Trading Day: ASX closes flat in mixed trade

Stocks lost ground after a strong US lead, slipping from intraday highs to close flat, as Bank of Queensland sank on writedowns.

David Rogers and Samantha Bailey

37 min read

7:58PMSeptember 29, 2020.

Updated 8:12PMSeptember 29, 2020

The Australian Securities Exchange in Sydney. Picture: AAP

Crown director faces questioning
Rate cut tipped for November
Seek CEO salary shaved
Cleanaway chief ‘won’t be fired’

That’s all from the Trading Day blog for Tuesday, September 29.

Australia’s S&P/ASX 200 share index finished flat at 5952.1 after hitting a 3-week high of 5995.4 and a 2-day low of 5935.1.

The major sectors were mixed and volume was light as investors awaited the outcome of the first US Presidential debate overnight.

Financials restrained the index with the major banks down 0.7-1.3pc as Bank of Queensland fell 7.2pc after flagging a $177m writedown on its home loan book in its results next month.

On Wall Street, the Dow gained 1.5 per cent, the S&P 500 rose 1.6 per cent and the Nasdaq climbed 1.9 per cent.

Perry Williams 7.56pm: Narrabri risky even if approved: Kean

Santos’s board faces a big risk proceeding with its $3.6bn Narrabri gas project if it wins approval from planning authorities given the danger of the project becoming a stranded asset, NSW Energy Minister Matt Kean has warned.

The Independent Planning Commission is due to make its recommendation for Narrabri on Wednesday following a high-profile public hearing. Santos first submitted its environmental impact statement for the development in February 2017.

While the IPC may approve the project with conditions, according to Mr Kean, the bigger question is whether the energy producer will sanction the facility given his view that gas may prove a poor investment in the long term.

“I just think it’s a big gamble for them, particularly in this environment,” Mr Kean told The Australian.

“You only need to look at capital and investment cycles. Already we’re seeing people getting out of fossil fuels and that will only increase.

“There will still be a market for gas for a long time, but will it be as big a market? Probably not.

“Could that market be satisfied in a cheaper way through LNG import terminals? Probably, so why would they do it?”

Global energy giants including BP have signalled a change in investment strategy in recent months, warning it may leave oil and gas in the ground in the future amid a rapid transition away from fossil fuels due to climate change.

Still, Santos and other producers point to a looming shortfall in gas supplies on Australia’s east coast and argue new projects need to be sanctioned to ensure heavy industry and manufacturing remain operating and competitive.

Ben Wilmot 6.23pm: RMIT tower sale talks ongoing

A strict lockdown is not stopping commercial property deals being struck in the heart of Melbourne, with a group of investors in talks to buy an RMIT-owned building for about $130m.

RMIT said in July it would sell and lease back its prominent Bourke Street tower in the Melbourne CBD.

The move comes as lockdowns gradually ease and it is believed to be consortium driven by high profile players Phil George of Futuro Capital and including an Asian group, Baring Private Equity Asia.

Futuro, an independent investment property company, was set last year to focus on Australian and New Zealand real estate, and identifies real estate with development or value add potential.

The Sydney-based investment group company last month put the Tivoli Arcade – a strata retail, office and car park leased to RMIT – that is at the bottom of the building under contract.

While the university has a five-year lease, Mr George and his partners would have effective control over a major CBD site that would suit a mixed use project in the next cycle.

Baring is stepping up after last year tapping Sydney-based Paul Gately as managing director and head of asset management for the company’s Asian real estate division.

Mr Gately joined Baring after eight years with CLSA Capital Partners in Singapore and more recently Sydney, where he headed the private equity firm’s Australia Real Estate Fund until late 2018. He was charged with seeking Australian opportunities for Baring Private Equity’s real estate fund.

The move is one of the first major office sales in Melbourne in the wake of the pandemic and shows that deep-pocketed players will chase an exposure to Melbourne‘s expected recovery.

Office investors appear to be looking through the current problems of the market, with leasing expected to be hit, and some tenants shrinking requirements.

Robyn Ironside 5.42pm: Singapore Airlines turns planes into dining cars

Singapore Airlines will turn at least one of its parked A380s into a double-decker dining car as part of the ongoing quest to find alternative sources of revenue in the COVID crisis.

The “restaurant A380” at Changi Airport, was devised in the place of a number of scenic flights to nowhere which were deemed to be undesirable due to the environmental implications.

As part of the dine-in experience, passengers will be able to choose a meal from chef Shermay Lee’s Peranakan menu, along with two alcoholic drinks, plus a movie from the airline’s vast inflight entertainment network.

The airlines’ acclaimed cabin crew will be on hand to serve the meal and assist passengers who will be seated in the class of their choice.

Two lunches have been scheduled for October 24 and 25, with bookings to open on October 12 with the prices to be revealed closer to the date.

It was not clear if all 470 seats on the A380 would be available for diners but it’s understood guests and crew would be required to wear face masks, other than when eating or drinking.

Singapore Airlines also announced a new “in home first or business class dining experience” with an all-inclusive package featuring not only a chef-prepared meal for two, but top shelf wine, tableware and amenity kits as well.

Again prices were not available but customers would be able to redeem KrisFlyer points should they desire.

The airlines’ chief executive Goh Choon Phong said they wanted to continue to engage with customers in the absence of regular flights.

“There has been a lot of interest in our customer engagement initiatives over the last few weeks and I would like to thank everyone for their great ideas and suggestions,” he said.

“We are very encouraged by and grateful for the enthusiasm and passion that we have seen.”

The premium carrier has been among the hardest hit by the pandemic due to its complete reliance on international flights, and posted a $1.15bn loss in the June quarter.

More than 20 of its aircraft have been parked at a storage site in Alice Springs, including seven A380s and three Boeing 777s.

Perry Williams 5.30pm: AEMO’s Zibelman quits for ‘moonshot’

The Australian Energy Market Operator has lost its chief executive with Audrey Zibelman quitting the organisation for a leadership role at X, the “moonshot” factory at Google’s parent company Alphabet.

Ms Zibelman, who joined AEMO in March 2017, will depart by the end of 2020 for the new role at X developing clean energy technologies.

“The decision to leave my colleagues here and the many friends I have made both in and out of the industry in Australia was far from easy. However, what I have learned in Australia is how important advanced computing and the application of artificial intelligence and machine learning is to our industry,” Ms Zibelman said.

“The opportunity to support these needs as part of the team at X is for me a compelling opportunity to support the power sector both here and globally as we navigate to greater electrification of our economy and a diverse, decarbonised power system,” she said.

AEMO chairman Drew Clarke said a search for her successor will start immediately.

“The AEMO Board is very sorry to see Audrey leave. She has been an outstanding leader through a time of significant change and has made a major contribution to the Australian energy transition. We wish Audrey every success in her new global energy role.”

Ms Zibelman arrived in Australia amid a turbulent period for the national electricity market in the wake of blackouts in South Australia and political tensions as industry and regulators attempted to secure a passage for the national energy guarantee.

A lot of people would love to shoot Zibelman down, Grattan Institute energy analyst Tony Wood told The Australian two years ago. Sydney radio broadcaster Alan Jones tried; he called her “a lefty, a global warming hoax alarmist… that woman — watch her — she should be run out of town”.

Ms Zibelman also sits on the federal government’s Energy Security Board, chaired by Kerry Schott.

She told investors on Friday the Morrison government was justified making an interventionist threat in the power sector as it has given investors the chance to respond before making any move of its own in the market.

The AEMO chief said intervention was always a part of running an essential service like the power grid and could trigger investment by laying out a clear vision.

Lachlan Moffet Gray 4.57pm: Myer pay decrease from the top

Members of Myer’s upper brass have seen their pay decrease after the COVID-19 pandemic forced the temporary closure of all 60 locations and resulted in the retailer’s second-largest loss in its history.

According to the 2020 annual report released Tuesday, CEO John King received total remuneration of $1,591,275 - a near 15 per cent decrease on the $1.864m he received in 2019.

The decrease was driven by a reduction in both Mr King’s base salary and share-based payments.

Chairman Gary Hounsell saw his chairman’s fee slashed from $300,000 to $250,000 and no executives were awarded under the FY2020 short term incentives scheme or vested their awards under the FY18 long term incentives plan.

In a joint report, Mr King and Mr Hounsell said that as part of a prudent cost management strategy, executive pay was frozen and for a period, executives worked without accessing their base salary.

“For a period during April, when all stores were closed due to COVID-19, the Executive Management Team elected to either forego their base salaries, or accessing their existing leave entitlements, and the Chairman and other non-executive directors elected to forego their director’s fees,” they said.

“Additionally, for a period in May and June, the Executive Management Team elected to work at reduced base salaries and the Non-Executive Directors elected to receive reduced Director fees.”

The lockdown of all stores greatly impacted Myer’s operations, resulting in total sales falling 15 per cent to $2.5bn and a net loss of $172.5m.

However, online sales increased by 61.1 per cent to $422.5 million as Australians flocked to online shopping during lockdown.

Mr King and Mr Hounsell said the stand out categories online were cosmetics, up 218 per cent and homewares, up 177 per cent.

The duo said that going forward Myer would continue to enhance its e-commerce offerings and online fulfillment and would continue to barter with landlords over lease commitments to further a $138.6m decline in the cost of doing business, a decline of 14 per cent.

However, the reduction in the cost of doing business was helped by the period when stores were shut and by Myer’s qualification for JobKeeper and the New Zealand wage subsidy equivalent, shoring up the balance sheet to the tune of $93.2 million.

Myer closed at 21.5c a share on Tuesday, down 4.44 per cent for the day.

4.36pm: ASX ends flat in mixed trading

Australia’s S&P/ASX 200 share index finished flat at 5952.1 after hitting a 3-week high of 5995.4 and a 2-day low of 5935.1.

The major sectors were mixed and volume was light as investors awaited the outcome of the first US Presidential debate overnight.

Financials restrained the index with the major banks down 0.7-1.3pc as Bank of Queensland fell 7.2pc after flagging a $177m writedown on its home loan book in its results next month.

Utilities, Real Estate, Consumer Staples, and Materials stocks also underperformed, with AGL down 1.7pc, Cromwell Property Group down 3.3pc, A2 Milk down 4pc and BHP down 0.7pc,

But the Technology, Communications, Industrials, Energy, Health Care and Consumer Discretionary sectors rose with Afterpay up 2.5pc, Seek up 3pc, Sydney Airport up 2.2pc, Cochlear up 1.2pc and ARB up 3.6pc.

The Australian dollar was slightly stronger by the close of the ASX session, trading up 0.17pc against the US dollar at US70.83c.

Bridget Carter 3.28pm: AMP real estate platform up for grabs

The $4.6bn Australian wealth manager AMP is understood to have turned its attention to the sale of its entire real estate platform, with the expectation that Dexus Property Group and Charter Hall will wind up fighting for control of its assets.

More to come

Bridget Carter 3.05pm: Blackstone weighs up property portfolio

Speculation is mounting that Blackstone is not only weighing a sale of its Fife Capital-managed portfolio of industrial properties, but its $3.5 billion Australian logistics real estate portfolio as well.

Blackstone has declined to comment on its intentions.

However, DataRoom understands that the New York-based private equity fund is in the planning process for a potential sale or float of its $3.5 billion portfolio of Australian industrial assets by as early as December.

More to come

Bridget Carter 2.30pm: Logos taps funder for Qube buy

Logos Group is understood to have hired an investment bank to secure funding for the acquisition of Qube’s $2 billion Moorebank logistics facility.

All fingers were pointing to Macquarie Group on Tuesday.

The industrial property owner has a long standing relationship with Macquarie Group, which previously has invested in Logos, and the Australian listed investment banking group has a strong track record of sourcing capital for real estate investors.

2.20pm: Fidelity portolio manager ranked in global top 30

Fidelity International’s Kate Howitt has been ranked 11th in Citywire’s list of the top 30 female fund managers in the world, the only Australian to make the list.

“Fund management is a challenging and absorbing profession that plays an increasingly important role in contributing to the retirement outcomes of Australians and the efficient allocation of capital in the economy,” Ms Howitt said.

“In the current economic uncertainty, this is more crucial than ever.

“Currently, only 11 percent of the asset management teams in the Citywire database are being led by women.

“It frustrates me that we don’t have more female portfolio managers because it means women are missing out on such a great job - and clients are missing out on more diverse perspectives.”

Howitt is based in Sydney and has been portfolio manager of the Fidelity Australian Opportunities Fund since 2012.

1.52pm: Citi initiates on mortgage brokers

Citi’s Brendan Sproules initiated coverage of Australian mortgage brokers today with a Buy rating and $3 target price on Australian Finance Group and a Buy rating and $1.25 target on Mortgage Choice.

He notes that after the setbacks from the Royal Commission, the broking sector has resumed growth, amid an easing of responsible lending rules, a lift in borrowers’ capital and record low rates.

Favourable demographics are expected to see 7pc per annum growth in finance commitments and mortgage brokers expected to win up to 60pc of total originations.

“Over the next 10 years, we expect there will be a boom in households aged 35-54, the key demographic for ‘house with a mortgage’ demand,” Mr Sproules says.

“This demand will be met by the downsizing of the ageing ‘Baby Boomer’ population.”

Moreover, mortgage brokers are expected to win market share as the lenders’ branch-centric distribution is no longer aligned to consumer preferences.

And one of the major areas of cost reduction for a revenue constrained sector is the transformation of branch networks, to the benefit of independent mortgage brokers.

“Mortgage brokers’ growing strength is set to be better monetised and they increase revenue through the shift to increasingly fund own-branded mortgages through securitisation,” Mr Sproules says.

Australian Finance Group is Citi’s preferred play in the sector, since, as the number two player with a pending consolidation with the number one player, it looks set to control 40pc of the broking industry.

“We believe AFG is the best placed in the sector to monetise its distribution to achieve 15pc of lodgments with 50pc funded through RMBS,” Mr Sproules says.

Meanwhile he says the recent franchise business model reshaping has put AFG in a better place to exploit a strong consumer-facing brand in a growing market for brokers.

While AFG is trading on an attractive P/E multiple of 11 times and dividend yield of 6pc, Mortgage Choice is seen as the “value play” of the sector.

“Valuation remains compelling despite strategic execution risks,” Mr Sproules says of Mortgage Choice.

“The dividend yield of about 7pc provides valuation support while the last leg of its restructuring phase is yet to be executed.”

AFG last up 5.8pc at $2.11. MOC last up 2.8pc at $1.085.

1.50pm: FSU calls on BOQ to pay back super, sooner

The Finance Sector Union of Australia says it is “disappointed” that the Bank of Queensland failed to follow through and properly audit its payroll 18 months ago when cases of underpaid superannuation for 750 workers was identified.

“We have been urging all the banks to review and audit their payrolls and we are not surprised that another bank has been underpaying workers,” said FSU National Secretary Julia Angrisano.

Ms Angrisano said the latest underpayments came after the Bank of Queensland failed to pay workers their correct base rates, overtime, penalty rates and full superannuation entitlements.

“The Bank of Queensland should have taken steps long before this to make sure they were paying staff properly,” she said.

While the issue was rectified, Ms Angrisano said it was “not acceptable” that employees have to wait until March 2021 to have the correct pay reinstated.

“This is wage theft and we are calling on the Bank of Queensland to accelerate the repayment program to pay affected employees immediately,” she said.

Bridget Carter 1.27pm: Inference plots IPO

Inference Technologies Group has become the latest technology stock to head to the public market for a listing, hiring Ord Minnett and Canaccord to work on its initial public offering plans.

The company’s chief executive, Callan Schebella, is fronting prospective investors this week via Zoom to offer more insights into the business.

The company is based in the United States and operates what is known as an Intelligent Virtual Agent ‘no code’ platform that is essentially an online chat facility.

The technology is designed to reduce call centre requirements for a company.

Bridget Carter 1.07pm: SILK Laser Clinics to list

Private equity firm Advent Partners is floating its laser, skin care and cosmetics injections business SILK Laser Clinics.

The company has hired Wilsons and Ord Minnett to prepare an IPO for December.

More to come.

1.05pm: 4Medical shares halted

Share trading in mid-cap bio-tech, 4Medical, has been halted pending a regulatory ruling.

The company says it expects to make the announcement to the market before the start of normal trading on Thursday.

4Medical designs applications for the medical field in the US and Australia.

4DX last at $1.55.

Damon Kitney 1pm: Crown director questioned in licensing inquiry

A director of the James Packer-backed Crown Resorts has acknowledged there was an error in a bombshell newspaper advertisement provided to the Australian Securities Exchange last year rebutting serious allegations against company, but has defended the decision to release it.

Michael Johnston, who is also the finance director of Mr Packer’s private company Consolidated Press Holdings, admitted there was an error in the advertisement in relation to its statement about Crown’s junket partner, the Hong Kong-based Suncity Group.

The advertisement stated Suncity was controlled by a Hong Kong Stock Exchange-listed company, when in fact the junket partnership was actually with Alvin Chau, who is the chairman of the listed company.

Mr Chau was blocked from entering Australia last year due to his suspected links to organised crime and money laundering.

The advertisement was released to rebut media allegations that Crown’s licensed junket operators had links to organised crime, drug and sex trafficking and money laundering.

In addition to Mr Johnston, it was signed by Crown’s board of directors including then executive chairman John Alexander and former politician Helen Coonan, who is now Crown’s independent chairman.

Robyn Ironside 12.50pm: Air NZ draws on last resort loan facility

New Zealand’s emergence from the COVID crisis may have come in the nick of time for the national carrier which has begun drawing on a government loan facility once described as a last resort.

Addressing Air New Zealand’s annual general meeting in Auckland on Tuesday, CEO Greg Foran said he had dealt with a number of different disasters and crises in his career to date but nothing like this.

“I have never been part of an organisation where your revenue disappears in a matter of weeks for a substantial period of time,” Mr Foran said.

“COVID-19 has fast evolved into the most financially threatening event that has ever faced our industry and indeed our economy.”

After forecasting a profit of between $277m and $324m for the 2020 financial year, Air New Zealand slumped to an $81m loss when passengers fell from 330,000 a week to under 8000 in April. Mr Foran said one of the greatest challenges to face the airline throughout the crisis, was responding to customers after cancelling 4 million seats in the space of a few weeks.

“A credit solution was implemented but not fast enough,” Mr Foran said. “That had calls reaching 56,000 in just one day in our call centres.”

11.59am: ASX rally fades to midday

Buyers have been reluctant to keep chasing the rebound in Australian shares.

The local bourse has pared most of its intraday rise despite a strong 1.6pc rise in the S&P 500 overnight and a 0.3pc rise in S&P 500 futures today.

Around midday the benchmark S&P/ASX 200 index was up 0.2pc at 5963 after rising 0.7pc to a three-week high of 5995.4 intraday.

Investors appeared to be waiting for the US presidential debate before adding to positions.

Intraday ASX200 trading value was 16pc below the 20-day average which was very quiet for a Tuesday.

The Technology, Energy, Communications, Industrials and Consumer Discretionary sectors were outperforming, with Afterpay up 1.8pc, Woodside up 1.1pc, Seek up 2.3pc, Qantas up 2.4pc and Crown up 2.8pc.

Some “economic reopening trades” including travel, property trusts and energy retailers were evidently benefiting from improving coronavirus trends and expectations of a big-spending budget next week.

But Afterpay and Qantas pared much of their early gains and banks also faded with ANZ up 0.3pc after rising 1.5pc in early trading.

BHP turned down 0.5pc after an early rise, while falls in A2 Milk, Woolworths, Rio Tinto and Newcrest also dragged on the market.

Bank of Queensland fell 3.9pc, weakest in the ASX200 after reporting a $175m writedown of his home loans portfolio for its upcoming FY20 results next month.

Economic news was encouraging with the ANZ-Roy Morgan Consumer Confidence index rising 1.6pc to a 14-week high of 95 points, though it remained well below the long-run average of 112.6 points.

Lachlan Moffet Gray 11.55am: Pioneer package backed

Analysts at JP Morgan have given debt collector Pioneer Credit’s refinancing package the tick of approval, saying it will be a positive for the industry.

It follows months of turmoil for the company and the debt collection industry, with many players forced into confrontation with their lenders.

In April, senior lender Carlyle Group almost demanded Pioneer Credit return $141.6m of debt it had loaned.

But last week Pioneer Credit announced it had finalised a refinancing of its senior debt facility with the Carlyle Group.

The deal was advised by Azure Capital and K&L Gates and syndicate leader Nomura and includes a $169m term facility and $20m purchasing facility maturing on September 30 2022, with an option to extend to the following July under conditions.

11.30am: Rate cut now to be November: TD

TD Securities senior APAC rates strategist Prashant Newnaha has pushed his prediction of RBA rate cuts and other monetary policy measures out to November from October.

“Media reports downplaying an October RBA move are just too hard to ignore,” he says. This follows a similar move by Westpac’s Bill Evans on Monday.

NAB also favours November over October after shifting last week to predict cuts.

“NAB’s view remains a rate cut in either October or November, though November is looking more likely given the backgrounding of journalists who say the RBA wants to see the contents of the October 6 Budget, as well as not wanting to steal the limelight from the Budget,” says NAB’s director of economics & markets, Tapas Strickland. But after hitting a 4-day high of 0.7096 in early trading AUD/USD has dipped to 0.7075 as the US dollar starts to bounce. Copper and oil futures are also fading though spot gold remains buoyant.

Bridget Carter 11.16am: Johnston heads Goldman promotions

Goldman Sachs has promoted a number of high ranked Australian staff, including its corporate advisory head Christian Johnston.

Mr Johnston will become chairman of the bank for Australia and New Zealand.

Leading the corporate advisory operations for Australia and New Zealand (ANZ) will be Zac Fletcher and Nick Sims.

Marissa Freund will also become ANZ head of Mergers and Acquisitions.

As chairman, Mr Johnston will work closely with ANZ chief executive Simon Rothery in shaping the firm’s overall strategy across the region.

Mr Johnston remains a member of the Asia Pacific Management Committee as well as the ANZ Operating Committee.

He has previously served as co-head of Corporate Advisory in ANZ from 2007 to 2011 after joining Goldman Sachs JBWere in 2003 and has recently been the sole corporate advisory head.

Mr Johnston was named managing director in 2005 and partner upon full acquisition of the ANZ businesses in 2011.

Mr Sims and Mr Fletcher will work closely with Mr Johnston and Chris Champion, head of the Financing Group for ANZ.

Mr Sims is currently co-chief operating officer of investment banking in ANZ, head of Mergers and Acquisitions in ANZ and head of Natural Resources in ANZ.

He joined Goldman Sachs as a managing director in 2009 and was named partner in 2016.

Mr Fletcher is currently co-chief operating officer of investment banking in ANZ, head of General Industrials in ANZ and head of Investment Banking Services in ANZ.

Mr Fletcher joined Goldman Sachs in 2005 and was named managing director in 2009.

Both Mr Sims and Mr Fletcher are members of the ANZ Operating Committee.

Ms Freund joined Goldman Sachs as an executive director in 2015 and became a managing director in 2019.

She has been the chief operating officer of M&A in ANZ since 2016.

11am: A2 Milk risks remain: Bell Potter

Bell Potter’s Sam Haddad cut a2 Milk to Sell from Hold and cut his price target 20pc to $13.75 based on the risks that he sees to the “material acceleration” in revenue the company needs against “elevated proper year comparisons” to achieve its FY21 revenue and earnings guidance.

“The combination of continued weak trends observable in trade data, a material 2H21 earnings uplift required on difficult previous corresponding period comparison and the arrival of a new CEO, suggest continued earnings risk,” he says.

He notes that in periods where earnings uncertainty has existed - notably late 2018 and late 2019 - A2M traded in a range of 17-19 times EBITDA, compared to the guidance implied valuation of 19-20 times.

A2M shares are down for a second day after Monday’s profit warning, falling 2.7pc to a 6-month low of $14.71 after diving 11pc on Monday.

10.55am: Westpac expected to pay final dividend

Morgan Stanley analysts expect Westpac to reinstate its dividend and deliver a 22 per cent lift in underlying profit for the second-half, helped by lower loan losses and a rebound in insurance income.

The analysts said that while a dividend deferral is possible it was unlikely, and predicted a 25c final dividend. Westpac did not pay a first-half dividend this year, due to economic uncertainty and its dispute with Austrac, which at the time of its first-half results was ongoing.

“On balance, we see risk of a better-than-forecast outcome on margins, impairment charges and capital, but a worse-than-forecast result on fee income, expenses and the final dividend,” Morgan Stanley analysts said.

Morgan Stanley downgraded its reported cash earnings per share estimate by 25 per cent, due to the Austrac fine, which was larger than Westpac’s initial provisions, as well as capitalised software and goodwill write-downs.

Lachlan Moffet Gray 10.47am: Cleanaway chief ‘won’t be fired’: Jarden

Analysts at NZ finance house Jarden predict that embattled Cleanaway CEO Vik Bansal won’t be fired over media reports concerning his “overly-assertive behaviour.”

The waste management company has seen its share price reduce 16 per cent over the last fortnight after media reports reported the board had investigated Mr Bansal over his behaviour.

Also impacting investor sentiment were reports that Mr Bansal sold shares in the company for the first time in his five-year tenure and the retirement of CFO Brendan Gill.

But the analysts say the biggest fear of investors - that the effective Mr Bansal will be pressured to resign - is unlikely to happen.

Vik Bansal.

‘Vik Bansal has been at Cleanaway for five years. During that time underlying NPAT increased by ~300% and the share price by 280%,” they wrote in an investor note.

“(The) Board appears to have dealt with this appropriately: When these issues were raised

earlier this year, the Board undertook an independent investigation

“Following the press reporting, the Board also withdrew resolutions from the upcoming AGM (14 October) for granting the CEO ~1 mn of performance rights.

“We think the board has dealt with this issue appropriately and the CEO appears to be focused on changing behaviour.

“The CEO is likely to focus on overcoming risk to his legacy from the conduct issues

and is highly unlikely to resign of his own volition, in our view.”

Jarden rates Cleanaway as a buy with a target price of $2.45 a share, a 14 per cent premium on the current price of $2.15.

10.45am: Corporate Travel makes US acquisition

Corporate Travel Management to buy a North American corporate travel business Travel & Transport, for a cash and debt free enterprise value of $US200.4m ($274.5m).

The acquisition, foreshadowed by The Australian’s DataRoom column will be funded through a fully underwritten entitlement offer to raise $375m at $13.85 a share, a discount of 14.3 per cent to the last traded price on September 25. Corporate Travel shares remain under a trading halt.

Corporate Travel has been able to navigate the Covid downturn better than consumer-facing travel agencies, however it is currently operating at just 25 per cent of last year’s travel volumes. The deal is expected to be about 10 per cent EPS accretive on a pro-forma calendar 2019 basis excluding synergies.

10.30am: Suncorp branch closures to spur earnings: MS

Suncorp could lift earnings by about 8 per cent if it went completely branchless, Morgan Stanley analysts estimate.

The banking and insurance group blamed COVID as it announced the closure of 19 branches earlier this month, leaving it with 93 branches.

Morgan Stanley estimated that the branch cost footprint was $90m or about 3.5 per cent of group costs.

“All things being equal, removing these costs entirely would lift bank earnings by about 29 per cent or group earnings by about 8 per cent,” the analysts said.

They said that the coronavirus crisis is likely to accelerate the adoption of digital banking as consumers shift to online and mobile interactions, which will provide an opportunity for the banks to accelerate branch rationalisation and digitisation.

The crisis could become a catalyst for the banks to accelerate branch closures, the analysts said.

10.23am: ASX makes a solid start

Australia’s S&P/ASX 200 share index rose 0.7pc to a three-week high of 5994.5 after strong offshore gains and a further rise in US stock index futures this morning.

The Technology, Energy, Industrials, Financials and Real Estate sectors are outperforming with Afterpay up 3.1pc, Ampol up 2.7pc, ANZ up 1pc and Stockland up 2.3pc.

Travel stocks soared for a second day running with Qantas up 3.3pc, Webjet up 3.1pc and Flight Centre up 3.7pc after NZ PM Jacinta Adhern said a tans-Tasman travel “bubble” may be possible by Christmas.

Bank of Queensland bucked the market rally, falling as much as 2.7pc after flagging a $175m impairment of its home loan portfolio in its FY20 results next month, while leaving its dividend up in the air.

Economic reopening optimism remains a feature given the outperformance of banks, travel stocks, energy retailers and property trusts.

US stock index futures are up about 0.3pc and the US dollar index is down 0.2pc this morning, keeping the mood positive for equities and commodities.

AUD/USD rose 0.3pc to a 4-day high of 0.7096 and spot gold rose 0.3pc to a 4-day high of $US1886.

Ben Wilmot 10.19am: Elanor unveils new trust

Property funds manager Elanor Investors Group has unveiled a new trust that will own the Riverside Plaza, a Coles supermarket anchored-shopping centre in Queanbeyan in NSW that it bought for $60m.

The company said launching the Riverside Plaza Syndicate was consistent with its strategy to reposition town centre retail real estate it was buying at below replacement cost.

Sitting in the growing south-eastern Canberra corridor, Riverside Plaza generates strong, stable income from its convenient everyday goods and services offering. The asset also has significant value-add opportunities from the repositioning of the vacant Target discount department store into health uses and a potential sale of non-core surplus land.

The 21,525sq m centre is anchored by a strongly performing Coles supermarket, complemented by over 45 specialty non-discretionary focussed goods and services retailers.

he centre also has from office tenancies predominantly leased to government agencies.

The acquisition of Riverside Plaza reflects an attractive passing yield of 7.9 per cent per annum and a capital value of $2,787 per sq m.

Elanor chief executive Glenn Willis said there was strong investor demand for the fund. “The acquisition of Riverside Plaza exemplifies our strategy of acquiring well located town centre retail real estate where we identify opportunities to unlock value through repurposing the real estate to deliver strong returns for our capital partners,” he said.

10.10am: Seek CEO salary shaved

Online job classifieds company Seek has declared it won’t raise director fees or executive salaries as part of a cost management plan amid the challenges arising from the coronavirus crisis.

Chief executive Andrew Bassat received a total pay packet worth $4.65m for the 2020 financial year, down slightly from nearly $4.83 the previous year. That figure included nearly $2m in ongoing share-based payments, compared to $1.94m last year.

The company narrowly received a first strike against its remuneration report at its annual general meeting last year, with 25.71 per cent of shareholders voting against its adoption.

Seek received $8.4m of COVID-19 related government support across Australia, New Zealand and South East Asia for the 2020 financial year.

Perry Williams 9.55am: Boral board shakeup brings greater scrutiny: Jefferies

The two Boral board seats handed to Kerry Stokes’ Seven Group will bring greater scrutiny to its pending portfolio review while the appointment of former CSR boss Rob Sindel will have created shock waves in his former boardroom, Jefferies said in a client note.

Seven gained the Boral board roles to reflect its 19.9 per cent stake in the construction materials company with chief executive Ryan Stokes and finance boss Richard Richards appointed directors as part of a broader shake-up at the Sydney-based company.

Former CSR chief executive Rob Sindel will also join the board along with Deborah O’Toole.

Seven’s two board seats is a “meaningful development given our expectations that Seven Group will be active in promoting the creation of greater value for shareholders and a critical set of eyes to review the forthcoming portfolio review to be delivered by the new CEO in late October 2020,” Jefferies analyst Simon Thackray said.

Jefferies said it expects the appointment of Mr Sindel would have sent shock waves inside the CSR boardroom and came just days after the end of a non-compete restriction from one of Boral’s chief rivals in the Australian construction materials sector.

“We expect shock waves inside the CSR Boardroom on this announcement, given Sindel was the very capable CSR CEO/MD who led the renaissance of investment returns under his watch up to 2019. This Boral announcement must come only days after what we assume would have been the end of a non-compete restriction from CSR,” Mr Thackray said.

Boral poached its new chief executive Zlatko Todorcevski from competitor AdBri, where he served as deputy chairman on the board.

Mr Sindel is expected to offer “much welcome counsel” on realigning Boral Australia to boost margins and returns, assessing the long-term viability of US flyash and analysing competitive behaviour in plasterboard and building materials.

Citi upgraded Boral to buy arguing that while the company is at an earnings trough, construction markets are rebounding.

“While the path to recovery is mixed, we estimate a ‘mid-cycle’ EBITDA of $956m, and a return to mid-cycle levels would imply a ~35 per cent rebound from FY20 levels. Looking through the cycle we see the most upside in detached housing in Australia and the US, partially offset by sharp declines in commercial,” Citi analyst Lisa Huynh said.

Boral’s property portfolio could also be worth between $700m to $1.5bn, Citi said.

Boral’s share price has outperformed the ASX 200 ex Resources by 107 per cent since the end of March.

9.42am: What’s impressing analysts

A2Milk raised to Add: Morgans Financial

A2Milk cut to Sell: Bell Potter

Boral cut to Hold: Morningstar

Boral raised to Buy: Citi

Charter Hall Retail cut to Hold: Morningstar

Cleanaway raised to Outperform: Credit Suisse

Paradigm Biopharma raised to Speculative Buy: Bell Potter

Tietto Minerals rated New Speculative Buy: Canaccord

Australian Finance Group started at Buy: Citi

Mortgage Choise started at Buy: Citi

9.40am: ASX set to rise

Australia’s share market rebound from a 3-month low last week should resume after another strong night on Wall Street amid hopes of US fiscal stimulus.

The local bourse may even outperform as major fiscal stimulus at next week’s Budget looks certain versus the low chance of much-needed US fiscal stimulus before the US election.

Improving domestic coronavirus and economic reopening trends in Australia versus worsening trends in Europe and the US should also help the local market versus offshore markets.

While markets have their hopes up, US House speaker Nancy Pelosi was cryptic, telling MSNBC: “We can get this done”, while emphasizing that more “much more” money is needed.

“When he’s ready to come back to the table we’re ready to have that conversation,” Pelosi said. “But he has to come back with much more money to get the job done.”

So nothing has really changed from a few weeks ago, when the fiscal talks were at a stalemate.

The bigger risk here may be a lack of progress this close to the US election, particularly after Amy Coney Barrett’s Supreme court nomination.

The major US indexes may have seen “false breakouts” from “bullish pennant patterns” which could yet guide the US market lower in coming weeks before a likely sustained break higher.

Overnight futures relative to fair value suggest the S&P/ASX 200 will open up 0.7pc at a 3-week high of 5994 after the S&P 500 rose 1.6pc and the Nasdaq gained 1.9pc.

Energy was the strongest US share market sector with WTI crude up 0.8pc at $40.59, while Financials and Technology outperformed, with the KBW Bank index up 3pc and tech giants including Apple, Amazon and Intel up 2.4-03pc.

The Materials performed in line with the S&P 500, though spot gold rose 1pc to $US1880.2.

BHP ADR’s equivalent close at $37.29 suggests the resources-sector heavyweight will rise 0.4pc to $US37.29.

Spot iron ore rose 1.3pc to $US114.70, while the LME index rose 0.9pc as the US dollar index fell 0.4pc.

Together with Westpac pushing its RBA rate cut call out to November, the US dollar pullback has lifted AUD/USD 0.8pc to 0.7085 so far this week.

Markets could also swing around on Tuesday’s US Presidential TV debate, as well as month end rebalancing (less of an issue after the pullback), and economic data including China’s official and Caixin PMI’s on Wednesday, US ISM PMI on Thursday and non-farm payrolls on Friday.

The S&P/ASX 200 should have support at 5930 and resistance at the 50-day moving average at 6015. A test of the 200-day moving average at 6055 may be possible this week while the US market stays positive.

9.15am: Westpac treasurer to retire

Long-serving Westpac treasurer and acting CEO of Westpac’s institutional bank Curt Zuber to retire in 2021, the bank says in a statement. Acting treasurer Joanne Dawson has been appointed group treasurer, effective immediately. Ms Dawson has been acting in this role while Mr Zuber acted in the role of chief executive, WIB.

“Joanne is a highly experienced leader and has been with Westpac since 2003 and in the role of Deputy Treasurer since 2008. Her extensive experience in global funding, liquidity and balance sheet management will help ensure a smooth transition to this critical role,” Westpac Group chief Peter King said Westpac. Mr King thanked Mr Zuber for his service to the bank over the past 25 years.

“Curt has made an outstanding contribution to the Group, particularly leading the all-important Treasury function for many years. He has navigated us through a number of challenges, including the global financial crisis and COVID-19,” Mr King said.

8.30am: Bank of Queensland to take $186m hit

Bank of Queensland says full-year 2020 provision modelling forecasts a pre-tax loan impairment expense of $175m, and $11m for fixing employee pay issues.

The impairment expense includes a COVID‐19 related expense of $133m, based on updated RBA economic data, customer analysis and an exposure review.

Further, the 2020 result will include an expense of $11m following a review of employee pay and entitlements, which found “irregularities”.

“BOQ has made a full and unreserved apology to people affected by these issues and will ensure people are remediated fully as a matter of priority as it completes a broader external wage analysis and review for EA employees,” it said.

The bank says it will make a decision on dividends when it reports full-year results on October 14.

6.20am: ASX to open higher after US gains

Australian stocks are set for an early rise following a rally on global markets.

At about 6am (AEST) the SPI futures index was up 37 points, or 0.6 per cent.

On Monday, Australia’s S&P/ASX 200 share index finished down 12.6 points, or 0.2pc.

The Australian dollar was higher at US70.70.

Brent crude, the global oil benchmark, rose 1.2 per cent.

Spot iron ore was up 0.9 per cent to $US117.05.

6.10am: Wall Street rallies

The Dow Jones Industrial Average rose more than 400 points, clawing back some lost ground after four consecutive weeks of declines, as investors piled into economically sensitive stocks including those of banks and energy companies.

The gains were broad, with 27 of the 30 stocks in the blue-chip index rising, along with all 11 sectors of the S&P 500. The rally was a welcome relief for investors, who said last week’s sell-off was overdone.

JPMorgan Chase and Goldman Sachs Group were both up more than 2 per cent, while Chevron climbed nearly 3 per cent as investors snapped up beaten-down stocks outside the high-flying technology sector.

The Dow was up 1.5 per cent as of the close of trading in New York. The S&P 500 gained 1.6 per cent, while the tech-heavy Nasdaq Composite climbed 1.9 per cent, paring some of their earlier gains.

The financial and energy sectors, which tend to be sensitive to economic trends, were the best-performing sectors of the S&P 500, both rising about 2.3%.

Thomas Hayes, chairman of investment-management firm Great Hill Capital, said his firm had bought shares of Wells Fargo and other banks in recent days. He expects such stocks to fare better than the tech stocks that drove the market’s rally from March to September.

September has been a turbulent month for stocks, with declines in tech stocks pulling down major indexes. Apple has dropped 11 per cent since the start of the month, while Amazon.com has slumped 8.3 pr cent and electric-car maker Tesla has slid 16 pr cent.

Even so, such stocks have enjoyed an extraordinary run-up this year, thanks to profits that have remained resilient during the coronavirus pandemic and a sense that Big Tech will benefit as more Americans continue working from home. Apple is up 56 per cent for the year, while Amazon is up 71 per cent. Tesla’s stocks has roughly quintupled in 2020.

Markets have been turbulent in recent weeks due to investors’ concerns about rising or elevated levels of coronavirus infections, the uneven pace of economic recovery, political risks and tensions between Beijing and Washington. The Cboe Volatility Index, a measure of expected swings in the S&P 500, inched higher on Monday.

The pan-continental Stoxx Europe 600 rose 2.2 per cent. In Asia, most major benchmarks ended the day in positive territory. Japan’s Nikkei 225 Index rose 1.3 per cent, while Hong Kong’s Hang Seng rose 1 per cent.

Futures on Brent crude, the global oil benchmark, rose 1.2 per cent to settle at $US42.43.

Dow Jones Newswires

5.55am: US household wealth rose before pandemic

U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

As property and stock prices increased, households’ median net worth, or wealth, rose 18pc to $US121,700 from 2016 to 2019, according to the Fed’s Survey of Consumer Finances released on Monday. The report is produced every three years.

Median household income -- the level at which half are above and half are below -- rose 5pc to $US58,600, before taxes and adjusted for inflation. The rise in incomes came as the economy grew 2.5pc a year on average, inflation remained low and the unemployment rate fell.

The data suggest households were on a relatively solid financial footing headed into the coronavirus pandemic. The pandemic triggered an initial shock that hurt all aspects of the economy, including income, but government stimulus, recent improvement in the labour market and enhanced unemployment benefits have helped prop up household finances.

Dow Jones

5.45am: US oil gains

Oil futures ended higher on the heels of last week’s loss, finding some support as a possible oil workers’ strike in Norway may lead to lower production, analysts said.

Oil firms in Norway plan to close down 22pc of the nation’s oil and gas output if workers go on strike on Wednesday, Reuters reported Friday.

Price gains for oil, however, were modest as traders continued to fret over the rise in global cases of COVID-19 and outlook for energy demand. November West Texas Intermediate crude rose 35 cents, or 0.9pc, to settle at $US40.60 a barrel on the New York Mercantile Exchange.

Dow Jones

5.40am: Amazon sets date for global mega-sale

Amazon announced the new date for its annual global mega-sale, which it said aims to promote small and medium-sized businesses despite accusations by numerous lawmakers and trade associations that the retail giant is trying to crush competition.

“Prime Day,” named for the Amazon subscription service that offers users free delivery and other perks, will be held on October 13-14, the company said.

Launched in 2015, the wildly popular sale is normally held in July but had to be pushed back this year because of the coronavirus pandemic.

Because of lockdowns, Amazon has faced a huge surge in demand for online shopping and delivery of household goods, forcing its warehouses and supply teams into overdrive.

AFP

5.38am: ECB’s Lagarde downplays stimulus split

European Central Bank chief Christine Lagarde said Monday she wasn’t “overly concerned” about differences among governing council members over the future direction of the bank’s pandemic stimulus.

Senior members are becoming increasingly split on future moves to address the economic fallout from the coronavirus between those who believe the ECB’s monetary policies should be more restrained and those who think support for the bloc’s economy should carry more weight.

ECB chief Christine Lagarde. Picture: AFP

“I’m not overly concerned that people can have slightly different views and opinions,” ECB chief Lagarde told an online hearing before the European Parliament.

“What is important is actually once a decision has been made and once a majority has been established it’s a question of discipline, staying the course, being together,” the former French finance minister said.

AFP

5.35am: Markets surge, pound in focus

Global markets surged higher as bargain-seekers moved in following sell-offs triggered by virus spikes and the return of some economically damaging containment measures.

As the coronavirus death toll topped one million, the World Health Organisation warned that figure could double without more global collective action.

Major indices took little notice however as the Dow Jones had gained around 1.8 per cent in midday trading, adding to a strong finish the previous week.

And despite swirling clouds of Brexit uncertainty, London added 1.8 per cent while Frankfurt and Paris gained 3.2 per cent and 2.4 per cent respectively.

“Investors appear to be warming towards equities and other risk assets again,” remarked Fawad Razaqzada, market analyst with ThinkMarket.

“The relatively low (new) Covid-linked deaths mean investors are not showing too much concern towards rising virus cases. Instead, they remain optimistic over the potential approval of a vaccine soon, which together with ongoing central bank support will probably help accelerate the recovery,” Razaqzada added.

Elsewhere, investors kept an eye on the resumption of trade talks between Britain and the European Union, hoping for a breakthrough despite feuding over a controversial UK bill that threatens to scupper a deal.

The pound rallied against the dollar and euro on optimism surrounding the latest talks.

Traders also awaited the first US presidential debate this week, which could set the tone for November’s election, with many worried about potential scenarios if the vote is close.

The agenda for US data this week includes reports on US manufacturing and consumer confidence and the September employment report.

AFP

5.30am: Aldi to create 4000 more jobs in UK

German supermarket Aldi, which enjoyed strong sales during the pandemic, said it will hire 4,000 more staff and open 100 new stores in Britain by 2022.

The announcement came as UK-based supermarkets create lots of jobs to meet a surge in food sales, while other retailers, hospitality and travel groups have slashed tens of thousands in the face of slumping demand.

Aldi UK and Ireland employs 36,000 people and has already created 3,000 permanent jobs this year, it added in a results statement.

AFP

5.25am: Uber wins London licence after appeal

US ride-hailing giant Uber won an appeal to operate in London after a judge ruled it was a “fit and proper” firm despite safety concerns.

Uber -- which has 3.5 million customers and 45,000 drivers in the British capital -- overturned Transport for London’s (TfL) refusal last year to renew its operating licence around the issue of unauthorised drivers.

The San Francisco-based company was permitted to continue operating in London during the appeal process.

“Despite their historical failings, I find them, now, to be a fit and proper person to hold a London PHV (private hire vehicle) operator’s licence,” said deputy chief magistrate Tan Ikram, sitting at a central London court.

He noted that Uber had sought to explain how breaches had taken place and how they would be remedied.

The judge did not state the length of the licence -- but Uber said in a separate statement that it would be for 18 months and welcomed the ruling.

AFP

5.20am: VW in new electric cars investment

German car giant Volkswagen announced a fresh 15 billion euro ($US17.5 billion) splurge on China’s vast electric vehicle potential.

Global car makers are pegging hopes on an increasingly electric future with China at the forefront as a customer base and manufacturing hub.

Beijing has targeted a 25 per cent adoption of energy-saving vehicles by 2025. Volkswagen’s commitment -- made with its three Chinese joint ventures -- see the firm double down on EV car manufacturing and the linked infrastructure between 2020 and 2024 and takes its total investment in the sector to nearly 40 billion euros.

China accounts for around 40 per cent of the Wolfsburg-based automaker’s sales and has become the world’s largest car market in recent years.

Volkswagen has three Chinese joint ventures. Picture: Getty Images

AFP

5.15am: Piedmont Lithium shares soar on Tesla deal

ASX-listed Piedmont Lithium’s American depositary shares more than tripled in premarket trading after it said it entered a five-year agreement with Tesla to supply spodumene concentrate, or SC6, from its North Carolina deposit.

The agreement represents about a third of Piedmont’s planned SC6 annual production of 160,000 tonnes, as well as additional quantity based on Tesla’s requests. The deliveries could start between July 2022 and July 2023, based on the development schedules of both parties, the companies said.

The company said it expects the sales to generate 10pc to 20pc of Piedmont’s total revenues from its proposed integrated mine-to-hydroxide project for the first five years.

“We will now accelerate our mine/concentrator development to support Tesla’s plans, work to further expand our mineral resources, and potentially increase our planned annual spodumene concentrate production capacity,” President and Chief Executive Keith Phillips said.

Tesla shares rose 4.3pc in premarket trading.

Dow Jones Newswires