Australian Investors Swarm Towards Precious Metal ETF’s
Investors are swarming to exchange traded funds that invest in precious metals such as platinum and palladium. The precious metal ETF’s have become popular because of the perception they carry as being a store of value and their relevance to cyclical global industry.
The ETF’s purchase the metals on the open market and then proceed to store their stock waiting for the price to appreciate.
Analysts estimate that approximately 13 per cent of global platinum reserves are locked up in vaults, and that hoarding coupled with a shortage of supply has pushed the price of the metal to nearly 18 month highs.
London-based ETF Securities on Friday said trading volumes of platinum and palladium ETFs surged in the first week of 2010, up nearly 200 per cent to $1.3 billion.
ETF Securities has launched products on both the Australian and New York Stock exchanges, and says investors in both markets have fully embraced their funds.
ETF Securities Nigel Phelan says that precious metal ETF’s allow investors to carry direct exposure to a commodity without having to undertake the company risk associated with an equity.
According to ETF Securities, products have been launched on the Tokyo stock exchanges but its popularity in Japan has not matched that seen in Australia and America.
Mr. Phelan says he believes that Australians are receptive to new investment products and are very savvy when it comes to making investments in the natural resource sector.
“Asia is the next frontier, we have no doubt that Japanese investors, in particular, will want these products at some point.” Mr Phelan said.
Mr. Phelan has an extremely sanguine view of the outlook for precious metal and says that price rises will be driven by industrial demand for their use in catalytic converters that are used to power electric cars.
Supply from miners in Africa had been crimped by a lack of funding, which did not look set to abate any time soon, Mr. Phelan said.
“The stars are aligning in terms of an investment case for platinum and palladium ETFs,” he said.
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Competition Regulator Begins Reviewing NAB’s AXA APH Bid
The Australian competition regulator says it has begun undertaking an informal review of Australian banking major National Australia Bank’s $13.3 billion proposed acquisition of AXA Asia Pacific Holdings.
The regulator, better known as the Australian Competition & Consumer Commission (ACCC) announced the review on its website and says it will release the results on March 18th.
Last month NAB in a surprise move revealed during its annual general meeting that intended to bid for AXA APH and would bid $6.43 a share, trumping a similar lower bid from wealth manager AMP.
Despite bidding a higher price for APH, NAB must now convince AMP’s joint acquisition partner and parent of the target company, AXA SA to join its bid and forsake it former partner in acquiring the company.
The ACCC has had previously stated that it was waiting for information from NAB, and that it was monitoring the situation.
“NAB has sought ACCC clearance regarding its proposed acquisition of AXA Asia Pacific Holdings’ Australian and New Zealand businesses,” the ACCC said in a statement.
The regulator has previously noted that the acquirer and target company do have over lapping business in the areas of superannuation, life insurance, wealth management, financial planning and advisory.
Currently APH’s parent, French insurance giant AXA SA is locked into an exclusivity agreement with its joint acquisition partner AMP. The agreement is valid until February 6th, after which it is widely expected that AXA will begun discussing the terms of a new takeover attempt with NAB.
The ACCC is also conducting an informal review of AMP’s proposal, despite it being rejected by AXA APH’s independent directors who backed the NAB plan.
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Australia Would Like To Double Its Financial Exports
Australia’s financial exports could double within the next five to seven years according to Mark Johnson, a former deputy chairman of Macquarie Group, and the person charged with developing policy that will boost the international output of Australia’s financial system.
Australia’s financial exports currently only account for less than three per cent of the sectors total contribution to the economy. This figure pales when compared to the UK, where financial exports account for roughly 50 per cent of the total sector, 25 per cent in Singapore and 8 per cent in the US.
One of the recommendations made in a recently released report titled Australia As A Financial Centre, was to scrap a withholding tax currently levied on the earnings of domestic branches of international lenders.
Mr. Johnson says he believes that scrapping the tax would provide more incentive for major Asian lenders to open Australian branches.
“I think some of the big Japanese banks have limited growth opportunities in Japan, and as their customers increase outside of Japan, they will come back to Australia. (Chinese banks) will come to Australia on the traditional routine of financing their customers, but they will move to financing trade and financial investments and then local operations.” Mr. Johnson said.
However Prime Minister Kevin Rudd has not supported the proposed change and in an interview with The Australian Financial Review says he would prefer to use other measures to foster and expand Australian financial services exports.
Prior to the onset of the global financial crisis, Financial Services Minister Christ Bowen commissioned a study on how to incentivise growth within the Australian financial services industry.
Recently several international lenders have threatened to retreat from Australia, with Toronto-Dominion abandoning Australia altogether, and Societe Generale scaling back its Australian operation and relocating a large part of its business to Hong Kong ahead of a possible full exit.
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Big Four Banks Expected To Deliver Strong Profit Growth
The Australian banking sector can expect a broad based re-rating after CBA surprised the market and issued unaudited profits that were in excess of analyst expectations. Most lenders are now expected to post improved earnings forecasts.
Banking stocks rallied on Monday on strong buying of financials, pushing the broader equity market higher.
CBA, which is Australia’s largest bank as measured by its $90 billion market capitalisation, issued a trading update on Friday, informing investors that it expected to post a 44 per cent rise in first half profits of $2.9 billion.
CBA’s update suggested a profit increase of more the $200 million in excess of consensus analyst forecasts, and its improved performance is expected to be replicated at other lenders.
Analysts believe Westpac is also like to show a marked improvement in performance due to its strong focus on the domestic Australian market.
Most analysts agree that the reasons for the improved performance at CBA are likely to also be profit drivers for CBA’s rivals.
“CBA’s upgrade has reiterated several positive themes for the banking sector: good revenue growth, disciplined costs and declining bad debts,” Goldman Sachs JBWere banking analyst Ben Koo said.
Some analysts believe that this is just the beginning of a rally in Australian banking stocks despite the fear by some that their valuations have appreciated too quickly.
“Some people are still cautious about the banks because they have rallied so hard,” Macquarie Private Wealth divisional director Lucinda Chan said
“The CBA upgrade should stand the rest of them in good stead and the banks have been supported on the market. Australian banks have outperformed their US peers in the crisis and are going to remain very resilient.”
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ANZ Rumoured To Be In Negotiations For Acquisition Of Asset Manager
According to a newspaper report in The Age, Australian banking major ANZ is said to be in talks to acquire fund manager IOOF Holdings. The negotiations are believed to be at a preliminary stage.
The report, which quoted unnamed sources says that negotiations are ongoing, and it is uncertain whether a deal will eventually be reached.
IOOF is one of the few remaining independent fund managers in the financial advisory and superannuation industry. The acquisition negotiations come at a time when there is large scale consolidation taking place within the wealth management industry.
If a deal is eventually reached, then it will follow AXA Asia Pacific Holdings agreement to be acquired by National Australia Bank in a transaction costing NAB $4.6 billion
IOOF and ANZ both declined to comment.
“We don’t comment on market speculation,” an ANZ spokesman said yesterday.
As part of its negotiation with IOOF, ANZ is believed to have agreed to remain outside the takeover battle that has erupted over APH’s Australian wealth management business, which for the original bidder AMP, really amounts to an existential one.
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CBA Unaudited Profits Jump 44 Per Cent
Australian banking major, Commonwealth Bank of Australia re-emphasised just how unscathed the nation’s largest lenders have emerged from the global financial crisis, and on Friday reported a 44 per cent jump in first half profit to $2.9 billion.
The half year result ending December 31st 2009 is expected to come in about $200 million above analyst expectations and will most likely trigger a re-rating of the entire banking sector.
On Friday CBA issued a release to the Australian Securities Exchange which said the nation’s largest mortgage lender was expecting to post an unaudited rise in net profit from $2.01 billion to $2.9 billion, after experiencing robust growth across all key business areas.
CBA’s net profit was more than 7 per cent above consensus analyst expectations, which had estimated its net profit to be approximately $2.7 billion.
CBA’s announcement highlights the relative strength of the Australian banking sector, at a time when rivals have been nationalized in other countries and many major lenders still require a long road to recovery.
The recovery in equity markets was the main reason behind CBA’s improved performance; the lender reaped a $240 million after tax windfall. During the last six months of 2009 the Australian equity market has rallied some 24 per cent.
The Melbourne based lender said there were also other factors that contributed to its strong performance, including a disciplined approach to cost control, a reduction in credit impairment charges, and strong income and volume growth across all its banking businesses.
Last year CBA saw its provision for bad and doubtful debt rise fivefold to $1.6 billion, after making loans to failed companies including ABC Learning.
CBA is scheduled to release its full results for the first half of the financial year on February 10.
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Australia’s Big Banks Have Emerged From Crisis In Good Shape
According to a new report by credit rating agency Fitch, the Big Four Australian banks have emerged from the global financial crisis strong and robust, but continue to face challenges in the form of asset quality.
The ratings agency says it believes that credit quality may be tested further as the effect of fiscal stimulus ends and interest rates rise.
Fitch says it is confident the big Australian lenders will be able to withstand additional credit impairment, largely as a result of robust trading profits, and relatively low levels of bad debt.
“Pre-impairment operating profit has continued to rise, which, when combined with loan-loss reserves, offers a substantial capacity to absorb further impairments before impacting capital,” Fitch said in a statement today.
Mike Smith, chief executive of ANZ during the lenders annual general meeting told shareholders he thought the bad debt cycle had peaked already. ANZ recorded nearly $3 billion in credit impairment charges during the year ending September 30th 2009.
Despite the large rise in credit impairment charges, ANZ still posted net profits of $2.94 billion during the year, an 11 per cent decline compared to the previous year.
Cameron Clyne, chief executive of NAB declines to agree however, after reporting a 42 per cent drop in the lenders net profit of $2.59 billion in October last year.
Mr. Clyne says he believes that the bad debt cycle was yet to peak.
Fitch also said it expected the banks to be more conservative with their funding mixes and maturities, due to the potential of more onerous regulatory capital and liquidity requirements.
The ratings agency has a stable outlook on Commonwealth Bank, ANZ, NAB and Westpac.
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Five Steps For Financial Health
Recession can cause people to feel a lot of stress, as budgets tighten and people have to do more with less. Fortunately Australia seems to have put the worst behind it, and if you have lost a job or are on the hunt, then things certainly seem to be a lot brighter than a year ago.
If you are still feeling the pinch though, it can take its toll on your body, causing a variety of symptoms from body pain, sleeping difficulty and exhaustion. There is even a name for the condition, as silly as it sounds it’s called Recession Strain Injury, and there are millions of Australians who owe more than they can manage and are at risk of suffering from physical stress symptoms as a result of money problems.
If you find yourself suffering from financial tension, here are five tips that can help you get your financial position into a healthier condition.
1) Diagnose Your Problem
Perhaps the first thing you need to do is calm yourself, and once you have taken a deep breath, write down your after tax take home pay each month. Doing this is the first step in defining what your boundaries are for a financially healthy life.
You might find you can extend your earnings by claiming welfare payments if you are unemployed, renting a spare room out, or taking a part time job. If you know what you have written down is the end of it, then you will have to learn how to live within your boundaries.
2) Take Control Of Your Life
Once you have determined what your boundaries are, you need to start looking at where the money is going. You need to start looking at your monthly credit card and bank statements to find the exact source of your financial pain.
Writing down your daily expenditure is a useful way of tracking where your money is going, and whether you are making the best use of your dollar. I run a monthly spread sheet, which records everything I spend on my debit or credit cards, and every time I take money out from a machine. In the age of internet banking its easy to see where and when you spent your money, and the spreadsheet lets me know that perhaps I am exceeding my monthly limit, and where I can cut back on spending.
Sometimes I don’t want to know where and when I spent my money, because I know perhaps I have gone a little too far, but it’s something I have disciplined myself to do, It is important to know the news even when it’s not good.
3) Get Your Life In Order
After you have worked out what your monthly budget is, and where exactly your cash is going, the next thing you need to do is work out which expenses are the most important to you, as opposed to which of your creditors are giving you the most grief.
You need to focus on the most important payments; mortgage or rent is the absolute first. There isn’t anything more important than keeping a roof over your head. After that you should start looking at any court ordered payments, and unpaid tax, because legal action apart from being more than a pain, adds to your financial burden. Finally you should look at any unsecured debt you have such as credit card or your overdraft.
4) Maintain calm
Even if you find yourself in a financial pickle and under a mountain of debt, the courts tend to guarantee your right to a basic standard of living. The courts have no interest in seeing you being impoverished. This means the court will ensure you have enough cash to pay your mortgage and utility bills, as well as feed and clothe yourself and family.
5) Talk things over
Find someone you can talk too, obviously if you are married or in a relationship, the first person is your partner, it is important to have some support if you want to turn you debt situation around. Creditors are not necessarily rigid unhelpful organizations you would think they are. They have a vested interest in helping you pay off your bills, and have plenty of experience in soothing customers who find themselves overwhelmed.
If you are single, then talk to a friend or debt councillor, but make sure you find someone you can talk over the things that are causing you the financial stress you are under. It is important to understand and believe you are not alone.
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CBA Wealth Management Unit Freezes Mortgage Fund
Australian banking major Commonwealth Bank of Australia (CBA) has had to freeze redemptions from one its mortgage income funds, after the $850 million fund suffered a number of lending losses.
According to a report in The Age, CBA’s wealth management unit Colonial First State was forced to freeze redemptions, which could be seen by some as an indication that problems in the mortgage fund industry remain.
Last year as a result of the global financial crisis, and the federal government deposit guarantee, the mortgage fund industry faced a spate of redemption requests, as investors began a flight to perceived quality, forcing may funds to freeze redemptions.
CBA’s wealth management unit says that a rise in bad debts has forced it to freeze redemptions at one of its mortgage income funds, which had only a month ago re-opened for business again, after freezing redemptions for more than a year.
Colonial says it will next month update its investors, and has initiated a full review of the fund and its loans, which will determine the full extent of the losses on the fund and its investors.
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The Number Of Australians Employed Stands At Record High
The Australian unemployment rate fell for the second consecutive month, and the number of Australians in employment hit an all time high last month.
According to data released by the Australian Bureau of Statistics (ABS), 35,200 Australians found work in December, taking the number of Australians employed to 11 million, the highest it has ever been.
Most economists had predicted an increase of 10,000 both part and full time jobs.
Australia’s unemployment rate was a seasonally adjusted 5.5 percent in December, compared with a downwardly revised 5.6 percent in November, the ABS said today.
Despite the fall in unemployment being a positive sign for the economy in general, it does raise the prospect of further interest rate rises going forward.
Consumer sentiment is likely to improve as a result of the recovery in the labour market, adding further fuel to the cause for higher interest rates.
Total employment in December stood at 10.906 million during December, and rose by 35,200.
The number of people employed full time grew by 7,300 and stood at 7.635 million. The number of part time workers rose by 27,900 and stands at 3.271 million.
The median market forecast was for total employment to have risen by 10,000 in December, an unemployment rate of 5.8 percent.