Wednesday 8th April – Australian Market Wrap | Beeks Downunder-Because not all financial news is boring!

ASX down 45 points to 5207 (-1.1%) in robust trade after early selling pressure wanes and turned positive before match out selling again took us down 50 points. Aftershocks on APRAs move failed to dent ongoing enthusiasm and a slight bounce in Dow Futures evaporated now down 22 points hurting late sentiment. News that Wuhan had gone back to normal was also a factor. Banks remain the ugly duckling sector after the APRA letter on dividends and Fitch downgraded credit ratings. The Big Bank Basket fell to $105.93 with CBA down 3.3% and WBC down 5.3%. CBA performing better as it has already paid its div. HSBC has been named in a new AUSTRAC inquiry as alleged money launderers. Broad gains in the bulk of the market although volumes seem to be winding down ahead of Easter. Miners were easier though S32 had a great day up 5.1% and BHP down 1.2% whilst energy stocks lower at the close ahead of the OPEC Plus Zoom meeting on Thursday. WPL down 0.8% and STO down 0.2%. Healthcare was flat led by CSL as brokers pushed the bullish argument on collection centres and R&D in the US. The stock unchanged with FPH seeing some buying up 0.6% and COH down 0.1%. Consumer stocks were benefitting from curves flattening, COL up 0.8%, ALL up 0.5% and TWE up 0.5% on the potential demerger of Penfolds. Tech stocks on the shopping lists with XRO up 2.9% and REA doing well up 0.7%. The All Tech Index fell 0.4%. REITs had a reprieve from the recent selling, on the rent deal that has been hatched with LLC up 3.5% joining in, SGP up 7.8% and DXS up 2.5%. In corporate news, OSH returned to trade and fell 3.39% below the adjusted previous close price of 266c. BOQ fell 2.1% after postponing the interim dividend completely. Elsewhere we saw more guidance withdrawn and more uncertainty of earnings. PAR resumed after a $35m issue and fell 3.8%. The 10-year bond yield rose slightly to 0.93% and the AUD steady at 61.49c despite S&P downgrading our sovereign credit outlook. In Asia, we saw mixed emotions as China fell 0.3% and japan up 2.1%.

ASX 200 down 45 to 5207.
High 5321 Low 5122 Lower volumes.
Stimulus measures in the house.
Dow futures up 339.
RBA leaves rates unchanged.
Big Bank Basket falls to $ on dividend fears.
BOQ cancels interim. CBA escapes a little, it has already paid its dividend.
Miners and energy firms.
Oil futures up around 4.4% in Asia.
10-year bond yields rise at 0.93%
AUD steady at 61.49c.
Aussie gold slips to $2677
Bitcoin rallies higher to US$7383
Asian markets mixed with China down 0.3%, Japan up 2.1%.

STOCKS

MQG +0.48% completion of the takeover of AirTrunk data centres.
TYR -15.62% has been a good run so some profit-taking.
JIN -8.10% good bounce, had to end.
SCP -6.36% completes capital raising.
LIC -5.41% change in substantial holding from SOL.
APT -5.60% business update coming.
VUK +12.50% short covering maybe.
SGP +7.81% SCG +7.43% and VCX +10.55% REITS rally on rent deal.
VHT +4.88% business update focus.
WEB +6.06% retail offer details.
KMD -6.06% pressure remains.
SPL -5.08% broker downgrades.
AFG -6.43% good rally yesterday unwinds.
NGI -26.41% March 2020 update.
OSH -3.39% ex entitlement. Adjusted previous close 266c.
PAR +3.85% completes raising.
TEK +5.56% chairman’s update.
Z1P -3.70% cuts jobs in a business update. UK expansion on hold.
DCN – $98m capital raising.
SUN -0.77% outlook cut to negative
BLD -1.72% outlook cut to negative by Moody’s.
SXL -4.35% UBS sees value but limited growth.
Speculative stock of the day: G Medical (GMV) +200.00%. Good volume. FDA grants Prizma OTC authorisation in USA. ‘The ‘Prizma’ Medical Smartphone Case is one of two key products developed by G Medical and is aimed at everyday consumers focused on their medical health and wellbeing. The ‘Prizma’ allows consumers to turn their smartphone into a mobile medical monitor to measure a wide range of vital signs’.
Biggest Rises: VUK, URW, VCX, SKC, SGP, EOS and SCG.
Biggest Falls: TYR, ARF, JIN, SCP, APT and LIC.

TODAY

Bank of Queensland (BOQ) -2.14% reports H1 cash NPAT of $151m vs consensus is $154.5m. Net interest margin (NIM) down 3bps from FY19 to 1.89%. CET1 capital ratio at 9.91%, +87bp from FY19. The estimated impact of COVID-19 in FY20 is in the range of $49m-$71m. Interim dividend deferred.
McMillan Shakespeare (MMS) -0.94% from April 13 the company will temporarily move into a partial or full stand down where there has been or is likely to be a material change in workload. To also reduce all non-essential operating and capital expenditure.
Seven Group (SVW) +1.37% withdraws FY20 guidance. To date, COVID-19 has had limited impact on WesTrac, where mining and construction activities have, at this stage, been largely unaffected. Coates Hire’s operations are performing in line with expectations, however, events revenue has been curtailed. Governments measures have also suppressed the short term outlook for non-essential services including advertising and major sporting events.
Treasury Wine Estates (TWE) +0.47% To consider a demerger of the Penfolds business into a separate company listed on the ASX by the end of calendar year 2021. Penfolds accounts for approximately 10% of TWE’s volume, but well over half of its earnings. In China, staff have returned to working in the office. The business said it will resume operations through the remainder of F20 but notes consumption levels remain subdued.
Insurance Australia Group (IAG) -1.45% CEO Peter Harmer to retire by end of 2020. CFO Nick Hawkins has been appointed Deputy CEO and Michelle McPherson has been appointed acting Group CFO, previously deputy CEO for nib.
Stockland (SGP) +7.81% Notes it will be some time before full impact from small and medium enterprise (SME) tenants suffering hardship is known. Managing Director comments, “We will engage proactively with our SME tenants to determine eligibility and suitable solutions for their businesses. As the impacts of this process will remain very uncertain until those discussions are complete, it will be some time before we know the full impact on Stockland.”
Virgin Australia (VHA) – CEO Paul Scurrah says that the airline is not looking for a bailout from the government but needs assistance to bridge through the crisis to restore business confidence.
QBE Insurance Group (QBE) – Has considered APRA’s new dividend guidelines and will pay a final dividend of 27cps on April 9 as previously scheduled.
Zip Co. (Z1P) – reports Q3 revenues $45.0m, up 17% on the previous quarter. Transaction volume was up 8% to $518.7m. Receivables up 12% to $1.17bn. Customer numbers 1.95m, 194k added over the quarter. Merchants 22,744, 1.9k added in the quarter. Due to the outbreak has reduced around 20% of its workforce. Capex now expected to be $1.2m in Q4. Notes current conditions and a delayed launch in the UK, has impacted the ability to reach its global customer target. However, Zip is comfortable that the annualised transaction volumes will meet or exceed the stated target of $2.2bn.

ECONOMIC

The number of dwellings approved rose 1.0% in February, in trend terms, according to data released by the ABS. Private sector dwellings excluding houses, which rose 1.6%, in trend terms. The seasonally adjusted estimate for total dwellings approved rose 19.9% in February, driven by a 61.7% increase in private dwellings excluding houses. This was largely due to strength in approvals for apartments in Victoria, which came off a low base in January.

The value of new loan commitments for housing fell 1.7% in February, seasonally adjusted, according to the latest ABS numbers.
The value of new loan commitments for fixed term personal finance fell 0.5% in February following a 2.1% rise in January and were up 10.1% on February 2019.
In trend terms, the value of new loan commitments to businesses for construction fell 1.6% in February, while the value of new loan commitments to businesses for the purchase of property rose 1.3%.

There was no notable impact of the COVID-19 virus on new lending commitments for February 2020. The reference period for Lending Indicators fell at a point where there was only a relatively low number of confirmed COVID-19 cases within Australia and before it was declared a global pandemic.

CV19 NEWS

Global cases now 1.43m.
Wuhan is back to normal. Normalish. About 55,000 people had train tickets from Wuhan on Wednesday, according to Chinese state television, as the government eased its lockdown on the city. Flights are resuming from the city’s international airport, usually 24m passengers pass through Wuhan airport a year.
HK is extending its social distancing measures by another two weeks until April 23^rd.
Foxconn which makes iPhones for Apple is now switching to making ventilators.

BONDS

ASIAN NEWS

Another accounting scandal in China. TAL Education Group, a tutoring business delivered the latest fiasco after saying a routine internal audit found an employee had inflated sales by forging contracts. This follows Luckin Coffee which has had serious accounting problems.

EUROPEAN AND US NEWS

Euro futures showing early losses of around 1%-2%.
FED minutes today.
Trump blames WHO for not acting earlier and being too China-centric. Puts a hold on funding.
France has become the fourth country to post more than 10k deaths.
Tesla is cutting some salaries by 30%.
EU economic aid on the table as Euro finance ministers meeting. No deal it seems. Can’t agree on credit lines. Another Zoom meeting tomorrow.
Boris Johnson remains in St Thomas’ in intensive care. The UK has no bill of rights or constitution. There are no real plans for a deputy. Dominic Raab is a temporary head prefect but it could well fall to the Chancellor of the Exchequer. Boris appears to be stable and conscious.Thankfully. Get well soon.
The amount of global debt, across all sectors, increased by more than $US10.8 trillion ($17.5 trillion) to top $US255 trillion in 2019, according to the Institute of International Finance. Global debt now represents more than 322% of GDP and is 40% higher than at the onset of the 2008 financial crisis
Anyone remember Brexit negotiations? Let’s hope there is an EU to negotiate with.

And finally….