of the Hides Gas-to-Electricity Project is also expected to be fully impaired,” Mr. Wulff said

Dow Jones Newswires

Oil Search has warned of a $US300m writedown for the full year. Picture: Supplied.

9.05am: Cochlear CFO resigns

Cochlear chief financial officer Brent Cubis has resigned from the hearing aid maker, set to leave at the end of the year “to pursue other opportunities”.

The company made the announcement this morning, saying they had commenced a search to find his replacement.

Mr Cubis joined Cochlear in March 2017 and was said to have “strengthened capability and commercial acumen across the global finance function”.

Samantha Bailey 9.01am: Estia warns of COVID cases, impairments

Aged care service provider Estia Health has told the market this morning that two of its staff members have tested positive for COVID-19 as it flagged a non-cash impairment charge its full year results.

Neither of the two employees to have tested positive for COVID-19 showed any symptoms of the virus.

All infection control precautions were put in place immediately and no cases have been detected in any residents, Estia Health said in a statement to the ASX on Monday morning.

The company said the impairment, which is expected to be between $124m and $148m, was a result of ongoing funding and financing uncertainty in the aged care sector, exacerbated by issues arising from the COVID-19 pandemic.

The company will release its full-year results to the market on August 18.

EHE last traded at $1.50.

8.48am: Praemium FUA rebounds

Investment platform Praemium says its funds under administration has rebounded to above $20bn in the June quarter, an increase of 26pc on the same time last year.

After a hit from the market rout last quarter, Praemium today said it had recorded $459m in inflows for the quarter, up 43pc from March, and helped by $400m in positive market movements.

This includes a 9 per cent increase in platform funds under management in Australia to $5.7bn.

Praemium said with COVID-19 continuing to impact all 6 countries in which it operates, it had maintained work from home requirements across its 10 offices.

“Our resilient business model, including diversified revenue streams, a strong balance sheet and solid cash flows, also provides the financial strength to withstand any future volatility and support the business for the long term,” chief Michael Ohanessian says.

He added that the company’s takeover bid for Powerwrap was progressing well, touting the opportunity as having potential to boost FUA to $27bn.

5.50am: ASX set to surge at the open

Australian stocks are set to open firmly higher, after Wall Street surged on Friday as progress on a coronavirus vaccine offset worries about spiking US case levels.

Australian futures markets are pricing in a 95 point, or 1.6 per cent, gain on opening, even as Victoria on Sunday recorded 273 new cases of coronavirus.

The Dow Jones Industrial Average on Friday advanced 1.4 per cent. The S&P 500 rose 1 per cent and the Nasdaq Composite climbed 0.7 per cent to afresh record for the technology-heavy index. All three indexes were positive for the second consecutive week, even as new coronavirus cases in the US repeatedly hit fresh records.

Last week, when the Nasdaq index hit a record high and China’s sharemarket hit a 2½-year high, Australia’s sharemarket had its worst five-day run in a month as the second wave of coronavirus in Melbourne prompted a closure of the NSW and Victorian border and a lockdown of Melbourne.

Even after the Nasdaq had its best day in seven weeks last Monday — boosting the S&P 500 to its best level in four weeks — Australia’s S&P/ASX 200 continued to slip as Victoria outlined a stage-3 lockdown of Melbourne for at least the next six weeks.

By the end of last week, the S&P/ASX 200 had fallen 2.3 per cent to 5919.2 points, making it the worst week in four. If not for a late bounce off a seven-day low of 5899.5 on Friday it would have been the worst week for Australian shares in almost three months.

In the week ahead, the release of Westpac-MI Consumer Sentiment Index on Wednesday may shed some light on the impact on national confidence of the Victorian virus spike.

Also to be closely watched is employment numbers on Thursday, with economists tipping the unemployment rate shifting to 7.1 per cent in June from 6.4 per cent in May.

Investors are also bracing for the start of US earnings season, with Citi, JPMorgan and Wells Fargo due to report on Tuesday, amid reports that Wells is looking to let go thousands of workers.

Goldman Sachs reports on Wednesday, while BofA, Morgan Stanley and Netflix are out on Thursday.

The Australian dollar was this morning at US69.42c, up from US69.36c on Friday.

Read More

5.30am: Hedge fund wins McClatchy auction

Hedge-fund manager Chatham Asset Management emerged as the winner in a bankruptcy auction for McClatchy Co, ending 163 years of family ownership for the newspaper chain and increasing financial investors’ control of the American publishing industry.

The sale, announced by McClatchy on Sunday, must be approved by the judge overseeing its bankruptcy. McClatchy publishes some 30 daily papers, including the Miami Herald, the Sacramento Bee and the Kansas City Star.

The sale price for McClatchy’s assets couldn’t immediately be learned. A purchase agreement should be filed in the U.S. Bankruptcy Court in Manhattan in coming days, McClatchy said.

For years, the U.S. newspaper industry has struggled to cope with the collapse of print advertising as readership has moved online and the digital ad market became dominated by tech platforms like Alphabet Inc.’s Google and Facebook Inc. McClatchy filed for chapter 11 protection in February before the outbreak of coronavirus, which has further destabilised the industry, causing widespread lay-offs and cost cuts.

A sale to Chatham would mean roughly one-third of all newspapers sold in the U.S. each day are published by companies controlled by financial institutions.

Dow Jones

5.25am: China economy rebounds

China returned to growth in the second quarter after the coronavirus pandemic handed the world’s second largest economy its first contraction in decades, according to an AFP poll of analysts.

The survey of analysts from 11 institutions pegged China’s growth at 1.3 per cent — a far cry from the 6.1 per cent expansion posted last year but in better shape than other countries still grappling with the contagion.

The coronavirus, which first emerged in China’s industrial central province of Hubei late last year, has shut businesses worldwide and destroyed hundreds of millions of jobs.

But analysts forecast China will be the only major economy to experience positive growth this year — partly because it was first to be hit by COVID-19 and therefore first to recover.

China is expected to post 1.7 per cent growth for the full year, according to the economists surveyed by AFP, compared with IMF forecasts of a global contraction.

Growth data for the April to June period will be published on Thursday.

A car factory in Weifang, in China's Shandong province. Picture: AFP

AFP

5.20am: Wall St recap

Wall Street stocks jumped Friday, with the Nasdaq racing to yet another record as progress on a coronavirus vaccine offset worries about spiking US case levels.

The tech-rich Nasdaq Composite Index finished at 10,617.44, up 0.7 per cent, notching its sixth record close in seven sessions.

The Dow Jones Industrial Average rose 1.4 per cent to end the week at 26,075.30, while the broadbased S&P 500 advanced 1.1 per cent to close at 3,185.04.

Investors cheered remarks from the head of German biotech firm BioNTech to the Wall Street Journal that a vaccine candidate would be ready for regulatory review by the end of the year.

Analysts also pointed to a positive announcement from Gilead Sciences about clinical trials on remdesivir, a drug treatment for coronavirus.

The US has been averaging more than 50,000 new coronavirus cases a day of late, leading more states where infections are spiking to roll back steps to reopen their economies after closures earlier this year.

But airlines and hotel stocks rallied Friday, along with petroleum producers — sectors hard-hit by social distancing protocols.

The prospect of a vaccine in the foreseeable future “is the kind of announcement that gives the market a bit of comfort that there is light at the end of this,” said Quincy Krosby, chief market strategist at Prudential Financial.

Another winner was Carnival, which surged 10.8 per cent as it confirmed that its Aida cruise line would resume sailing in August, the first of nine brands to begin again after a worldwide shutdown due to the pandemic.

AFP