Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
Kiwibank cut its fixed rates 3, 4 and 5 years. Heartland followed up last week's reduction to its 1 year fixed rate with more cuts to its 2 and 3 year fixed rates.
TERM DEPOSIT RATE CHANGES
No changes here.
EASING OFF
The service sector's expansion, which was quite respectable in June, eased off in July to a quite modest expansion and to a five month low. New orders were especially week. And weakness was most notable in Auckland, least in the bottom half of the South Island.
A BIG NON-BANK INSTITUTION
Fisher Funds has won the bidding to buy Kiwi Wealth. It will mean that they become the third biggest KiwiSaver provider, after ANZ and ASB. It will become the second largest managed funds outfit, topping ASB on that basis. It will seek to retain the Kiwi Wealth KiwiSaver default provider status - 7 months after Fisher Funds lost theirs. It is understood Fisher paid about $310 million for Kiwi Wealth, which has been shopped around by its government-linked owners for the last six months at least, beating out other local contenders Booster and Jarden in the process. Fisher and Kiwibank will maintain a distribution relationship under the deal.
DAI-ICHI LIFE HOLDINGS ACQUIRING PARTNERS LIFE
Japan's Dai-ichi Life Holdings is buying New Zealand life insurer Partners Life for $980 million, with the deal announced late on Friday. Dai-ichi says Partners Life has grown into the second largest life insurer in NZ since its 2010 inception, with a non-legacy strategy and strong digital capabilities. It also says Partners Life has established "an unparalleled reputation" with Independent Financial Advisers, the dominant insurance distribution channel. Partners Life says it'll remain a stand-alone NZ business with Managing Director Naomi Ballantyne and her executive team continuing to lead the company. Dai-ichi expects the deal to complete some time between December this year and April next year, with regulatory approvals from the likes of the Overseas Investment Office and Reserve Bank required.
JAPAN PICKUP CONFIRMED
After stagnating in the March quarter, the Japanese economy picked up to be +2.2% higher in the June quarter from a year ago, and Q1 was revised higher too. This confirms a string of better data we have been noting for a few months now. But the expansion, while welcomed, wasn't quite as strong as analysts were expecting. Exports helped. But Japan can now claim its economy is now larger than pre-pandemic. It's been a slow recovery for them, and the IMF last month downgraded Japan's growth forecast for the full 2022 to +1.7% from the April projection of +2.4%.
UNDER-PERFORMING
Chinese retail sales data for July disappointed. It came in up +2.7% from the year-ago level, lower than the June gain, and much lower than the +5% expected. It is a bad miss. Industrial production came in weaker too, although not by quite as much. It was up +3.8%. Both sets of data confirm China isn't going to get anywhere near its target of "about 5½% growth" in 2022. Independent analysts will be downgrading prospects on this data. And it isn't an especially good look for Emperor Xi ahead of his appointing to the top job for life.
MORE POWER, LESS OUTPUT
China's electricity production rose +4.5% in July from a year earlier. "Thermal power" (coal fired) was up +5.3%.
FALLING, BUT HOW FAST?
House prices in China in July fell more than expected from June, now down -0.9% year-on-year. That's their third straight month of retreat. Forty of their seventy largest cities posted month-on-month declines for new housing. 51 of these 70 posted declines for resales. In these official data not were especially large, but the consistency of these tiny movements doesn't really gel with individual market reports of stress and retreat.
THEN A SUDDEN RATE CUT
The People's Bank of China said it was cutting the rate on a ¥400 bln one-year, medium-term lending facility loans to some banks by -10 basis points to 2.75% from 2.85%.
AUSSIES WATCHING NERVOUSLY
This Chinese data is important for Australia who will be watching nervously. Fears are that the Chinese construction could could stumble badly as developers’ funding dries up. The key commodities the Aussies will be watching are copper and iron ore of course. Neither have moved yet after today's data, but it is early days given analysts in the US are still in weekend mode.
SWAP RATES HOLD (NERVOUSLY)
Wholesale swap rates are probably little-changed today. The 90 day bank bill rate rose +4 bps to 3.31% ahead of Wednesday's OCR review. The Australian 10 year bond yield is now at 3.41% and down on the China news. The China 10 year bond rate is at 2.69% and a very big -6 bps dive (for them). The NZ Government 10 year bond rate is now at 3.48%, down -4 bps from this morning, and now below the earlier RBNZ fix for this bond which was unchanged at 3.51%. The UST 10 year is now at 2.84% and still where it was at today's open.
EQUITIES MIXED
The NZX50 has started this week up +0.5% in late Monday trade. The ASX200 is up +0.4% in afternoon trade. Tokyo has opened the week up a full +0.1% in late morning trade. Hong Kong is down -0.3%, knocked by the Chinese data. Shanghai is also lower after an early dip. The S&P500 futures is down -0.3% so far as the Chinese data filters in.
GOLD SLIPS OFF IT'S RECENT HIGH
In early Asian trade, gold fallen back below US$1800, now at US$1,797/oz.
NZD SLIPS SLIGHTLY
The Kiwi dollar is marginally softer at 64.3 USc. Against the AUD we are similarly softer at 90.5 AUc. Against the euro we are holding at 62.8 euro cents. That means our TWI-5 is now up at to 72.5 and down slightly from where we opened this morning.
BITCOIN UP AGAIN
Bitcoin is up +2.8% from this morning's open to US$24,915. Volatility over the past 24 hours has been modest at just over +/- 1.7%.
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18 Comments
So Fisher were withdrawn from default status from K/Saver but buy it back through acquisition of Kiwi Wealth which in itself, was bought off Gareth Morgan’s scheme by Kiwi Bank. Is this then a harbinger that there is going to be a merging and/or takeover bent, amongst providers with possibly a resultant reduction in options available? Guess that is why Dr Cullen insisted from the outset that moving from one provider to another, would need to stay free and easy.
House prices falling across Canada also
Metro Vancouver home prices down by up to 25% compared to early 2022 | Urbanized (dailyhive.com)
So re China, where is the increased demand for credit coming from? Consumer and business confidence has fallen off a cliff and there is no activity to suggest that is changing. It's as dire as the U.S. in 2008.
Visited F&B / pharma trade fair in Saigon last week. No Kiwi presence at all. One Aussie food service company. Teeming with Russian and Indian businesses though. Some of the Vietnamese companies on display were exceptional.
Quoted from renowend colleague and ecommerce expert in China:
"China's wealthy are struggling. Amid tough economic times spawned by prolonged lockdowns, many of China's affluent citizens are turning to their closets to earn extra cash."
"Strapped with debt and struggling to stay afloat, people have turned to selling their luxury goods in an effort to increase cash flow."
"As formerly prosperous business owners sell off luxury watches and bags to pay off debts, the price of second hand luxury goods has plummeted. Reports indicate that numerous brands of high end goods have lost between 20% and 50% of their market value over the past few months."
The Chinese are Proper Fuc ed, so much unlived in, so much unbuilt, so much pain to come... all based on borrowed money and capital gains.... all not based on any system of law or transparency re bank funding, going to make the US savings and loans debacle look small.... the faster you go, the bigger the mess.
Buckle your seatbelt Dorothy, 'cause Kansas is going bye-bye!"
The Chinese are Proper Fuc ed, so much unlived in, so much unbuilt, so much pain to come... all based on borrowed money and capital gains.... all not based on any system of law or transparency re bank funding, going to make the US savings and loans debacle look small.... the faster you go, the bigger the mess.
But in the Springfield suburbs across the Anglosphere, debt stress is seen as little more than a scratch wound.
In Springfield there is a marginal buyer, In Chyna when you buy property with no intention to rent it out (Because its in ghost town......) then its actually worth the yield ie ZERO.... you only bought it to sell it to a bigger fools, and we just ran out of em. this will be bigger then ben hur before the budget cuts
Plus the forecast halving of China's population ove the next 50-80 yrs based on current demographic trends.
And how does help the sales of milk powder and infant milk formula? Rivers of gold from selling milk formula for the elderly? How's that working out in Japan?
In Springfield there is a marginal buyer, In Chyna when you buy property with no intention to rent it out (Because its in ghost town......) then its actually worth the yield ie ZERO.... you only bought it to sell it to a bigger fools, and we just ran out of em. this will be bigger then ben hur before the budget cuts
OK. Fair point. But isn't the idea that they're also future buyers for the Springfield boltholes? You know, busloads of them turning up with a king's ransom to keep the prices propped?
Wonder if we will start seeing distressed property sales of NZ property by Chinese owners. I suspect they will be doing their best to hold on to international assets, but if things get worse they might have no choice but to dispose of foreign property, just as the Japanese did en masse back in the day.
Interesting point. Does the CCP have knowledge of said ownership(s.) Because not far from here are a couple of not that young Chinese ex pats, good people and neighbours, probably in that category, who ain’t risking heading to the homeland anytime soon because they might not get to see NZ ever again. Serious stuff , is totalitarian governance.
Fifty million empty flats threaten to plunge China’s troubled property market further into crisis, warns think tank
https://www.scmp.com/business/china-business/article/3188781/fifty-mill…
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