ABX Weekly 22nd August 2018 Market update

  • The US stock market has had another good week with the S&P coming within points of an all-time high, double top? We will see. It has made a quick retreat since after news just out that The Donald’s former campaign chairman Paul Manafort was found guilty on 8 charges including Tax fraud. I’m guessing there will be another story to focus on as soon as tomorrow though.
  • We have seen good buy flows in CNI 2021, NXT 2021, SYDAIR 2030 with inventory running low due to demand
  • Last week Centuria Capital Group announced their F18 results with Assets under management up 29% to a new peak of $4.9 billion and Net operating profit after tax was $45.1 million, up 191%. We have a small amount of Centuria fixed coupon 7% 2021 bond
  • Investment Grade Corporates continue to borrow at extremely low levels. Today’s example is Volkswagen that issued 3.5yr bonds yielding at 3.3725%

Focus on AUD:

After Reserve Banks Philip Lowes speech and the RBA minutes yesterday offering more of the same “no need to adjust rates anytime soon” it seems the AUD will be tied to external events. Yesterday. The Donald mumbled something about not being happy with the FED tightening and the AUD has rallied nearly 2c since as a result of a weaker USD. Throw in the concerns with Turkey, Italy, and not to mention tariffs on China and it’s hard to imagine the AUD rallying much from here.

Westpac chief economist Bill Evans yesterday also extended his timeline for a domestic rise in rates pushing it out to 2020 stating “The tightening of financial conditions which is normally associated with increases in the RBA cash rate has been replaced in this cycle, with macro-prudential policies and rising wholesale interest rates. Accordingly, Australia’s participation in the global tightening cycle has taken a different form”

Swiss Desk:

In Greece, a new era begins. The country regained its financial independence on Monday, after a good eight years of international oversight and three aid programs. The country currently manages to attain a budget surplus and they still have a liquidity cushion of more than EUR 20 billions at their disposal. This should be enough to pay back maturing debt until 2020. However, Greece still show only little economic growth and a massive government debt of 178%.

The outlook for Turkey, its neighbouring country, is far more devastating. Although Turkish assets and other EM assets recovered slightly from their lows, the calm is probable to prove more like the eye of the hurricane than a sustained reversal. For those who think the lira’s 24% plunge this month (or 60% year-to-date) is extreme, the Venezuelan bolivar’s 95% devaluation last weekend is instructive about what could happen when a government decides to pursue unorthodox economic policies.

ABX Colour:

Greater scrutiny from the aftermath of the Royal Banking Commission as fund managers and banks being questioned on their fee charging practises. With regulators putting more emphasize on “client’s best interest”, knowing exactly what you’re investing in has been on the rise. Seeing a lot of flow into direct bonds as investors want more transparency and less fees.

Ask your ABX representative how to have more control on your investments on +61 2 8076 9343.

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Greece lightning and Turkish bath

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