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Shares climb 2.9pc as lockdowns ease - The Australian Financial Review
Shares in travel companies and listed landlords surged as investors re-evaluate the trade environment as some restrictions are lifted earlier than planned.
Monash Investors principal Simon Shields said while there was a risk of some long-term scarring because of the crisis, investors were now focused on the return to normal activity. "Economic growth is going to get back to a normal rate soon enough there shouldn't be a lot of difference in the way we've been pricing stocks," he said. The reduction in restrictions was also expected to gather pace in Europe, the US and Japan. The real estate sector, which has suffered heavy selling because of the impact of containment measures, led today's gains. Unibail-Rodamco-Westfield, whose retail property assets are concentrated in the US and Europe, was the best performer among the landlords. Its securities rose 13 per cent to $3.99. The local retail landlords also gained ground, with Vicinity Centres up 5.6 per cent and Scentre Group closing 5.6 per cent higher at $2.45. In residential property, Stockland's shares added 7.2 per cent to $3.43. Among the travel companies, Flight Centre rallied 9.5 per cent to $14.25, Webjet climbed 5.8 per cent to $4.40, Qantas gained 5.4 per cent to $4.07, while Helloworld shareholders saw the value of their holdings jump 32.7 per cent after the stock closed at $2.19. The banks provided a major boost to the market gains aided by the improved outlook for the Australian economy. Westpac rose 6.3 per cent to $16.30, ANZ closed 6 per cent higher at $16.52, National Australia Bank advanced 5.7per cent to $16.64 and Commonwealth Bank gained 3.9 per cent to end the day at $61.31. "In times of crisis or a market crash people get very risk-averse, and their time horizons shorten a great deal," Mr Shield said. "What we're seeing at the moment with the share market going up is really just an unwinding of that to some extent." Share prices across the index are still trading at a significant discount to where they were before the crash, Mr Shields added. Investors looking for discounted stocks added to demand for Southern Cross Media on Tuesday. The company's shares remain 69.4 per cent below the price they were fetching at the start of year, despite gaining 15.6 per cent to close at 18.5¢. Other investors, though, were more cautious about the state of the economy and the outlook for company earnings. "The dichotomy between the false market tranquillity and the high level of uncertainty about the length of the crisis and its long-term implications is striking," investment professionals from Amundi Asset Management said. "In our view, we are far from being out of the woods and investors should stay alert as current market levels are still pricing in a too rosy too soon endgame. "The disconnect between market hopes and economic and pandemic reality reinforces our conviction that now is a time to remain cautious: dont chase the bulls, but gradually and selectively play investment themes better positioned towards a slow road to recovery." Coca-Cola Amatil was among the few companies to end the day in the red. It fell 1.6 per cent to $8.82 after a trading update that fell short of investor expectations. The iron ore miners underperformed the benchmark after prices for the commodity eased, with Fortescue Metals Group edging 0.4 per cent lower to $13.78. Crude oil has continued to gain ground this week lifting local energy producers on Tuesday: Santos shares advanced 4 per cent to $5.46, Oil Search rose 3.9 per cent to $3.47, and African producer FAR closed 14.3 per cent higher at 1.6¢.
Banks soar as ASX exits bear market - The Australian Financial Review
The local sharemarket closed at its highest level since March 11; Michael Frazis says he's shying away from travel stocks; the major banks soared during the session.
Michael Frazis thinks airlines are terrible ways to play the COVID-19 recovery, "as losses are still accumulating, gnawing away at balance sheets". The Frazis Capital Partners stockpicker prefers to own Disney, or technology companies which can intensify their edge (Pinduoduo, Shopify and Sea) in the pandemic. But on airlines, he agrees it's certainly a good time to "start" an airline, and that's about it. Michael Frazis says airlines and cruises don't interest him. Peter Braig "Tightly held airport slots around the world are up for grabs, new-build and second hand planes are on the cheap, and there are plenty of qualified staff looking for work." As for cruise ships, they're as capital intensive, competitive and cyclical as ever. What to make then of travel tech such as Amadeus or Sabre? Broadly, not interesting enough. "You could argue Sabre and Amadeus have market leadership, but they are low growth and, as they were once considered low risk, carry debt." The history of these businesses is interconnected with the aviation industry and they have suffered from under-investment and "cashflow harvesting" in various evolutions of public and private ownership. "Our portfolio consists almost entirely of the opposite: companies with insatiable demand, investing every dollar they can to put their brilliant products in front of more people. These invariably look terrible on cash flow measures, but often create the most equity value." Also, the user experience is harrowing. "If ever there was a time for a modern competitor to break the Sabre/Amadeus oligopoly... it would be now. Airlines may never again have a better chance to renegotiate long-standing contracts, nor have a greater need for incremental efficiency. Something to watch for."
ASX climbs 2.2pc to 11-week high, buoyed by travel stocks - The Australian Financial Review
The Australian sharemarket closed at an 11-week high as shares extended their rebound from the March rout as the economy edges back to normal.
Optimism on the local market was broad-based, with blue chip stocks across the board pushing the market higher. CSL rose 2.5 per cent to $298.27, Macquarie Group advanced 3.5 per cent to $106.17, BHP Group climbed 1.3 per cent to $34.76, Telstra firmed 2 per cent to $3.12 and Wesfarmers rose 1.7 per cent higher at $39.50. Travel and tourism stocks were among the best performers after Treasurer Josh Frydenberg told ABC News Breakfast further support for the tourism sector was possible after being quizzed about the $60 billion JobKeeper costing blunder. "When it comes to JobKeeper, well be conducting a review in the month of June," the Treasurer said. "And obviously well look at how its being implemented, well look at whats happening in various sectors and ... the tourism sector could be one sector thats going to be in need of further support." Webjet shares advanced 15.6 per cent to $4.16, Flight Centre climbed 15.2 per cent to $13.01 and Qantas rose 7.2 per cent to $3.86. The banks were also broadly firmer. NAB rose 2.7 per cent to $15.75, ANZ advanced 2.4 per cent to $15.59, Westpac firmed 2.1 per cent to $15.33 while Commonwealth Bank closed just 0.5 per cent higher at $58.99. QBE Insurance climbed 6 per cent to $8.18 after telling investors its reinsurance contracts would limit its exposure to business interruption insurance claims by UK customers to $US75 million ($115 million). Afterpay shares shot 9 per cent higher to $48.50 after the company confirmed interim chairman Elana Rubin would become chairman of the board immediately and US-based Yelp director Sharon Rothstein would become a non-executive director on June 1. Ramsay Health Care rose 3.5 per cent to $69.00, after successfully completing its $300 million share purchase plan, saying valid applications of $695 million had been received from more than 50 per cent of its eligible shareholder base. Toll roads operators also climbed with Macquarie saying evidence suggested toll road traffic volumes were recovering well ahead of public transport volumes. Transurban rose 3.4 per cent to $14.64and Atlas Arteria firmed 6.1 per cent to $6.91. Mining stocks were among the worst hit stocks, with increased tensions between the US and China weighing on sentiment for base metals. Alumina slid 1.3 per cent to $1.47, South32 declined 0.5 per cent to $1.89, IGO fell 1.4 per cent to $4.92, Perenti Global lost 2.1 per cent to $1.16 and Lynas Corp dropped 0.9 per cent to $2.10.
No glamour when flying returns - The Australian Financial Review
Travellers should expect health warnings and hand sanitiser not pretty photos at airports when they start booking flights again.
While the numbers of people flying are just a fraction of what they were six months ago Adelaide Airport now only has 30 largely empty interstate flights a week compared with 500 flights a week before the virus outbreak making social distancing easy, airports are preparing for flights to resume and crowds to return. While the borders of Queensland, Western Australia, South Australia, Tasmania and the Northern Territory are still closed, with governments fighting over when they should reopen, Qantas, which has continued to operate some 164 weekly flights between capital cities and 36 regional destinations throughout the crisis, is expecting domestic travel to return before the end of July. Virgin Australia (which like Qantas has received federal funding to keep flights in the air) added more services on Friday, including three return flights weekly between Adelaide and Perth and two flights daily between Brisbane and Melbourne, and now has 76 return flights around the country every week. Airports are now filled with signs telling people to stay apart but this is expected to be difficult when crowds return. Louie Douvis Mr Culbert is hopeful that flights from Sydney to more than 100 international destinations will be fully restored, arguing that plans for a trans-Tasman bubble should become a template for reconnecting air travel city by city, country by country. The problem is that like aeroplanes, airport terminals have limited space, and although many have puts spots on floor showing people where to stand or have taped off seats, they don't think it is feasible to make people stay 1.5 metres apart while they are queuing for bag drops or waiting at airport gates when there are flights departing and arriving every few minutes. Airlines and airports are working together in a new group known as the Australian Aviation Recovery Coalition to develop strategies to convince the public that flying is safe when governments do relax border restrictions. Alison Roberts, CEO of industry group Airlines for Australia & New Zealand, says airlines and airports have one big advantage over other transport networks like buses or trains: they know exactly how many people are turning up for a flight because flyers book ahead. For airports, this means they can try to arrange embarkation and disembarkation at different parts of terminals so that flyers are spread as far apart as possible, as well as encouraging people not to congregate in small areas, such as gate lounges. Airlines, meanwhile, can contact travellers before they arrive at airports and give them information on how to travel safely as well as asking them to provide declarations they are fit to travel. International terminals like this one at Brisbane Airport look spacious when they are empty but will fill up quickly when flyers come back, making it hard to socially distance. Attila Csaszar "It will be essential that both industry and governments develop clear, concise and consistent messaging for the travelling public to ensure we restore confidence," says Simon Bourke, acting chief executive of the Australian Airports Association. Qantas has already said it will "strongly encourage" people to check in online and to use self-service bag drops, and that it will give sanitising wipes and masks to passengers on board and ask them to limit their movement around cabins. Canberra Airport has also moved quickly to try to get people comfortable with flying again, installing a thermal-imaging camera at its departures terminal that reads travellers' temperatures as they pass through security. The camera records their face and takes several readings of their temperature. If travellers have readings of or above 37.8 degrees Celsius they are referred to a nurse who retakes their temperature. If the temperature is still high, the airlines with which they intend to fly will be informed. But other bigger airports are currently resisting thermal imaging, arguing it is too expensive and time-consuming for large numbers of travellers and does not always provide accurate screenings. Melbourne Airport also says managing health risks at the airport, or on planes, is too late. The International Air Transport Association (IATA) has suggested testing for COVID-19 before people get on planes, and using "immunity passports" that are backed by medical science and recognised by governments, would encourage people to fly again. IATA opposes social distancing on aircraft and quarantining people on arrival at their destination, arguing that health declarations and contact tracing can reduce the risk of imported cases developing into local chains of transmission.
Government urges Australians to 'do the three and stay COVID-free' - The Australian Financial Review
Pharma company AstraZeneca expects to be able to deliver a billion doses, but acknowledges it does not yet know if the vaccine works. Follow our live coronavirus blog here.
Pharma company AstraZeneca expects to be able to deliver a billion doses of a possible COVID-19 vaccine this year and next if tests are successful, adding on Thursday it should shortly get results of an early stage clinical trial. The British drugmaker said it had signed the first agreements to supply at least 400 million doses of the vaccine, which it is developing with Oxford University. This includes 300 million doses for the US government, worth $USD1 billion, which hopes to roll out the vaccine by October. "This contract with AstraZeneca is a major milestone in Operation Warp Speeds work toward a safe, effective, widely available vaccine by 2021," US Department of Health and Human Services Secretary Alex Azar said on Thursday. AstraZeneca said it recognised the vaccine might not work but if results from the early stage tests were positive, they would lead to late stage trials in several countries. Only a handful of the vaccines in development have advanced to human trials, an indicator of safety and efficacy, and the stage at which most fail. There are currently no approved treatments or vaccines for COVID-19 being tested by pharmaceutical giants across the world, with governments, drugmakers and researchers working on around 100 programmes and experts predicting a safe and effective means of preventing the disease could take 12 to 18 months to develop. AstraZeneca said the COVID-19 vaccine it was testing would include a planned late-stage clinical trial with 30,000 participants and a paediatric trial, adding that it planned to start supplying the vaccine in Britain in September.
ASX snaps four-day rally as iron ore miners fall - The Australian Financial Review
The ASX has ended its longest run of gains since the market crash began, as investors bid down some of the benchmark's major companies.
After carrying the market higher over the course of this week, the materials sector lost ground on Thursday after news that China had introduced changes to its iron ore import inspection processes. While the amendments will mean less inspections for iron ore heading into China, they come after authorities in the country imposed tariffs on Australian barley and banned meat product imports from certain vendors. After passing a record high this week, shares in Fortescue Metals Group closed 2.2 per cent lower at $13.60. while BHP slid 0.6 per cent to $34.51, and Rio Tinto fell 1 per cent to $93.19. The amount of capital flowing into and out of shares remains beholden to the competing forces of sentiment, stimulus and containment measures, as investors grapple with the company earnings outlook. A key threat to the sharemarket recovery is the risk of a de-leveraging cycle should households and businesses choose to save and pay down debt as the economy emerges from the pandemic's immediate shock, said BetaShares portfolio manager Chamath De Silva. "The question is, will we see an acceleration in credit growth or demand as we open up, or will the focus be on paying down debt first and foremost?" said Mr De Silva, a former Reserve Bank of Australia analyst. "The idea of V-shape recovery really hinges on companies and households taking advantages of cheap funding: borrowing, spending, or investing. "But if they're just going to pay down debt, the recovery could be very [much] prolonged." While the rapid response from central banks and governments had ensured stability in financial markets and economic support as the containment measures set in, the dust is yet to settle, Mr De Silva said. "Once a lot of this stimulus and liquidity wears off, we're still left with the big solvency issues from business models not being able to survive in the post-COVID world, as well as just the permanent loss of income and cash flows going forward," he said. Some companies are emerging from the crisis in a stronger position than had been expected, with shares in resources and infrastructure provider NWH Holdings surging 32.7 per cent on Thursday following an update from the company on its performance for the year ended April 30. Aristocrat Leisure disappointed with its first-half results. The gaming company's shares fell 5 per cent after reporting interim revenue of $2.3 billion and a $1.3 billion net profit. Service Stream shares also dropped after releasing updated guidance for earnings in 2020 and telling investors the impacts of COVID-19 would persist at least through the early part of fiscal 2021. Shares in the network infrastructure services company fell 5.9 per cent, slumping to $2.07.
China changes iron ore inspection rules in new trade threat - The Australian Financial Review
China has changed its inspection procedures for iron imports under new rules that analysts say could be used to block Australia's most important export as trade tensions between the two countries escalate.
In the past customs would check every batch of iron ore but now they will only check at the request of importers, MySteel analyst Xu Xiangchun said. But others said it meant officials could let the Brazilian imports sail through without inspections and just check the Australian batches. It said traders, who are required to submit an import quality certificate, would need to submit an application to customs. Customs would then release the goods after passing the checks. The notice from the General Administration of Custom said the changes were designed to "streamline" the procedures to "build a better business environment". One iron ore trader, Ji Minlei, said the policy was not targeting Australia but was for all imported iron ore. "I don't think this will have a strong impact on Australian iron ore," the trader said. Du Hongfeng, a senior analyst at trading and consultancy firm steelhome, warned the move could hurt Australian imports and rival exporter Brazil would not have these concerns. "In order to prioritise the quality inspection of imported iron ore, Chinese authorities made an announcement on the adjustment of the method of inspection," he said. "China takes the same position on all imported iron ore. However, Australia is not grateful to China's assistance during the outbreak. Instead they asked for a groundless investigation by following a certain country. Therefore the market will link this to other things." "On one hand this will improve the quality of imported iron ore and better protect the interests of related companies. On the other hand these measures will quicken the pace of iron ore clearance. " Asked if it would inhibit iron ore imports, he said: "Some Australians politicians are scared because they did something wrong. Brazil iron ore supplies won't have this concern." Comment has been sought from the Morrison government and iron ore giants BHP, Rio Tinto and Fortescue Metals Group. Asked by Labor Senator Murray Watt during the COVID Senate inquiry about the potential ramifications for Australia's economic recovery from the inspection changes, Treasury Deputy Secretary Meghan Quinn said she was unaware of the report and could not comment specifically but pointed to the importance of diversification. "It is the case that any restrictions in global trade for the commodities we export would be detrimental to our access to international markets," she said. "It is important to think about what's happening in the whole global market in terms of Australian exports. Even if we currently export to a particular country at the moment, that doesn't mean it's the only country that we can export to so if other markets are available then producers can shift their supplies somewhere else. "The most important thing for our exports is the overall level of world demand and the demand for that product in the market." Australia is the biggest iron ore exporter to China, accounting for 62.2 per cent of the country's total imports. The state-run Global Times newspaper warned Australian iron ore imports could also be hurt by the political tensions between the two countries. "This is another implicit warning to Australia," the newspaper's English-language website quoted Yu Lei, a chief research fellow at the Research Centre for Pacific Island Countries at Liaocheng University, as saying. "It is associated with how Australia has acted, and a general decline in demand for steel on the global level."
Australian stocks limp to small rise, ignoring record retail pain - The Australian Financial Review
A cooling of enthusiasm for Moderna's COVID-19 vaccine candidate was overtaken by a turnaround in the banking sector during the session for a 13-point gain.
Citi economist Josh Williamson thinks the worst is already over: "reopening segments of the economy should guarantee that such a large fall in sales is not repeated," he said. "With personal movement restrictions somewhat lifted and evidence that trading conditions are starting to improve, we dont expect another large decline in May." Deputy chief medical officer Paul Kelly said on Wednesday that there was no medical case for keeping state borders shut. "From a medical point of view I can't see why the borders are still closed," he said. Active cases fell below 600, to 546, nationwide. Earlier, South Australian Premier Steven Marshall announced a further loosening of restrictions on restaurants and cafes from May 22. He also brought forward a date for the reopening of pubs to June 5, from June 8. Commonwealth Bank of Australia rose 0.7 per cent to $60.07, National Australia Bank 0.7 per cent to $15.60, Westpac 0.6 per cent to $15.32, while ANZ Banking Group firmed 0.45 per cent to $15.51. Small cap Alliance Aviation Services popped 24 per cent to $2.66 upon providing earnings guidance after previously suspending it, with the contract and charter flight operator guiding to a $40 million full-year pre-tax profit. EML Payments surged on a trading update that showed nine-month EBITDA (earnings before interest, tax, depreciation and amortisation) of $27 million, up 24 per cent, with a further $2.2 million of previously incurred "breakage" newly recognised in April. The stock raced 13 per cent higher to $3.71. TPG Telecom will split in two, with the larger company merging with Vodafone Hutchison Australia at the end of June and the smaller Singaporean operation listing as a separate ASX-listed company to be called Tuas. Shareholders will receive one share in the new merged company for every share they held in the old company, and one share in the new Singaporean company for every two shares held. TPG shares rose 4 per cent to $7.57. AACo added 3.3 per cent to $1.11 after saying it swung to a financial 2020 $31.3 million statutory profit from a year-earlier $148 million loss, a result buoyed by increased values of land and its herd of some 346,000 head of cattle. Overall demand for beef is still very strong, managing director Hugh Killen said. We are seeing strong demand for safe, high-quality, packaged imported meat, particularly in Asia. Scentre Group gained 0.9 per cent to $2.26 after a successful debt raising in the US market. The company raised $US1.5 billion ($2.3 billion) in a deal split into two tranches. The first was a $US750 million offer of five-year fixed rate notes that priced at a 3.625 per cent coupon and the second was a $US750 million lot of 10-year notes at 4.375 per cent. Mortgage insurance underwriter Genworth rose 5 per cent to $2.12 even though it lost a contract for tender with NAB to provide lenders' mortgage insurance. Sydney Airport's passenger traffic collapsed in April because of COVID-19, with less than 100,000 passengers making their way through Australia's gateway airport. The stock added 1.1 per cent to $5.66. Total traffic collapsed 97.5 per cent year-on-year to a mere 92,000 passengers. Fletcher Building recorded an operating earnings before interest and tax loss of $NZ55 million ($50.9 million) in April, which was attributed to New Zealand's "Level 4" lockdown measures. The stock fell 2.8 per cent to $3.08.
Facebook launches new bid for shopping empire - The Australian Financial Review
'This is the first major push that we're going to be making into that next step around commerce,' said CEO Mark Zuckerberg of the new Shops product.
The "vast majority" of Facebook advertisers are small businesses, Mr Zuckerberg said, so ensuring they can operate was important to Facebook's business as well. "All these tools are open for business even when your physical store-front can't be," he said on a livestream Tuesday announcing the new feature. Facebook stock rose more than 3 per cent after the news, adding to gains from earlier in the day. Personal involvement The real significance of Tuesday's announcement, though, may be Mr Zuckerberg's personal involvement in the effort. Facebook has built shopping features into its service before without much traction. Prior efforts around buy buttons in users' feeds and selling virtual gifts never took off. Facebook has even offered product catalogues for years, including a "Facebook Page Shop" that lets brands list products within a "digital store front" much of the same functionality that Mr Zuckerberg announced Tuesday but under a different banner. Mr Zuckerberg has been heavily involved in Shops, spending significant time and attention on the product usually a sign that a feature is here for the long haul. He said he has been meeting with the company's small-business commerce team every day during the pandemic. Shops is also under the direction of another high-ranking Facebook official, Javier Olivan, who is running the company's efforts to integrate all of its products and has led Facebook's growth organisation for years. What is unknown is whether this added attention will lead to a different outcome than Facebook's prior shopping efforts. Facebook has been good at helping people find new products through ads, but has never succeeded at becoming a place people go specifically to shop, Mr Zuckerberg concedes. Making it easier He has also learned lessons from previous commerce attempts, including the importance of making it as easy as possible for retailers to sign up. When Instagram first launched shopping in 2016, for example, Mr Zuckerberg said Facebook made it difficult for businesses to sign up by forcing them to use all of Instagram's software systems instead of enabling them to upload existing catalogues from other services. With Shops, which are free to create, retailers can import existing product catalogues from Shopify or BigCommerce to expedite the process and eliminate barriers. "We think this will get the flywheel going a little bit more," Mr Zuckerberg said. Facebook's push into commerce could help boost its advertising business. If retailers believe they can close a sale directly on Facebook or Instagram, they may be more likely to promote products on those apps. But commerce could also offer an alternative revenue stream to advertising. When users buy a product directly through Instagram, for example, the company takes a small cut of those sales. Instagram only works with a few hundred retailers right now for direct checkout. Shops could eventually increase that number by hundreds of thousands, or even millions. A foray into a new business line is likely to draw attention from regulators, too. The social network is already criticised for its size it has 3 billion global users across all of its products and is under antitrust scrutiny from multiple agencies, including the US Federal Trade Commission, the Department of Justice and 47 state attorneys general. "Any new thing that we do is going to have scrutiny," Mr Zuckerberg said. "That's certainly something we think about in everything we do. But at the same time, I don't think you can let the fact that there will be scrutiny and questions prevent you from doing things that you think are going to be good." Bloomberg
Westpac admits 23m anti-money laundering breaches - The Australian Financial Review
Bank admits to an enormous volume of breaches and says it should have kept a closer eye on suspicious customers.
The penalty is unlikely to be anywhere near this figure however with rival bank CBA agreeing to a record breaking $702 million settlement in 2018 for breaches which carried a maximum theoretical penalty of $1 trillion. Westpac made provisions of $900 million to settle the case last month. Westpac was sideswiped by the financial intelligence regulator on November 20 with allegations its desire for faster and cheaper international transfers led it to break the law millions of times and left it unable or unwilling to identify payments consistent with child exploitation activity. AUSTRAC singled out indifference by senior management and inadequate oversight by the board for the failures, which saw CEO Brian Hartzer step down and chairman Lindsay Maxsted bring forward his retirement. Westpac however takes aim at AUSTRAC in its defence for failing to articulate its concerns during its engagement with the bank in what has become a familiar criticism of the low-profile regulator. The bank says that in December 2016 report on the compliance of its correspondent banking arm - which saw the bank perform transactions on behalf of other banks and vice versa - AUSTRAC made recommendations for Westpac to consider in enhancing its compliance but " did not identify any non-compliance". The division of Westpac which oversaw the relationships known as Australasian Cash Management (ACM) became ground zero for the breaches. The arm allowed the bank to side-step the slower and more expensive SWIFT protocol by allowing other banks to use its payments system with "virtual accounts" and "off-system BSBs". AUSTRAC claims Westpac had limited visibility over the payments made with records missing the origin of the funds and other information. It said some correspondent banks did business with sanctioned countries including Iraq, Zimbabawe and Ukraine. In its defence Westpac denied that it failed to carry out regular assessments of the correspondent banks but admitted it "did not sufficiently assess some ofthe risks" the correspondent banks faced" with regard to "money laundering or financing of terrorism."