Trading Day: ASX top starts for 2021 on good Covid news

S&P/ASX 200 has best start to the year since 2001 and best day since November 11 to close up 1.5pc.

The ASX rose at the open, despite futures pointing to a fall. Picture: Christian Gilles

• Link takeover bid withdrawn

That’s all from the Trading Day blog for Monday, January 4. The S&P/ASX 200 had its best start to the year since 2001, according to CommSec, and its best day since November 11 to close up 1.5pc, as markets closely watched the latest coronavirus outbreak. CoreLogic home prices showed all but one capital city recording a rise in home prices in 2020. For more on the coronavirus situation, follow The Australian’s live blog.

5.42pm: Australia’s mutual capital instruments debut

Australia’s debut mutual capital instruments traded for the first time on Monday, with $120m worth of MCIs issued by member-owned private health and wellbeing company Australian Unity listing on the ASX.

Australian Unity successfully issued 1.2m MCIs in December at a face value of $100 per security.

The MCIs commenced trading at $104.9 per security before steadily climbing to close at the intraday high of $107.

The listing represents the completion of a 2019 bipartisan push to modify the Corporations Act to provide a way for mutual entities like Australian Unity to raise permanent capital without compromising their member-owned status.

Mutual entities could previously only raise capital while remaining member-owned by taking on debt, a situation that encouraged many longstanding member-owned entities to demutualise, such as AMP in 1998 and National Mutual Life in 1995.

Despite having a face value and paying a rate of interest, the MCIs differ from a traditional bond by registering as capital instead of debt on a balance sheet, having no maturity date and by granting holders the right to vote at AGMs, except for issues relating to demutualisation or wind-ups in the case of Australian Unity.

They are classified in the Corporation Act as a type of share, but differ in the amount of influence they afford the holder: presently, an Australian Unity member still receives just one vote, regardless of how many of the MCIs they hold.

The Australian Unity MCIs have a 5 per cent dividend rate, or 7.14 per cent grossed for franking credits, although it is discretionary and can be withheld.

Australian Unity Group managing director Rohan Mead said the mutual entity “is delighted to have successfully completed Australia’s first offering of mutual capital instruments”.

“The offer will help further Australian Unity’s ambitions to continue building our portfolio of health, wealth and care products and services that deliver member, customer, community and social value,” he said.

4.31pm: ASX jumps on first trading day of 2021

Australia’s sharemarket rose strongly on positive offshore leads and encouraging signs on the COVID outbreak in Sydney.

The S&P/ASX 200 rose 1.5pc to a two-day high of 6684.2 after falling 1.4pc on Thursday.

It was the best day since November 1st and also the best start to the year since 2001.

The ASX 200 closed up 1.5pc, or 97.1 points, at 6684.20.

The All Ordinaries was up 1.5pc, or 103.1 points, at 6953.70.

The strong bounce came after quarter-end rebalancing by index funds depressed the local index on Thursday.

The US share market rose solidly on Thursday with the S&P 500 up 0.6pc to a record high close of 3756.07 amid optimism about COVID vaccines.

NSW reported no new locally-acquired cases of COVID for the previous day, although testing rates were relatively low and there were two new cases overnight.

All sectors rose, with the Materials sector the strongest with Fortescue Metals up 5.9pc as iron ore prices remained near 7-year highs and Newcrest Mining up 4.8pc as spot gold rose 1.2pc to $US1921.32 on Monday.

Silver Lake Resources rose 6.7pc, Saracen Mineral Holdings ws up 6.1pc.

The Consumer Discretionary and Consumer Staples sectors also outperformed with Wesfarmers up 2.2pc and Woolworths up 1.8pc.

CBA made the biggest points contribution to the index with a 2pc gain.

Link Administraion Holding plunged to close 13.5pc down to be the biggest loser on the day with the shares punished after a $3bn SS&C Technology bid was pulled.

The Australian dollar was steady, trading around US76.97c by the close of the ASX session on Monday.

David Ross 3.03pm: Mortgage broker banned after sharing credentials with banned dad

The corporate regulator has banned Sydney mortgage broker Astna Shirtika Sahay after she let her father use her and her company’s credit representative authority and ANZ accreditation.

Ms Sahay’s father, Shiv Prakash Sahay, used her accreditations after he was banned for life from practising by ASIC in 2015.

Mr Sahay, a former Aussie Home Loans advisor, was initially charged and banned for various fraud-related offences in 2015.

He was charged with new offences three years later, after his conduct featured as a case study at the financial services royal commission.

ASIC in 2018 found Mr Sahay continued to practice despite being banned, issuing 38 credit contracts for loans totalling $18m during that period.

The corporate regulator found Ms Sahay was involved in 31 contraventions of the National Consumer Credit Protection Act through her father’s use of her accreditations, despite repeated legal action against him.

ASIC found Ms Sahay did not possess the attributes of diligence, judgment, honesty and integrity necessary to discharge the duties and obligations imposed by the credit legislation and was not a fit and proper person to engage in credit activities.

2.45pm: Fortescue hits record high

Fortescue Metals Group has hit a record high on the back of a surging iron ore price, hitting $24.47 a share early in the afternoon before pulling back slightly to $24.41 by 2.15 pm (AEDT).

It means the iron ore miner has added more than 18 per cent to its share price in just one month. In that same time period, the broader market lifted by around 0.70 per cent.

Iron ore imported into Northern China last traded close to $US160 a tonne, up around 11 per cent over the month.

1.49pm: $A trading above fair value: NAB

The Australian dollar is trading above fair value, according to NAB’s Head of FX Strategy, Ray Attrill.

NAB’s estimate of short-term fair value for the AUD/USD rate at the end of December was 0.7500.

That’s 2.2pc below the current level of 0.7717.

“The difference is a result of the commodities and interest rate factors together only justifying a rise of less than half a cent in AUD/USD, and our preferred emerging market-related risk sentiment measure dragging fair value down slightly even as US equities powered ahead,” Mr Attrill says.

The exchange rate rose 5.4pc last month amid a largely uninterrupted rise in risk sentiment (based on US equities), as well as related USD weakness encompassing new two-and-a-half year lows and still-surging commodity prices.

1.20pm: Roku close to rights to Quibi’s content

Quibi is in advanced talks to sell its content catalog to Roku, according to people familiar with the matter, as the short-form streaming service winds down its operations following an unsuccessful run.

Quibi, which was founded by movie mogul Jeffrey Katzenberg, raised $US1.75 billion with an ambitious plan to develop high-end content for mobile phones. But the service, which launched in April, never gained traction and Quibi said in October it was shutting down.

Roku, which sells the most popular streaming-media player in the US, is pushing aggressively into content with its own ad-supported app, the Roku Channel, which offers movies and shows produced by other companies. A deal with Quibi would give Roku a roster of exclusive programming.

Under the terms the companies have discussed, Roku would acquire rights to Quibi’s library, the people familiar with the matter said. Financial terms of the proposed deal couldn’t be learned. The deal talks could still fall apart.

Quibi’s shows, with episodes fewer than 10 minutes in length, feature stars such as Anna Kendrick, Liam Hemsworth and Sophie Turner. The shows include “Most Dangerous Game,” a show about human-hunting, “Dummy,” a series about a talking sex doll, and “Murder House Flip,” a fusion of home-improvement programming and true-crime shows.

Quibi CEO Meg Whitman speaks about the short-form video streaming service for mobile Quibi during a keynote address last January. Picture: AFP

Dow Jones

12.45pm: Tokyo sinks on expected virus emergency

Tokyo stocks began the new year in volatile form, starting the Monday session up but quickly sinking on reports Japan may call a state of emergency over surging coronavirus cases.

The benchmark Nikkei 225 index started the first trading day of the year up 0.53 per cent but within an hour it was down 1.07 per cent, or 292.88 points, to 27,151.29.

The broader Topix index, which had also started higher, gave up 1.32 per cent, or 23.80 points, to 1,780.88.

The volatile start came as local media widely reported that Prime Minister Yoshihide Suga was considering issuing a regional state of emergency for Tokyo and surrounding areas as the nation continues to log record numbers of daily coronavirus infections.

AFP

11.41am: ASX extends rise after Covid news

Australia’s S&P/ASX 200 share index extended its intraday gain to 1pc after an encouraging COVID update in NSW.

The state reported zero new locally-acquired cases of the disease for Sunday, although the number of tests was relatively low and there were two new locally-acquired cases overnight.

The consumer discretionary and real estate sectors are now in the lead with Wesfarmers up 1.4pc and Goodman up 1.9pc.

But the heavyweight financials and materials sectors continue to make a solid contribution to strength, with CBA up 1.6pc and Fortescue Metals up 3.1pc.

The consumer staples and utilities sectors are outperforming with Woolworths up 1.3pc and APA Group up 1.4pc.

Link Administration shares are worst off, down 13pc after SC&C Technology withdrew its takeover bid.

The energy sector is also underperforming with Oil Search down 1.4pc and Ampol down 1.1pc

Sydney Airport and Corporate Travel are down 2.5pc and 0.8pc amid worsening COVID outbreaks domestically and overseas.

10.36am: Georgia election risk for markets: Nomura

With some clarity around Brexit and a $US900bn US fiscal package emerging before year end, Georgia Senate elections on January 5 are perhaps the key risk factor for global markets this week, according to Nomura.

US chief economist Lewis Alexander says the Georgia runoffs - which will determine control of the Senate in 2021 - are “effectively a toss-up”.

While election data from November and historical experience suggest an advantage for Republicans, significant strength in recent early voting data, along with tight polls and solid fundraising, suggest Democrats could capture both seats.

But the outcome will likely depend on how effectively Republicans can generate strong turnout on election day.

While his current economic outlook assumes Republicans will win at least one of the two seats, maintaining Senate control in 2021, Democrats capturing both seats “poses significant upside risk for growth in 2021”, he says.

Nomura’s US forecasts assume about $US300bn of fiscal/infrastructure spending in H2.

“But if the Democrats pull this off, we could see $US2 trillion of additional spending, pursuing social, environmental and infrastructure objectives,” Mr Alexander says.

“This would add ~1.6pp and 0.9pp to our US GDP forecasts for 2021 and 2022, and of course, would need to be funded.

“We think it most likely we will know the results on election night (January 5 US time) but there is a good chance it could take a couple of days.”

Donald Trump at a rally in December to support Republican Senate candidates. Picture: AFP

10.18am: ASX rises firmly in early trading

Australia’s S&P/ASX 200 share index rose 0.8pc to 6643.5 points in early trading.

The index brushed off concerns about the potential for tighter COVID restrictions in NSW.

With selling related to end-of-quarter rebalancing out of the way, investors are focussing on the fact that Wall Street set fresh record highs on Thursday.

The tech and consumer staples sectors are strongest with Afterpay up 3.4pc and Woolworths up 1.4pc.

Heavyweight stocks in the financials and materials sectors are also boosting the market with CBA up 1.1pc and Fortescue Metals up 2.2pc.

Link Administration shares dropped 12pc after SC&C Technology withdrew its takeover offer.

10.10am: Link shares drop 12pc

Link Administration shares dropped 12pc to a five-week low of $4.91 after SC&C Technology abandoned its $5.65 a share bid.

Link shares have erased all of their 15pc gain following disclosure of the SC&C bid on December 7th.

Link was last down 11pc at $4.97.

9.20am: Pelosi wins 4th term as House Speaker

Nancy Pelosi won her fourth term as House speaker, showing in the first vote of the new session of Congress how her narrow majority will make it difficult for House Democrats to pass legislation in the new Congress.

The 80-year-old California Democrat, who has led her party in the chamber since 2003, won in a 216-209 vote between her and Republican Minority Leader Kevin McCarthy, with five Democrats voting present or for someone besides the speaker.

The daughter of a congressman from Baltimore, she is the first woman speaker and the first since 1955 to lose the gavel and regain it. She ran unchallenged for the position.

To win the speakership, Mrs. Pelosi had to carry a majority of those present and voting by name. Democrats have 222 seats to Republicans’ 211 because one race in New York is still in dispute, and a seat in Louisiana is vacant because Republican Rep.-elect Luke Letlow died on Tuesday from complications of COVID-19.

Nancy Pelosi has won another term as House Speaker. Picture: AFP

Dow Jones

9.09am: Link takeover bid withdrawn

Link Administration shares are set to fall after it said SS&C Technology Holdings has withdrawn its takeover proposal.

On December 7, SS&C launched a conditional, non-binding indicative bid for 100pc of Link for $5.65 a share.

That announcement boosted Link’s share price as much as 15pc to a 10-month high of $5.68.

On December 10, Link opened a data room for SS&C after saying its proposal did not represent compelling value.

Link now says it continues to consider all alternatives to maximise value for shareholders.

That includes the previously disclosed potential demerger of its interest in Torrens Group and its core asset, PEXA.

Link shares closed down 0.5pc at $5.55 on Thursday.

Link says SS&C Technology Holdings has withdrawn its takeover bid. Picture: Christian Gilles

8.52am: ASX set for five-week low

Australia’s share market is set for another sharp fall as local COVID restrictions threaten to tighten further in NSW.

The indx dived 1.4pc to a four-week low of 6587 in a shortened session on Thursday.

Thursday’s fall was mainly attributed to quarter-end rebalancing by index funds.

Even after falling 2.5pc in the final two weeks, the index surged 12pc in the December quarter, but with quarter-end selling out of the way, the index may soon bottom out, with the December 1 low at 6511 potentially offering support on the charts.

However, the local share market may stay soft early this week ahead of a potential spike in COVID cases that may lead to a further tightening of COVID restrictions in Sydney.

Any future lockdown in Sydney would be “hard and local”, according to Acting NSW Premier John Barilaro.

Mr Barilaro said tougher restrictions could be on the cards as health authorities battle to control a new outbreak linked to a Berala bottle shop.

He said the number of potential contacts posed a concern with a thousand customers passing through the store over Christmas Eve alone.

Travel stocks will be in focus along with property trusts, banks and others linked to the domestic economy as investors assess the outlook.

8.44am: Infratil data investment values soar

Infratil said the value of its investment in CDC Data Centres has risen sharply over the past three months, bolstering its takeover defense against potential suitors.

Infratil said its 48.1 per cent investment in CDC is now valued at between $2.04 billion and $2.33 billion. That is up from $1.60 billion-$1.81 billion at September 30.

“This valuation increase reflects the acceleration in demand that CDC is experiencing from new and existing customers across its portfolio, which is expected to result in its existing data centers reaching capacity earlier than expected, with a consequential effect on forecast growth,” Infratil said.

Last month, Infratil said its board rejected takeover proposals from Australia’s largest pension fund as materially undervaluing assets that include wind power and data centers.

AustralianSuper had made a cash-and-shares offer worth $NZ5.4 billion for Infratil, which has controlling stakes in businesses across Australia and New Zealand including wind-power company Tilt Renewables., Vodafone New Zealand and New Zealand’s capital city airport.

On Monday, Infratil said the new valuation of its investment in CDC means its International Portfolio Annual Incentive Fee is now estimated to be $NZ147.6 million, an increase of $NZ89.9 million since the end of September.

Dow Jones Newswires

8.20am: MGM seeks to buy Entain

MGM Resorts International is seeking to buy British gaming company Entain, according to people familiar with the matter, in the latest move by a casino operator to double down on the red-hot online-gambling business.

MGM recently made an offer to buy the owner of the popular British gambling brand Ladbrokes, which has a market value of about $US9 billion, the people said. The offer, which would have a substantial stock component, comes after an earlier, roughly $US10 billion all-cash overture was rebuffed. The new bid comes with financial backing from the MGM’s largest shareholder, IAC/InterActiveCorp., the people said.

The exact details and value of the new bid couldn’t be learned, but it is above the £12.85 a share MGM had previously offered late last year, the people said. There is no guarantee Entain will be receptive to the new offer or that there will be a deal.

A combination could create one of the few large gaming companies in the world with a significant online and bricks-and-mortar presence. It would come on the heels of other recent consolidation in the industry.

Like its peers, MGM has been under pressure as the coronavirus pandemic kept its biggest moneymakers -- casinos and hotels on the Las Vegas Strip -- closed or operating at sharply reduced capacity for much of the year.

The MGM logo.

Dow Jones

5.50am: Bitcoin passes $US30,000 for the first time

Bitcoin, the leading virtual currency, saw its price pass $US30,000 over the weekend for the first time in just its latest record high.

The first decentralised cryptocurrency surpassed $US30,823.30 at 1313 GMT, according to data compiled by the Bloomberg news agency, having broken $US20,000 on December 16.

Analyst Timo Emden noted that “the appetite for risk”, which is reflected in buying of bitcoin, “remains unshakeable”.

“More historic highs could follow,” the Germany-based analyst added. Just 12 years old, bitcoin has seen a meteoric rise since March, when it stood at $US5,000, spurred by online payments giant PayPal saying it would enable account holders to use cryptocurrency.

After PayPal’s announcement in October, analysts at investment banking giant JPMorgan Chase compared the cryptocurrency to gold.

“Bitcoin could compete more intensely with gold as an ‘alternative’ currency over the coming years given that millennials will become over time a more important component of investors’ universe,” they said.

A number of central banks have meanwhile responded to the rise of cryptocurrencies and the dwindling global use of cash by announcing plans for bank-backed digital units.

Several central banks including those of China and Sweden -- but also the US Federal Reserve -- are also testing digital applications in response to Facebook’s recent moves to produce its own digital unit, Libra.

AFP

5.45am: OPEC+ meeting to decide production levels

Members of the OPEC group of oil producers and their partners will meet via videoconference on Monday to decide on production levels for February, hoping to turn the corner on a difficult year.

The OPEC+ ministerial meeting comes after oil consumption tanked in 2020 due to the COVID-19 pandemic and a price war between Saudi Arabia and Russia.

Despite a pick up in prices towards the end of last year, the market levels for black gold remain uncertain.

After their last summit, from November 30-December 3, the OPEC+ members agreed to increase production by half a million barrels per day in January.

Also at that meeting the 13 members of the OPEC cartel, led by Saudi Arabia, and their six allies, led by Russia, agreed to meet at the beginning of each month in order to decide on any adjustments to production volumes for the following month.

Russia and Saudi Arabia are respectively the second and third biggest oil producers in the world after the United States.

The decision illustrates OPEC’s desire to maintain a strong influence on the oil market and the gravity of the situation for crude producers last year.

OPEC members gather for a meeting. Picture: AFP

AFP

5.35am: Markets recap

Wall Street indices finished 2020 at all-time highs on Thursday, a surprising conclusion to a year in which the United States endured a recession caused by the deadly COVID-19 pandemic that continues to plague the country.

The Dow and S&P 500 finished at fresh records, capping a year in which they, along with the Nasdaq, scored significant gains even amid elevated joblessness, rising hunger and acute pain in sectors such as hospitality, airlines, oil and gas and the performing arts.

“For Main Street, it was a terrible year,” said Briefing.com analyst Patrick O’Hare. “For Wall Street, it was a fantastic year.”

The broadbased S&P 500, which swooned below the 2,200-point level at its nadir in March, finished the year at 3,756.07, up 16.3 per cent for the year.

European equity markets had a mixed year, with Frankfurt higher, but Paris declined and London suffered its worst year since the global financial crisis.

The gains in US indices seemed impossible in March, when exchanges were forced to suspend trading as stocks went into free-fall as much of the US economy was shut down to combat the coronavirus.

Back in Europe, Paris suffered a 7.1-per cent drop but Frankfurt gained 3.6 per cent in volatile record-breaking deals over the course of 2020.

London’s FTSE 100 suffered a 14-percent drop for the year, its worst since 2008, but the British pound zoomed to a 2.5-year dollar peak before Britain’s long-awaited exit from the European single market, with a trade deal in the bag on markets’ final day of a coronavirus-ravaged 2020.

AFP