insto - Australian financial markets

"Never waste a good crisis" is advice usually attributed to Machiavelli, but German Chancellor Angela Merkel and her finance minister Wolfgang Schaeuble appear to have adopted it as a mantra. One would assume the German financial services regulator, Bafin, would have anticipated the likely market reaction to Germany's  ban on naked short-selling of German-listed securities and CDS transactions. Was it moralising desperation as claimed by commentators, or is there another explanation for this precipitate action?

The first week of May saw the RBA raise the cash rate once again by 25bp to 4.5pct. This hike was in line with consensus expectations and is the sixth increase in the current cycle that started in October 2009. In spite of this news, it was another fairly quiet week in the debt markets, with BNG conducting two transactions, an A$50m tap to its Jan 2015 EMTN and a NZ$50m tap to its Dec 2014 EMTN. Telstra also launched and priced a NZ$100m Kauri bonds, after holding a roadhsow the week before.

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After the Anzac long weekend, the markets remained fairly quiet early on in the week, and picked up slightly towards the end with Rabobank and BNG both pricing EMTN’s. Meanwhile news of the largest ECM deal of the year by QBE filtered through, on Friday and also on Friday Telstra Corporation Limited held a Kauri bond investor update hosted by BNZ, CBA and Westpac. Meanwhile SACL also announced that it was holding a roadshow in Melbourne and Sydney this week to give an update on its operating and financial performance.

*EMTN*

Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors summed up the week ended 20 November 2009 as follows in a note to clients:

The past week has seen mixed economic data out of the US - good signs in terms of retail spending, unemployment claims and leading economic indicators but some rather weak housing related data possibly related to the impending ending of the first home buyer tax credit. Fortunately the tax credit has since been extended so that should help housing going forward.

Debate about whether low US interest rates are fuelling the next global asset bubble has intensified over the last week. The likelihood is that they probably are but its doubtful that the US has any choice but to keep rates low. And there is certainly is no sign of any bubble in US assets and countries most worried about a bubble should consider letting their currencies appreciate against the US dollar to ensure that capital inflows show up in a rise in the value of their currencies rather in an unsustainable surge in their domestic money supply and asset values.

A focus on a company’s intangible features such as corporate governance, environmental and social responsibility is vital to uncovering its long term asset value. An over emphasis on short term factors that are able to be measured, rather than on longer term qualitative risk issues, contributed to the asset price bubble that preceded the global financial crisis. This according to a corporate governance report prepared by AMP Capital Investors presented at this year’s International Corporate Governance Network conference.

It seems the share market had just found its feet again after the 50 per cent-plus gains since March lows. However, the past fortnight has seen the market fall back by around 5 to 7 per cent on concerns over the strength and durability of the recovery, said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors.

On 2 October, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, released draft rules on disclosure of short selling information. The draft regulations require the reporting of:

According to Shane Oliver, chief economist for AMP Capital Investors points out, the key data and trends for this week are:

• In the US, the ISM manufacturing conditions index is likely to remain consistent with a continuation of the US economic recovery and payroll employment data is likely to show a further reduction in the rate of job losses, albeit not enough to stop unemployment edging up to 9.8 per cent. Data for house prices, consumer confidence, consumer spending, construction activity and pending home sales will also be released.
   
• The Japanese Tankan business survey and a Chinese manufacturing survey (or PMI) will also be watched for further signs of recovery, with the Tankan in particular likely to record another strong rise.

Companies at the smaller end of the market are now showing confidence in hitting up investors for extra capital. A prime example is emerging gold miner Apex Minerals NL (ASX: AXM), which announced a fully underwritten nine-for-two renounceable rights issue on 25 September.

In an ASX release, the company said it aims to raise $108.6 million in a transaction “which will leave the company debt-free and on track to become a substantial mid-tier gold producer with annual production of over 140,000 ounces”. The offer price of 4 cents per new share represents a hefty 59 per cent discount to Apex’s closing price on 21 September 2009, prior to entering a trading halt.

International property securities funds rated by Standard & Poors’ have experienced extreme market volatility over the past year, but nearly all funds rated by S&P have remained ‘stable’.

Conditions meant that many rated property securities funds struggled to outperform their benchmarks.