Trading Day: ASX holds gains as US futures jump
Miners, banks among the winners as sharemarket holds gains. Analysts see threats to Coke takeover. Petrol prices in biggest weekly rise.
That’s all from the Trading Day blog for Monday, January 25. Australian stocks have held gains, ahead of a holiday on Tuesday and a week of global and domestic economic data and US earnings.
John Stensholt 7.47pm: Waislitz technology punts pay off
Billionaire Alex Waislitz has had a good start to the year, doubling his money on a couple of diverse investments as he chases big returns from stockmarket float candidates.
Waislitz was a pre-IPO investor in Australian cryptocurrency payments firm Banxa, which listed on the TSX Venture Exchange in Canada earlier this month.
Banxa offers payment services for cryptocurrency investors, converting normal currency to crypto via its gateway. It reportedly processes more than $100m in transactions every quarter and announced recently that it had processed almost $3m on a single day.
It commenced at slightly less than $C1 and rose to $C1.92 on its first day of trading in the first week of January. At one stage it almost doubled in value again but has since settled back to trade at $C2.25 at the end of last week.
At that value it means Waislitz is up more than 100 per cent on his investment so far, having bought into Banxa in January last year via his Thorney Investments and listed investment company Thorney Technologies when Banxa raised $2m in a pre-float Series A round.
Waislitz has also recently doubled his money in another float candidate called AP Ventures, the venture capital firm backed by billionaires Nick Molnar and Anthony Eisen of Afterpay fame.
6.06pm: $A expected to break above US78c: CBA
Commonwealth Bank’s Global Markets Research notes AUD/USD continued to trade within its recent 0.7640‑0.7800 range.
“Australian Q4 2020 CPI is this week’s local economic highlight (Wednesday). We expect a 0.9%/qtr jump in headline CPI and a 0.4%/qtr lift in the trimmed mean CPI.
“We expect annual rates of inflation to remain low.
“We expect AUD to break above 0.78 in coming weeks because of high commodity prices. However, the risks facing AUD are not all up.
“The risk of lower Chinese steel production over 2021 to help meet the Chinese government’s goal of net‑zero emissions by 2060 can weigh on iron ore demand and AUD.”
Eli Greenblat 5.51pm: DJs reports improving trading performance
Upmarket department store David Jones has reported an improving trading performance in the lead up to Christmas, powered by the Black Friday sales, government stimulus and the easing of restrictions, although the severe 12-week lockdown in Victoria was a drag on its results.
South Africa’s Woolworths Holdings has issued a trading update to the market with its David Jones department stores which showed a strong Christmas similar to the bounce in sales for many consumer discretionary retailers, especially in the fashion sector which has ridden a wave of demand from shoppers.
Woolworths Holdings said that in Australia while the 12-week lockdown in the state of Victoria negatively impacted sales for the half, the easing of COVID-19 restrictions, together with the extended JobKeeper relief, its successful Black Friday and Cyber Monday campaigns, and further growth in our online sales, contributed to an improved performance in the last six weeks of the reporting period.
David Jones sales over the 26-week period declined by 8.8 per cent and by 10.5 per cent in comparable stores.
The retailer, which bought David Jones for $2.1bn in 2014, said excluding Victorian stores, which traded significantly down on the prior period due to the extended lockdown in the state, the balance of the David Jones business, including online, grew by 5.9 per cent.
Online sales increased by 55.5 per cent, contributing 17.7 per cent to total sales over the half.
5.20pm: China lead destination for foreign direct investment
China overtook the US as the world’s top destination for new foreign direct investment last year, as the Covid-19 pandemic amplifies an eastward shift in the center of gravity of the global economy.
New investments by overseas businesses into the U.S., which for decades held the No. 1 spot, fell 49% in 2020, according to U.N. figures released Sunday, as the country struggled to curb the spread of the new coronavirus and economic output slumped.
China, long ranked No. 2, saw direct investments by foreign companies climb 4%, the United Nations Conference on Trade and Development said. Beijing used strict lockdowns to largely contain Covid-19 after the disease first emerged in a central Chinese city, and China’s gross domestic product grew even as most other major economies contracted last year.
The 2020 investment numbers underline China’s move toward the center of a global economy long dominated by the U.S. -- a shift accelerated during the pandemic as China has cemented its position as the world’s factory floor and expanded its share of global trade.
While China attracted more new inflows last year, the total stock of foreign investment in the U.S. remains much larger, reflecting the decades it has spent as the most attractive location for foreign businesses looking to expand outside their home markets.
Foreign investment in the U.S. peaked in 2016 at $472 billion, when foreign investment in China was $134 billion. Since then, investment in China has continued to rise, while in the U.S. it has fallen each year since 2017.
The Wall Street Journal
4.39pm: ASX ends +0.4% at 11-month high
Australia’s sharemarket rose to an 11-month high on a daily closing basis before Australia Day as US futures rallied.
The S&P/ASX 200 finished up 0.4pc at 6824.7 - its highest daily close since 25 February 2020 - after hitting an intraday high of 6832.6.
The index is just 5.2pc below the record high of 7197.2. It came as US futures pointed to a rebound on Wall Street with S&P 500 futures up 0.4pc and NASDAQ futures up 0.8pc.
“Despite commentary homing in on the risks brought by an all too bullish market right now, as well as signs of slowing upside momentum in risk assets, stocks have broadly climbed in the Asian region today, with our prices suggesting a jump at the open for European indices and a flat start for US indices tonight,” said IG strategist, Kyle Rodda.
“There’s been relatively little substantial news for market participants to pick apart today, and perhaps that’s helped risk appetite overall. The key issues remain the vaccine and fiscal stimulus, and they are currently tailwinds for the markets, with risks like tighter lockdowns or future inflationary pressures being shoved to the periphery.”
“IT stocks continued their recent outperformance. But it was the so-called value stocks – those that ought to benefit mostly from the reflation trade – were what kept the market from a stronger showing: the energy, financial and industrial sectors all finished in the red for the day.”
Among heavyweights, Fortescue rose 4pc, BHP gained 1.1pc, Wesfarmers rose 1.7pc and Rio Tinto added 2.1pc, while Afterpay rose 1.5pc.
IDP Education jumped 5.7pc on a target price upgrade from UBS.
1.53pm: Petrol prices post biggest weekly increase
The national average price of unleaded petrol notched its largest increase on record last week, jumping 14.4 cents a litre to an average price of 134.0 cents, according to the Australian Institute of Petroleum.
CommSec chief economist Craig James said it was the largest one-week rise in 17 years of records, with metro price increases outpacing rural price growth: In the major cities pump prices went up 19.7 cents while regional prices went up 3.7 cents.
Mr James said based on regional and wholesale prices, the cost at the pump should only have increased by 2-3 cents a litre, as it did in Perth. But what was a modest lift in wholesale prices combined with the end of a discount cycle, meant a large price increase for many Australians.
However, he also said the price should decline in the next few weeks.
“The good news is that capital city pump prices are easing from cyclical highs of the discounting cycle,” he said.
“Prices are falling quickly in Adelaide but only slowly in Sydney, Melbourne and Brisbane. Over the next 2-3 weeks, pump prices should fall by around 25-30 cents a litre.
“So motorists should top up rather than fill up with prices just off cyclical highs.”
Lachlan Moffet Gray 1.42pm: Afterpay shares in big block trade
Investor appetite for buy-now-pay-later firm Afterpay doesn’t seem to be slowing, despite the shares gaining more than 1700 per cent from its 52-week low of $8.01 in March of last year to hit an highest of $151.22 on January 22.
According to Bloomberg, 955,071 Afterpay shares traded in a block at $143.50 a piece.
It values the trade at more than $137m, making it one of the largest purchases of Afterpay shares ever, behind the $203m block purchased by Goldman Sachs in November last year at $71.50 a piece.
1.10pm: What could end historic rally?
Amid record highs in the US and global share markets, Citi’s chief US equity strategist, Tobias Levkovich, notes that among his clients there’s “general concern that the market may peak at some point in time, but that is not stopping share prices from appreciating further.”
Despite concern among clients that they have “missed” the recent move into value, small caps and cyclical stocks, he argues that there is “still opportunity in areas that have not been rewarded similarly”, with capital goods and consumer services having underperformed energy and financials.
And while his panic/euphoria model is “clearly warning us on ebullience”, he notes that was also the case through 1999 before indexes finally peaked in early 2000.
Other measures implying exuberance include the fact that household equity exposure as a proportion of financial assets at 50-year highs (as appreciation has bolstered portfolios).
But “other measures also imply exuberance, with complacency stemming from the sense that central banks are backstopping all risk.”
Another concern among his clients is that “inflation may be coming back”.
He thinks inflation may spike in the near term if supply/demand imbalances develop and that “we could plausibly witness an inflation scare or two in 2021.
As for what could end the rally in shares, Mr Levkovich notes that while President Biden has proposed $US1.9 trillion ($2.46 trillion) of fiscal stimulus, “something shy of $US1 trillion is doable despite the President’s hopeful tone on unity in his inaugural address.”
“Less stimulus would be a market disappointment, as might a bout of inflation - even short term - as well as potentially higher taxes or even the Fed signalling changes to its low-rate stance in 2022/23,” he says.
“China trade policy also could be another disrupter. With vulnerabilities from sentiment, valuation and slackening earnings revisions, current risk/reward is unattractive given our 3,700-4,000 trading range expectation.”
12.01pm: ASX up 0.4pc at midday
Australia’s share market has clung to gains, amid a jump in US futures.
The S&P/ASX 200 was up 0.4pc at 6824 at midday after trading in a higher range of 6807-6827.4.
The index was close to breaking an 11-month high of 6829.3 that it reached on Thursday.
Trading was quiet before tomorrow’s Australia Day holiday, and ahead of some major economic data, US earnings reports and a Fed meeting this week.
But gains in US futures pointed to a bounce on Wall Street despite worsening news on the COVID pandemic over the weekend.
S&P 500 futures rose 0.3pc and NASDAQ futures gained 0.6pc in early APAC trading.
Australian share market leaders included a mix of consumer discretionary, staples, utilities, tech and financial companies.
Among heavyweights, Fortescue 3.5pc, Wesfarmers gained 1.8pc, CBA rose 0.6pc, Woolworths gained 1pc, Afterpay was up 1.5pc and Goodman Group rose 1.6pc.
Regulatory approval for Pfizer’s COVID-19 vaccine came as expected and travel-related companies didn’t benefit,
Among them, Qantas fell 1pc, Ampol lost 4.6pc, Flight Centre fell 2.8pc and Webjet lost 3pc.
Ben Wilmot 11.55am: Housing values ‘turn positive’
Capital city home values are in positive territory according to research house CoreLogic, as expectations grow of a property price surge.
The company’s property market indicator summary shows a year-to-date increase of 0.1 per cent for Melbourne while Sydney is flat. Among the other capital cities measured, Brisbane Adelaide and Perth were all up by 0.4 per cent.
The index showed that in recent months rises are occurring in the three smaller capitals, while Sydney and Melbourne are also bumping up.
There is a wide differential in the capital city properties listed for sale, with a 13.8 per cent decrease in the number of total listings in Sydney down to 12,446, while Melbourne has seen a 12.4 per cent increase, up to 19,001.
Overall there has been a 19 per cent drop in the total number of listings over the 12-month period across capital city markets down to 63,835.
But there are encouraging trends with the number of new listings surging in Melbourne over that time. They are up by 35.3 per cent to 3349 while Sydney was soft, dropping 3.5 per cent to 2336 new listings.
Eli Greenblat 11.46am: Bega completes Lion deal
Bega Cheese, which includes the Vegemite brand in its growing foods portfolio, has confirmed completion of the $560 million acquisition of Lion Dairy & Drinks business.
The deal will see Lion’s biggest dairy and drinks brands such as Pura, Dairy Farmers and Big M sit alongside the existing Bega stable of foods, cheeses and spreads, to make it one of the biggest foods manufacturers in Australia and a dominant player in the dairy aisle of the nation’s supermarkets.
Bega executive chairman Barry Irvin said the deal’s completion marked a significant day in the history of Bega.
“The acquisition of Lion Dairy & Drinks doubles the size of the company with revenue of $3 billion and brings together great brands including Bega Cheese, Vegemite, Dare, Farmers Union, Dairy Farmers, Yoplait, B honey, Big M, Masters, Juice Brothers and Berri.
“This goal of creating a great Australian food company with the capacity to service our customers in Australia and around the world took a major step forward today.”
After losing the bidding war for Warrnambool Cheese and Butter seven years ago, Bega triumphed over rival Saputo and John Wylie’s Tanarra Capital to snap up Lion Dairy & Drinks.
The acquisition will almost double Bega’s milk intake from 955 million litres to 1.7 billion litres a year.
11.29am: Look outside US equities for value: Citi
Investors worried about excess valuations in the US share market and the potential bursting of equity bubbles there should look elsewhere, says Citi’s chief global equity strategist, Robert Buckland.
His current favourite “value trade” in equities is the UK market, which now trades on a cyclically-adjusted PE ratio of 15 times, way below the NASDAQ and S&P.
And against UK gilts (bonds), UK equities are the cheapest they have been for a hundred years.
But even the frothiest equity indices still lag well behind performance during previous bubbles, Mr Buckland says.
While the NASDAQ is up 96 per cent over the past three years, it rose 201pc before its early 2000 peak. After that it fell by 72pc.
The S&P is up 44 per cent compared to 98 per cent in the late 1990s, while the MSCI World ex-US is currently flat over 3 years.
Moreover, while global equities are “looking increasingly frothy”, their current valuations also lag previous mega-bubbles, Mr Buckland notes.
The NASDAQ now trades on a CAPE of 58 times - well above its long run median of 38 times, but still well below its 113 times CAPE ratio reached in 2000 and a CAPE of 83 times for Japan in 1990.
The S&P meanwhile is trading on a CAPE of 36 times and Mr Buckland also notes that past equity bubbles hit much higher valuations at times when government bonds were yielding 5-6 per cent - not the 0-1 per cent they are now.
Also, while global equities are currently vulnerable to hints of higher rates or QE tapering from central banks, history suggests that bubbles can inflate even as rates rise.
Eli Greenblat 11.15am: Youfoodz confirms prospectus forecasts
Consumer lockdowns and the popularity of ready-made meals or home deliveries propelled sales for the recently-listed Youfoodz, which has posted robust second quarter growth and confirmed its prospectus forecasts.
Youfoodz said it will hit its forecasts of $149.9 million in revenue for fiscal 2021 and a pre-tax profit of $500,000 although it will still produce a net loss of around $600,000 for the year.
Youfoodz said key metrics showed continued substantial growth during the second quarter, notwithstanding the continued impact of the COVID-19 pandemic, including demand volatility and raw material and service cost fluctuations.
“Youfoodz has been able to successfully manage these market-wide occurrences and anticipates the COVID-19 pandemic may continue to have unpredictable impacts across the industry,” the company said.
During the second quarter, the meal kits business produced over 4.8 million meals, up 28 per cent, generated gross revenues of $50.6m, up 26.8 per cent, and net revenues of $36.7m, up 25.4 per cent.
“On a quarter-on-quarter basis, it was extremely pleasing that gross revenue for the second quarter .....was up 2.3 per cent on the equivalent figure in the first quarter,” it said.
This translated into first half gross revenues of $100m, up 16.5 per cent, which is consistent with prospectus forecasts.
Home delivery remained the key contributor to growth for the period, while sales through the wholesale channel continued to be constrained.
11.05am: Upside risk to CC-Amatil bid: Macquarie
Macquarie Equities sees “upside risk” to the $2.75 a share takeover offer for Coca-Cola Amatil from CC-European Partners given recent share price performance and a “strong” Q4 trading update.
“It raises the risk of shareholders voting against the scheme if it is not revised up,” notes Macquarie analyst Ross Curran.
“As a reminder, 25pc of shareholders - excluding KO (CC USA) and its 30.8pc stake - are able to block the scheme.”
Mr Curran adds that the recent trading update justifies consensus upgrades since it implies that volume declines have bottomed as activity resumes in Australia/NZ.
He also says CC-Amatil CCL stands to benefit from any easing in social/government restrictions and will be cycling undemanding comps into FY21.
CCL last down 0.2pc at $13.01.
Bridget Carter 11.01am: Pressure to lift Coke takeover offer: Morgans
Analysts at Morgans believe that Coca-Cola European Partners’ attempts to buy the Australian-listed Coca-Cola Amatil for $9.3bn could be in jeopardy, with pressure mounting to offer a higher price.
The analysts said in a research note that Coca-Cola Amatil’s fourth quarter trading results and 2020 financial year guidance, which were announced to the market on Friday, were materially stronger than expected.
“We think Coca-Cola Amatil’s better-than-expected trading justifies a higher offer price.”
Morgans said following earnings upgrades, its valuation had risen to $11.43 per share from $10.83 per share previously for the stock.
CCEP in October offered $12.75 per share for the company, less any dividend paid, which Morgans expects to be 26 per share.
This was months after Coca-Cola Amatil sales were hard hit by COVID.
A scheme booklet for CCEP’s offer is expected to be sent to shareholders in early March ahead of a shareholder vote.
The Coca-Cola Company based in the United States has a 30 per cent share in Coca-Cola Amatil, and plans to sell its shares into the offer at a discount.
“Given Coca-Cola Amatil’s stronger than expected trading update and medium-term earnings benefits from its COVID and ‘Fighting Fit’ cost savings (equating to A$145m), we think this increases the pressure on the board to pursue a higher offer from CCEP.”
The offer now represents only an 11.5 per cent premium to Coca-Cola Amatil’s valuation, equating to 12 times earnings before interest, tax, depreciation and amortisation to enterprise value or 9.9 times on more normal earnings after a COVID recovery.
In the past, bottling companies have been purchased at between 10 and 12 times, with developed countries at lower multiples and emerging companies at higher multiples given their stronger growth profile.
Lachlan Moffet Gray 11.01am: Savings to power rebound: Citi
Citi Research has moved its forecast for a return to pre-COVID levels of output from the second to the third quarter of 2021 due to border closures and “temporary restrictions that arose from local COVID cases in Sydney, Melbourne, and Brisbane at the start of the year”.
A “relatively mild” GDP decline of 2.7 per cent is forecast for 2020’s full-year results, while a positive growth rate of 3.6 per cent is forecast for 2021, while 2022 will see a “still-respectable” 2.5 per cent.
The researchers believe the rebound will be led by household spending financed by the near $100bn in savings accumulated throughout the pandemic, alongside rapid recovery in employment, equity and housing asset values.
“We forecast household consumption growth of 7.3 per cent this year, moderating to a still-high 3.4 per cent in 2022,” Citi analysts wrote in a note.
The analysts also believe that the potential of a COVID-19 vaccine to power growth is not as significant as in other economies “because of the relatively lower level of restrictions on daily activity to begin with,” but believe it will provide tailwinds to some sectors of the economy, helping bring down unemployment to 6.1 per cent by the end of the year.
The end of year forecast for 2022 is an unemployment rate of 5.6 per cent, meaning wage-based inflation will “remain modest.”
Lachlan Moffet Gray 10.51am: Banks tipped to lift dividends
Analysts at Ord Minnett are forecasting a slow return to typical bank dividends over the next two years due to strong capital positions.
“Strong capital positions should see the banks lift dividends materially in 2021, which is reflected in our forecasts for dividend yields of 3–4pc this year, building to 4pc to 5pc in FY22,” the analysts wrote.
“Capital management may become a theme later in the year, with CBA and NAB the best placed.”
The analysts said that FY21 net profits will be flat for the major banks amid ongoing mortgage competition when “banks are running out of room to cut rates further.”
10.28am: ASX opens higher as US futures rise
Australia’s share market rose slightly in early trading as US futures advanced.
The S&P/ASX 200 rose 0.4pc to 6827.4, as S&P 500 futures rose 0.3pc.
Outperforming sectors included Consumer Staples, Tech, Consumer Discretionary sectors and Materials, with Woolworths up 0.9pc, Afterpay up 2.3pc, Wesfarmers up 1.5pc, and Fortescue up 2.5pc.
Underperforming sectors included Energy, Industrials and Tech, with Woodside down 0.9pc, Transurban down 0.5pc and Xero down 1.6pc.
While the TGA has given provisional approval to the Pfizer vaccine as expected, travel-related stocks aren’t benefiting.
Qantas fell 0.8pc, Flight Centre fell 2.8pc, Webjet fell 2pc and Ampol down 3.1pc.
But banks are outperforming with the four majors up 0.4-0.6pc after Yarra Capital’s Dion Hershan predicted 2-3 years of double-digit earnings growth for the banks.
Bloomberg’s top US story is about how a global economic recovery has been delayed by slow vaccine rollouts, with the IMF due to update its view this week.
10.12am: Coles closing gap on Woolies: UBS
The latest UBS Supermarket Supplier Survey shows further improvement at Coles, although Woolworths Food continues to outperform.
The survey, conducted in January, featured 49 Australian fast-moving consumer goods players who rated Coles and Woolworths Food across 26 issues on a scale of 1-10.
The key findings were: Coles closing the gap, with the second consecutive half of improvement in 20 (of 26) sub-categories; Woolies is still out-performing and won Christmas according to 65pc of suppliers; Woolies average score is in line with historic high levels; market growth expectations are “strong”, with suppliers expecting 2pc on year market growth in 2021 despite 10pc growth in 2019, implying upside to UBS estimates; inflation was “supportive”, with suppliers expecting 1.3pc inflation in the next 12mths versus 1.0pc as of last June; and average Coles/Woolies inflation in the 2QFY21 slowed, albeit driven by fresh, with dry-goods recording solid growth of 2.6pc.
“Overall, results were supportive of our positive sector view and preference for Woolworths,” says UBS analyst Aryan Norozi.
“The results give us more confidence in our positive sector stance - structural COVID demand, inflation.
“While suppliers were incrementally positive on Coles, we believe further improvement is needed before it translates into market share.
“Overall, we maintain our sector preference for WOW and Neutral on Coles.”
10.07am: Nickel Mines hits record metrics
Nickel Mines Limited has reported record production and financial results for the fourth quarter, producing 11.527 tonnes of nickel and selling 11.401.4 tonnes.
The sales earnt a record $US158.8m ($205.9m) in revenue, up 16.6 per cent on the prior quarter, while EBITDA came in at $US71.6m ($92.8m), up 45.6 per cent on the prior quarter.
The strong earnings boosted the company’s cash on hand by 274.6 per cent to $US351.4m ($455.7m).
Managing Director Justin Werner attributed the results to consistent production and a stronger nickel pig iron price.
9.40am: What’s impressing analysts today?
Syrah cut to Neutral: CS
Viva Energy started at Outperform; $2.20 target price: Macquarie
Mirvac cut to Neutral: JPM
SCA Property cut to Neutral: JPM
Charter Hall Retail raised to Overweight: JPM
Mount Gibson cut to Neutral: Citi
9.27am: Shares set to stall before key events
Australian shares look set to stall before Australia Day and key events this week.
A slight rise in futures on Friday night suggests the S&P/ASX 200 will open marginally higher, and BHP ADR’s equivalent close at $36.54 was a 0.9pc premium to BHP’s Sydney close.
The absence of sharp falls on Wall Street avoided potential bearish chart patterns that might have formed after recent strength, including the strongest Inauguration Day rally on record.
But offshore leads may deteriorate early this week amid worsening COVID-19 news. If so the S&P/ASX 200 may test support from former resistance around 6755 and last week’s high of 6829.3 may cap.
President Joe Biden plans to reimpose a travel ban on nearly all non-US citizens who have been in Brazil, the UK, Ireland and 26 other European countries, as well as those who’ve recently been to South Africa, Reuters reports.
Late last week there were lockdowns announced for parts of Kowloon and Malaysian holiday resorts, case numbers in US and Mexico have hit records, and President Biden has predicted US pandemic deaths will exceed 600,000.
PM Johnson said the new UK covid variant was perhaps a third more deadly than the original strain, UK Health Secretary Matt Hancock said early data showed vaccines may be 50pc less effective against the South African variant, and EU political leaders were dismayed by supply problems for the Astra Zeneca and Pfizer vaccines.
It’s also a big week for economic data, central bank policy and earnings. Major economic data include domestic CPI, NAB’s business survey and US GDP on Wednesday.
Earnings reports include Microsoft after the US close on Tuesday and reports from Apple, Tesla and Facebook on Wednesday.
The Fed meets Tuesday and Wednesday with its policy statement due at 6.00am Thursday Australian time.
The S&P/ASX 200 fell 0.3pc to 6800.37 on Friday.
Lachlan Moffet Gray 9.23am: Moody’s in Crown rating move
Credit rating agency Moody’s has withdrawn its credit rating of Crown Resorts’ euro medium term note program, the gaming company announced this morning.
Late last year Moody’s downgraded Crown’s issuer level to just above “junk” status, citing revelations of potential money laundering through company accounts unveiled at the NSW gaming regulator’s inquiry into the company’s suitability to operate Crown Sydney at Barangaroo.
The ratings agency said the revelations were one of many that increased the risk of regulatory action both in NSW and elsewhere, leading to potential financial penalties and raising the spectre of the company losing its right to operate Crown Sydney.
In a release to the ASX today Crown Resorts said that if the official raters of the notes unrated them or placed them below investment grade, noteholders may be able to redeem them.
Moody’s still provides an issuer rating for Crown more broadly.
Lachlan Moffet Gray 8.40am: PointsBet signs Shaq as brand ambassador
Listed gambling app PointsBet has signed US basketball legend Shaquille O’Neal as its brand ambassador for Australia, with the former star to receive part of his compensation in the form of equity in the company.
O’Neal, a four-time most valuable player (MVP), is generally considered one of the greatest basketball players of all time, with a highly successful NBA career over almost two decades.
Since leaving professional sports O’Neal has launched successful business ventures and become a basketball analyst.
PointsBet said O’Neal will headline the 2021 brand campaign across television, social media and mobile channels.
O’Neal said he was excited to partner with the group. “The rise of responsible sports betting is really exciting, and I am so excited to join forces with PointsBet, the best-in-class partner in Australia when it comes to online sportsbooks,” he said.
8.35am: Saudi PIF boosts domestic investments
Saudi Arabia’s sovereign wealth fund will invest $US40 billion annually in the domestic economy over the next five years, the crown prince said Sunday, as the kingdom battles high unemployment and a coronavirus-triggered slump.
The Public Investment Fund “will invest at least 150 billion riyals ($US40 billion) annually in the domestic economy until 2025,” Prince Mohammed bin Salman said in a speech carried by state media.
The PIF, the main engine of the kingdom’s efforts to diversify its oil-dependent economy, has previously been focused on investing in major global giants -- from ride-hailing app Uber to US carmaker Lucid Motors.
The PIF intends to boost its assets to 4 trillion riyals ($US1.07 trillion) and directly or indirectly create 1.8 million jobs by 2025, the crown prince added.
Prince Mohammed’s speech coincided with a royal decree on Sunday which declared the sacking of central bank governor Ahmed Al-Kholifey.
AFP
Lachlan Moffet Gray 8.24am: Silver Lake set to meet forecasts
Gold and Silver Miner Silver Lake Resources says it is well placed to deliver FY21 guidance for gold sales of 240,000oz to 250,000oz after selling 59,824oz of gold in the last quarter at $2336/oz.
The company also upgraded full-year copper sales guidance to 1600 tonnes from 1100 tonnes after selling 931 tonnes in the last quarter at a price of $2400/oz.
Over the quarter the company increased cash and bullion by $12m to $315m, with no debt.
5.55am: ASX set to edge higher despite US leads
Economic data, both global and domestic, could call the shots for the market through the week.
The local sharemarket is set to open slightly higher on Monday, with ASX futures up 15 points, or 0.2 per cent, ahead of the Australia Day public holiday on Tuesday, and a slew of domestic and US economic data to be released in coming days.
It comes despite bearish leads from Wall St after a week of Biden-inspired growth.
The Australian dollar is lower at US77.15c.
IG market analyst Kyle Rodda said this week the market would be taking cues from US economic data.
“There’ll likely be too a level of positioning going in the market ahead of a big week... which will include advance US GDP data, a Fed meeting, and the meatiest week of the US earnings season, Mr Rodda said.
AMP Capital chief economist Shane Oliver said earnings of the US companies that had reported so far had largely exceeding expectations.
“It’s early days in the US December earnings reporting season with just 13 per cent of S&P 500 companies having reported but so far it’s been strong with 89 per cent surprising on the upside by an average 28 per cent,” he said.
“As a result, consensus expectations are getting revised up with earnings likely to have made it back to pre-COVID levels.”
The Federal Reserve will meet over January 26 and 27 with most observers expecting that chair Jerome Powell will reiterate the strategy of keeping rates low and bond buying high until the US economy recovers further.
On the domestic front, the market will be concentrated on inflation and trade figures, with the Australian Bureau of Statistics to release consumer price index figures for the December quarter on Wednesday, followed by the producer price indexes on Friday.
On Friday the RBA will release private sector credit data, with consensus estimating a 0.2 per cent lift in loans.
5.47am: Bullish stock bets explode
Investors are piling into bets that will profit if US stocks continue their record run.
Options activity is continuing at a breakneck pace in January, building on 2020’s record volumes. It is the latest sign of optimism cresting through markets as individual and institutional investors pick up bullish options to profit from stock gains and abandon bearish wagers.
More than half a trillion dollars worth of options on individual stocks traded on January 8 alone, the highest single-day level on record, according to Goldman Sachs Group Inc. analysts in a January 13 note.
Among the most popular bets were those tied to Tesla Inc., Amazon.com Inc., Apple Inc. and Nvidia Corp. And bullish call-options trading surged to a high on January 14, with about 32 million contracts changing hands, according to data provider Trade Alert.
Options are contracts that give investors the right to buy (a call option) or sell (a put option) shares, at specific prices, later in time. They are typically used to bet on stocks’ direction or hedge portfolios. Although they can be risky to trade for amateur investors, activity has exploded in recent months. The interest has stemmed in part from investors looking to magnify gains in the stock market, since options allow them to put down a relatively small sum for the chance at an outsize return.
AFP
5.45am: Foreign investment faces U-shaped recovery: UN
Global foreign direct investment flows are set to go through a U-shaped recovery, staying weak in 2021, the United Nations warned.
FDI is likely to bottom out this year before picking up again in 2022, said the UN Conference on Trade and Development.
“Global FDI flows will remain weak in 2021,” UNCTAD said in its latest Investment Trends Monitor report, with the world still in the grip of the COVID-19 pandemic, which has eviscerated economies.
The UN agency said FDI collapsed last year, falling by 42 per cent to from $1.5 trillion in 2019 to an estimated $859 billion in 2020. UNCTAD predicts a further drop of five to 10 per cent this year.
FDI finished 2020 more than 30 per cent below the trough after the global financial crisis in 2009, and at a level last seen in the 1990s, the report said.
“The decline of global FDI will bottom out in 2021, and a real recovery will start in 2022,” James Zhan, UNCTAD’s investment and enterprise director, told reporters in Geneva.
“Overall, the global FDI is likely to follow a U-shaped recovery, unlike global trade and GDP (gross domestic product), which have been predicted to be a V-shaped recovery starting already 2021.” The ongoing risks surrounding the coronavirus pandemic, the speed at which vaccination campaigns can be rolled out, and sluggishness in releasing economic aid will put the brakes on an FDI comeback this year, he explained.
“Investors are likely to remain cautious in committing capital to new overseas productive assets,” said the report.
AFP
5.43am: London stock market facing blockbuster IPO year
London will enjoy a very strong year for stock market flotations, analysts say, arguing that both Brexit and coronavirus offer firms a unique opportunity to expand.
Various big-name businesses that have seen booming online demand from home-bound customers during COVID-19 lockdowns have revealed eye-catching plans for initial public offerings (IPOs) in recent weeks.
Clarity over Britain’s final departure from the European Union on January 1 acted as a catalyst for many companies to raise funds, according to specialists, while the rollout of COVID-19 vaccines also soothed investor concerns over the deadly pandemic.
So far this year, the celebrated shoemaker Dr Martens, app-driven meals delivery service Deliveroo and online greetings card seller Moonpig have all outlined plans.
“Looking to the year ahead, we can expect 2021 to be a very strong year for the UK IPO market,” said Scott McCubbin at London-based financial services giant EY.
“An uptick in IPO activity may well intensify the competition for investment, placing greater emphasis on preparing early for IPO and raising profile with investors.
“Confidence continues to build with the Brexit deal now giving clarity around the future relationship with Europe and the rollout of COVID-19 vaccinations.” Added to the mix, online money transfer specialist TransferWise has reportedly appointed banks to co-ordinate a planned float.
British media report that others could include insurer Canopius, EDF-owned electric vehicle charging business Pod Point, and online fashion retailer Very.
AFP
5.40am: Wall Street recap
Wall Street stocks finished mostly lower on Friday as investors grappled with worries over new coronavirus strains while confidence in continued fiscal and monetary stimulus supported equities.
The Nasdaq edged to a fresh record, but both the Dow and S&P 500 retreated as British Prime Minister Boris Johnson warned a newer COVID-19 strain may be more deadly, and US President Joe Biden said fatalities in the hard-hit country are expected to exceed 600,000.
The Dow Jones Industrial Average ended 0.6 per cent lower at 30,996.98, while the broadbased S&P 500 shed 0.3 per cent to 3,841.47.
But the tech-rich Nasdaq Composite Index advanced 0.1 per cent to 13,543.06, finishing at a record for a third straight session.
“The market is underpinned by a great deal of momentum,” said Briefing.com analyst Patrick O’Hare, noting that the Federal Reserve and the newly-installed Biden administration are intent on taking sufficient measures to boost the economy.
“A lot of people are still fearful about being out of the market,” O’Hare said. New data showed existing home sales in December rose more than expected, capping a strong 2020 as Americans took advantage of low borrowing rates to buy homes amid the upheaval of the coronavirus.
AFP
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