What happened Wednesday

A review of things you need to know before you go home on Wednesday; no retail rate changes, equity rout continues, no insurance cover, EY's (Aussie?) culture problem, swaps lower, NZD soft, & more

26th Feb 20, 3:59pm by David Chaston

Here are the key things you need to know before you leave work today.

MORTGAGE RATE CHANGES
None to report today.

TERM DEPOSIT RATE CHANGES
None here either.

KIWIBANK ACKNOWLEDGES 'DISCLOSURE ISSUES' RELATED TO THE CCCFA
Kiwibank says it has "uncovered disclosure issues" in relation to the Credit Contracts and Consumer Finance Act. The bank says it has "proactively" discussed these with the Commerce Commission. At this stage the possible impact of the Commission's position can't be determined with any certainty, Kiwibank says.

GUILTY PLEA IN KICKBACK CASE
A former Auckland Council employee has pleaded guilty to a corruption charge brought by the Serious Fraud Office. Sundeep Dilip Rasila (42) today admitted accepting a $7,500 bribe as council employee in the Auckland High Court. Mr Rasila was employed by Auckland Council as a procurement relationship specialist at the time of the offending. His counterpart, Sunil Chand (56) also pleaded guilty at the hearing. He gave Mr Rasila the kickback in return for his company being awarded an Auckland Council contract valued at $140,150. Mr Rasila and Mr Chand were remanded on bail to reappear for sentencing in the Auckland High Court on 12 May.

EQUITY ROUT
The big news today is the stock market rout. Wall Street dived almost -3.1% earlier today. And now the NZX Capital Index is down another -1.0% so far today with the ASX200 down -2.1%. Tokyo has opened down -1.9%, Hong Kong is down -1.2% and Shanghai is down -0.3% in early trade. All these compound losses from yesterday.

NO INSURANCE COVER
Local insurance brokers are telling clients there is very little insurance cover for coronavirus losses. Most insurers have now removed cover for travel to China. Cancellation cover to other regions may apply although it is important to remember there is no cover for ‘disinclination to travel’. Material Damage and Business Interruption policies generally require a physical loss. Cargo Insurance for shipments to or from New Zealand, is also unlikely to provide cover as losses simply due to delay are generally excluded. Most insurance policies will exclude losses from failure to meet contractual obligations for example, a business’ inability to fulfill a supply order.

BIG BROTHER AND THE CORONAVIRUS
China’s facial recognition companies can now identify people even when they’re wearing face masks and also detect people who aren't wearing one. In addition, SenseTime is rolling out a product that incorporates thermal imaging cameras to help spot people with elevated temperatures, already in use in three public places. Samsung has collaborated with SenseTime for building access to its Seoul offices which can identify employees in 0.3 seconds with 99% accuracy even if they are using medical masks, glasses, and make-up.

CORONAVIRUS UPDATE
The latest compilation of Covid-19 data is here. There are now 2930 cases outside China, a rise of +500 in one day. A week ago that number was 1013 so it has more than doubled in one week.

CONTRACTING CONSTRUCTION
In Australia, official data reports large falls in construction completed in the December quarter. They were especially tough for residential building.

THE FIRE IS GOING OUT
In Australia, the proportion of self-managed Super (of all Superannuation) has fallen to 25.0% in 2019 from 26.3% in 2018. Self-managed Super plans were the slowest-growing sector in their national system after years of strong growth.

CULTURE PROBLEM
An Australian senator has used parliamentary privilege to air allegations of sexual harassment, illicit drug taking and alcohol-fueled benders at consulting firm EY.

LOCAL SWAP RATES DROP AGAIN
Swap rates are down another -3 bps across the board today so far. The 90-day bank bill rate is also down -3 bps to 1.09%. In Australia, their swap rates are currently down -2 bps across the curve. The Aussie Govt 10yr is unchanged at 0.91%. The China Govt 10yr is also unchanged at 2.87%. The NZ Govt 10 yr yield is down -3 bps at 1.19%. And the UST 10yr yield is down -6 bps at 1.35% although that is a recovery from 1.31% at its record all-time low earlier today.

NZ DOLLAR VERY SOFT
The Kiwi dollar has slipped further, now at 63.1 USc. Against the Aussie we are also soft at 95.7 AUc. Against the euro we are softer too at 58.1 euro cents. That means the TWI-5 is now lower at under 69.1.

BITCOIN WEAKER
Bitcoin is another -3.9% lower today at US$9,238. The bitcoin price is charted in the currency set below. Other cryptos are even weaker, most main ones down -8% (Ethereum) to -10% (bitcoin SV) on the day.

This chart is animated here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

Our exchange rate chart is here.

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56 Comments

by J.C. | 26th Feb 20, 4:10pm 1582686639

The banality of life at EY would drive any sane person to excess.

by Becnz | 26th Feb 20, 4:12pm 1582686738

Why is NZX holding up so well is it kiwis have our heads in the sand and are not aware of world events or is it lack of NZ media coverage.

by BadRobot | 26th Feb 20, 4:17pm 1582687036

Perhaps our market is not perceived as being overvalued as others.......

by printer8 | 26th Feb 20, 4:19pm 1582687165

Agreed.
Possibly being propped up by all those KiwiSaver funds as required by investment mix??? :)
NZSX 50 surprisingly still above its 4 February dip.

by Pathos | 26th Feb 20, 4:42pm 1582688577

I've been marvelling at the same. Could be a lot of CEOs out there quietly wondering why their stock prices are so high.

by Kezza R | 26th Feb 20, 4:20pm 1582687208

Heads in the sand.

by Fritz | 26th Feb 20, 4:44pm 1582688651

Yeah, complacency.
Common kiwi attribute.

by Kezza R | 27th Feb 20, 12:15am 1582715727

Hard buggars yes but smart??? We will see..!!! Not much #8 and electricial tape out there these days!

by streetwise | 26th Feb 20, 4:44pm 1582688687

I would say that the fact that NZ hasn't had one case yet of diagnosed Covid-19 would contribute to the lack of over-reaction on our NZX.
But I've just heard on the radio news that they're going to make an exception to some Chinese students as long as they've stayed at least 2 weeks in another country???? To me this is the thin edge of the wedge. We always cave in ( this time to the education institutions who teach foreign students ) when we should be ruthless at border control.
How can we trust these students? Once we get a single case of this plague our stand-out current plague-free status will evaporate and our NZX will plunge. I wish we had a strong Government that didn't buckle in to interest groups all the time.

by Advisor | 26th Feb 20, 5:14pm 1582690474

We can't seem to forgo a few millions in export education revenue when it'll cost taxpayers billions in medical expenses and quarantine when (not if) these students bring the virus to our shores.

by Lapun | 26th Feb 20, 6:02pm 1582693362

Online education. It works. Unless you have other reasons for leaving country of origin.

by Noncents | 26th Feb 20, 10:48pm 1582710537

Exactly, but slip an apple into their bag and watch what happens.

We protect the Kiwifruit,but not the Kiwi's.

by custard | 26th Feb 20, 5:59pm 1582693167

Surprised our currency hasn’t taken more of a hit….yet?

by Sammy D | 26th Feb 20, 8:23pm 1582701829

Everything is fine until data shows otherwise, move along now...

Tomorrow's business confidence will be interesting, consumer confidence will probably be fine (until someone mentions any kind of impact to property prices - then the shows over).

by printer8 | 26th Feb 20, 4:14pm 1582686849

Worth noting that the lawyer acting for the Comancheros was jailed 2 years 9 months on money laundering charges including actions related to real estate. Not only a jail sentence, but no doubt loss of practising certificate - possibly for life - as well meaning past study and qualifications are now all down the drain.
Clear example of how anti-money laundering provisions are working and what is at risk for lawyers facilitating illegal transfer of trust monies and property.
I hope CJ099 does take note as he has previously made recent claims that money laundering is rife in real estate and has accounted for high prices being obtained in some sales.

by J.C. | 26th Feb 20, 4:18pm 1582687134

Clear example of how anti-money laundering provisions are working and what is at risk for lawyers facilitating illegal transfer of trust monies and property.

A single example. Furthermore, the establishment is far more likely to go after the bikie gangs that they would after say offshore money launderers, particularly those with criminal organization ties.

by printer8 | 26th Feb 20, 4:22pm 1582687329

JC
Had any experience of buying property or transferring funds on behalf of a family trust lately?

by J.C. | 26th Feb 20, 4:35pm 1582688155

No, but I have recently experienced heightened AML surveillance on the transfer of funds for a BVI-registered company from the U.S. to S'pore. In the case of money laundering through property in NZ, if the surveillance is greater, then good.

by Kezza R | 26th Feb 20, 4:25pm 1582687542

I have a situation where a co trustee is refusing to supply his info for AML. Hopefully there are provisions in the law for such a case. Where there is smoke there is fire...

by printer8 | 26th Feb 20, 4:50pm 1582689020

Kezza
Yes, trusts - including family trusts - are now facing a lot of difficulties associated with new disclosure requirements.
Sold my 93 year old mother's home held in a long established trust; had been with both bank and lawyer for thirty years or so. To deposit the funds, the bank required details (tax numbers and bank accounts) on all beneficiaries which included four children and eight grandchildren - some of whom live overseas. Difficult enough with a 16 page disclosure statement and that was just to deposit funds clearly from the sale of a house; imagine the difficulty if the trust was to purchase a property with some beneficiaries living overseas and the FBB.
Sold a boat recently, vendor's finance company required all sorts of documentation from me.
Lawyer advised my wife when her trust was purchasing a rental property that she should do so as an individual rather than using the trust due to the multiple layers or disclosure requirements needed for the lawyer, bank and real estate agent.
This is not about having to seek out or investigate money laundering activities - rather red flags being raised by requirement.

by Roger Witherspoon | 26th Feb 20, 5:08pm 1582690086

Plus the creation of multiple insecure databases of wealthy targets for sophisticated criminal gangs.

You do not know what purposes the malevolent ones amongst us will put this to. Remember the Dutch Cemetery records and how they gave the Nazis a handy useful list of everyone of Jewish descent.

by Mrs The Point | 26th Feb 20, 8:08pm 1582700934

Having dealt with Mr Simpson, I can honestly say it couldn't have happened to a more deserving bloke. I shall pop a bottle of Bolli tonight to celebrate.

by Foyle | 26th Feb 20, 4:23pm 1582687412

There are now at least 10 cases of travelers from Iran tested as having WuFlu. Epidemiologists say this points to >20k infected there, close to 10x the number in the rest of the world outside of China. Means have been about 10x increase in Iran every 10 days, at that rate most of their 80million will be infected in another month and several million will die without vital hospital treatment.

by Kezza R | 26th Feb 20, 4:28pm 1582687719

Not long till they will also be zipping up body bags on the living like the Chinese You Tube clip you posted. If that is legit, man its insanly bad!

by custard | 26th Feb 20, 5:49pm 1582692561

No mind - not long until this whole COVID-19 nuisance is rid of from the sounds of it – Trump advises that coming summer weather should pretty much deal with it.

Something useful from global warming after all.

In the meantime he also advises buy stocks – they’re cheap!

by Fritz | 26th Feb 20, 5:17pm 1582690653

Ah Trump, the source of all wisdom...

by middleman1 | 26th Feb 20, 5:57pm 1582693079

Trump is a very sane genius; we know this because he told us so. Although Otago uni epidemiologist Dr Michael Baker is suggesting Trump may be right in claiming the virus will be less virulent in summer. But the good doctor also says about half the worlds population will be infected at some point in the next year or two. Apply the present death rate of 3.25% to say 2m cases in NZ and it starts to look a bit scary. Even assuming we do 50% better at preventing mortality than the chinese, that's still 30K deaths here. Compared with around 500 pa from influenza in a normal year. Might be a good time to quit smoking !

by Sammy D | 26th Feb 20, 7:11pm 1582697502

Sane *stable* genius

by Kezza R | 27th Feb 20, 12:22am 1582716159

So.... with tbat logic we would have expected a by far greater outcome if Hillary was elected? SERIOUSLY!
A choice between two hopeless usless pricks... wake up!

by custard | 26th Feb 20, 4:35pm 1582688115

Last year NZ ordered around 1.35 million doses of flu vaccine – and merrily ran out quite early with only the vulnerable being immunised from June or thereabouts on.

This year 1.46 million doses have been ordered.

Considering we ran out last year at 1.35 million – and bearing in mind an obvious heightened overall level of concern regarding influenza– is an order containing an extra 110,000 really going to cut it this year?

I understand that the vaccines are no longer of use after the year of intended use and are effectively “waste” - but surely a surplus is better than running out (again!).

Perhaps the die was already cast and orders had to be placed some months ago – prior to the scale of COVID-19 being known and public fear it can induce.

by streetwise | 26th Feb 20, 5:09pm 1582690168

Last week Chinese corrupting our political-contribution regulations.
This week Indian kickbacks corruption at the Auckland City Council.

So, proof that Asian immigration is a two-edged sword.

That reminds me to wet the bus-tickets that I'm sending free to our judiciary.

by Fritz | 26th Feb 20, 5:18pm 1582690726

We should remember that many of our immigrants are coming from countries where corruption is a norm...

by custard | 26th Feb 20, 5:47pm 1582692472

The judiciary should ensure that many of our immigrants remember that they are now in a country where corruption is not a norm…

by Lapun | 26th Feb 20, 6:06pm 1582693613

Didn't used to be a norm. Remember Prof Stringers report on exploited workers (Dec 2016) with her comment that she expected to find rorts and corruption but was surprised to find it widespread (from memory she said something about every person she interviewed knew somebody rorting and/or being exploited).

by Fritz | 26th Feb 20, 6:34pm 1582695256

Heres a moral question. Is corruption really any worse than crony capitalism???

by custard | 26th Feb 20, 6:52pm 1582696377

In worst case countries don’t they really just go hand in hand….

by Lapun | 26th Feb 20, 10:00pm 1582707619

Two wrongs do not make a right. I know that is true my Mum told me.

by Pragmatist | 26th Feb 20, 10:36pm 1582709788

..as she slipped out to the back porch with a bottle of gin and packet of smokes?

by custard | 26th Feb 20, 6:48pm 1582696091

My understanding is that the initial application of a lot of our legislative rules and regulations are trust/honesty based – and it’s then I guess some newly minted immigrants just can’t believe their luck.

by Uninterested | 26th Feb 20, 8:39pm 1582702798

Yes indeed. Some consider us naive.

by custard | 26th Feb 20, 10:30pm 1582709438

Really - say it's not so!

by Andrewj | 26th Feb 20, 5:28pm 1582691321

they know how to handle the bureaucracy, and get things done.

by scarfie | 26th Feb 20, 5:23pm 1582691013

Currently at DBX & only 1:1000 wearing masks. I was glad to get out for business in Africa before any lockdowns. Getting home in a couple of weeks could be interesting.

Made sure I got travel insurance that covered accommodation in case I can't get back. I'll have to double check the fine print!

by Andrewj | 26th Feb 20, 5:29pm 1582691340

thats a long flight home.

by Foyle | 26th Feb 20, 6:51pm 1582696269

Suggest you get out ASAP. WuFlu certain to be spreading fast in Africa, but no ability to test for it.

by scarfie | 27th Feb 20, 3:10am 1582726205

I'll be on the ground 8 days. I'm not worried about getting the virus, I'm very fit and healthy. My only worry is getting caught out in a lockdown, and being locked out of NZ. I'm sure the company I consult for would look after me though, they are a multinational. The reasons I'm here are worth the trouble.

So the really interesting thing is that on arrival in Zambia they took our temperature, made us wash our hands, and handed us a form to fill out with the temperature they recorded on it. All the staff in the airport were wearing masks.

by Mrs The Point | 26th Feb 20, 8:21pm 1582701713

OMG, Africa is the last place I'd be going. Likely to be large infected populations there already. Bath in hand sanitizer. Safe travels.

by streetwise | 26th Feb 20, 6:11pm 1582693866

NZX has had a mixed day as the following figures from my watch-list shows:

Fletcher Building: up 5 cents at $5.40 ( Fletcher now seems to be a defensive stock. The Government will look to Fletchers to mop up
the unemployed on infrastructure projects if and when the virus-caused-recession strikes.)

Zed Energy: only down 5 cents at $4.45 ( this stock has a FVE by Morningstar of $8.30. Electric cars are not going to replace petrol
overnight.)

It's the power stocks that have been hit today; but then you could say that they have been the most massively overvalued:

Contact down 18 cents
Genesis only down 3.5 cents
Mercury down 24 cent Both Mercury and Meridian have been placed on a "Sell" by Mornigstar
Meridian down 30 cents
Trustpower down 28 cents

Vector Lines Company up 2 cents ( but not strictly a power company.)

It's interesting that despite these falls today, and some yesterday, all the power companies are still above their Morningstar Fair Value Estimates.

Ryman and Summerset and the property companies have been only lightly hit.

by custard | 26th Feb 20, 6:13pm 1582694037

Don’t follow it much anymore, but I would have thought these utility stocks would be yield plays – and not hit too hard in what is currently a rapidly declining interest rate world – unless inherently overvalued as you suggest.

Off shore institutional selling?

by Audaxes | 26th Feb 20, 6:39pm 1582695596

And the UST 10yr yield is down -6 bps at 1.35% although that is a recovery from 1.31% at its record all-time low earlier today.

Like gold and UST yields, Euro$ futures prices turned around b4 COVID. Lower bond yields, higher gold, lower implied future $ rates.

That's not a pretty picture for '20.

Low rates are *not* stimulus, they are what happens when stimulus isn't stimulus. Link

by VictimOfOCR | 26th Feb 20, 7:26pm 1582698416

Today is finishing up much like it did yesterday. US futures look promising again, lets see if Europe opens flat again. The same happened last night but it didn't stem the hemorrhage in the US open.

by Henry_Tull | 26th Feb 20, 9:11pm 1582704682

Not good.
A trip into GP concerning an on going conditions see the GP bitterly complain they have been given no guidance, or action plan regarding the C virus.

This is terrible as the stressesd GP is not up to their usual best in working the tricky ongoing condition.

Issue poor planning by government and MoH is stressing out the system before the shitte comes down.

GP concerns were not test kits, not framework of disease (other than what they learn on cable tv).
No community testing, no nothing in their view.

This afternoon from the MoH site:
Current case definition
The Ministry of Health has developed the following case definition for COVID-19 based on expert advice from our Technical Advisory Group. The case definition takes into account both the epidemiology of the virus as well as its clinical presentation.

The criteria are provisional only and will be revised as more precise information emerges on the outbreak including characteristics of transmission, incubation and infectivity period and geographical spread.

MoH should be having observers in Singapore since 2 if not 4 weeks ago...

by Mr T | 26th Feb 20, 10:05pm 1582707954

ICYMI: New Zealand doctors are asking people to stay away from GP clinics if they feel they might have coronavirus https://www.newshub.co.nz/home/new-zealand/2020/02/stay-away-doctors-wa…

by Henry_Tull | 27th Feb 20, 9:05am 1582747523

Yep, as the link says resources stretched

"General practice currently is chronically underfunded and overstretched," she says.

GPs are experiencing people who've come from coronavirus-infected countries turning up with fevers and flu-like symptoms.

She says the Health Ministry needs to remove the reference from its website about getting in touch with your doctor if you have symptoms.

by custard | 26th Feb 20, 10:49pm 1582710565

US pre-markets starting to look grim – long overdue correction beginning to bite?

Highly leveraged billion dollar bets under stress?

Central Bank’s obviously starting to sit up and take notice.

What to do?

Worst case scenario – if this rout continues an orderly unwind of countless highly leveraged derivatives might just be impossible.

An abundance of cheap money can’t save this one.

Is this the Black Swan?

by Kezza R | 27th Feb 20, 12:05am 1582715107

The Dax down 2% plus. Really leasins have atill not been learnt from The tank from WW2.
Only yourselves to blame as it was more than obvious that this idea waa a BS plan fron the start