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90 seconds at 9 am with BNZ: Chinese factory output down again; Chinese export orders worst in 8 months; Fletcher's profit warning; Trade Me on track

90 seconds at 9 am with BNZ: Chinese factory output down again; Chinese export orders worst in 8 months; Fletcher's profit warning; Trade Me on track

Here's my summary of the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Chinese factory output fell for the fourth month in a row in February, according to the HSBC-Markit flash PMI (Purchasing Managers Index).

This measure of what purchasing managers inside factories are seeing is a leading indicator of production and therefore GDP in the world's fastest growing major economy, which is also the largest trading partner for Australia and New Zealand collectively. See more here at Bloomberg.

The HSBC-Markit flash PMI also found export orders from China fell in February by the most in eight months as demand from southern Europe shrivelled. Europe is China's largest buyer of exports. See more here at Reuters.

The outlook for China's economy is now crucial for New Zealand's economy and the outlook for interest rates, given hopes for our economic recovery depend on China managing a 'soft landing' that allows imports of New Zealand products and commodity prices to stay at near record levels. A hard landing in China would increase the chances of interest rates staying lower for longer. See more here from BNZ on wholesale interest rates dipping slightly in New Zealand after a sharp rise.

Meanwhile, the Markit Eurozone flash PMI showed the European economy tipping into recession in February. See more here at Reuters.

US stocks were down around 0.4% in late trade after weaker than expected growth in existing home sales in the United States and a poor result from Dell. See more here at Bloomberg.

All these 'risk off' factor saw the New Zealand dollar ease back from its highs agains the US dollar to around 83 USc in morning trade. See more here in BNZ's currencies report on our site.

Meanwhile, closer to home and a year on from the earthquake in Christchruch, not much has been rebuilt.

Fletcher Building and Trade Me

Fletcher Building's profit fell 13% to NZ$144 million after a slowdown in house building on both sides of a Tasman and a very slow start to the Christchurch rebuild, where Fletcher is the government's project manager and doesn't see much rebuilding work starting until later this year.

It also lowered its forecast for full year profits and warned of restructuring costs for its Laminex division and a strategic review of its insulation arm. Fletcher's shares fell another 2% to NZ$6.51 and are down 46% from a high of NZ$9.52 in April last year in the immediate aftermath of the quake. See more here from BusinessDesk on our site.

However, the news was much better from Trade Me. It's maiden profit result as a listed company was a half year net profit of NZ$36.4 million, which was above the forecast in its prospectus. Its shares were down 2 cents on Wednesday at NZ$3.14, but remain 16% above their December IPO price.

Trade Me is benefiting from the move in retail sales online and sees growth in the shift to mobile. It is sticking with its prospectus forecast. See more here from BusinessDesk on our site.


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Excuse my simplistic question (here it comes...), if the Reserve Bank owns shares in Fletcher Building Ltd, is RBNZ going to profit from Fletcher Buildings Ltd undertaking the rebuilding of Christchurch?   

I doubt that the fact that the majority of the major shareholders are super large multinational TBTF banks had anything to do with the fact that FB was awarded the contract.  This was an unbiased descision based on getting the best service at the best price.

I would be very interested to learn just what process was employed in awarding this project, what transpired between Fletchers, the Govt, the Mayor and the timing of all this?  I guesse that all this is available through the official information procces?

Miss Astrid, the Reserve Bank DOESN'T own Fletcher Building.

Ms Astrid,
Unfortunately this conspiracy theory about the Reserve Bank 'owning' Fletcher Building is simply wrong.
It's been doing the rounds via email for months and needs to be exposed as wrong.
NZ Central Securities Dopository Ltd (which is ultimately controlled by RBNZ) is simply the place where the shares are 'stored' on behalf of nominees who ultimately own the shares. It allows some fund managers not to disclose their ownership so they don't 'move' the share price whenever they buy or sell.
It does not mean the RBNZ owns Fletcher shares.

The task for Bernard is to identify to whom the share dealings are disclosed...because you can bet there are eyes on the walls...and I would ask where is the insider trading policing in all this.
Is anyone matching the trading done by managers directors etc on their own behalf, with what they decide will be done by the company? you ten bob there is nobody...

Re Fletchers & Laminex
Was Laminex such a smart purchase?  Seems to me that laminate is the sort of stuff that low cost ecconomies in Asia and South America could churn out as cheap as chips.  It is very thin so freight is hardly an issue.  Were the sellers of Laminex glad to offload it because of this?

That said, Fletcher does have its own factories in Asia, including China, through Formica.

Pleased to hear that.  Thanks.  Just checked the FB web site to see if they made particle board as it would be good add on exports for the laminate made in the overseas factories.  Sadly they dont so I guesse that we export our logs for a pitance for others to make the backing board.

Its crazy that the economy is so reliant on record commodity prices.  Shouldn't we be swimming in dough, rather then stressing about a mean reversion?  Is the entire economy addicted to splurging windfalls, and unable to cope during declines? 
I would like to believe that there are many business and people out there who are happy with what they have, and use a windfall to secure their finances, and be prosperous.  Rather then rush out and buy the latest doodad, or  increase leverage to grow the business (increasing risk). 

Also the Govn, they give tax breaks on the way up of a yes all of us to, "Is the entire economy addicted to splurging windfalls, and unable to cope during declines?"
It makes "sense" for businesses to increase debt as growing the business means a tax free sell off when you sell up (no CGT) and that debt servicing is tax deductable.
Mean reversion is what we should be considering, but just look at the "savers" they whine that they no longer are getting 7%+ on bank deposists.......except that is the past....
It really comes down to not considering the long term future properly if at all.

Aah Sjudiv, now haven't you just lifted the rock that the truth hides under. Yes, we have come to the point where the economy, just to function, relies on record commodity prices and running like b.ggery to stay in the same spot.
What is the economy equivalent of man never being able to run 100 metres in nothing flat.

Mr. HuiNewZe says:
As for China’s interest in Portuguese ports, particularly the deep-water Sines facility on southern Portugal’s Atlantic coast, it is easy to see the importance that it would acquire in connection with Chinese exports to Europe, especially after the Panama Canal’s widening is completed, which will allow the transit of huge container-carrying cargo.
China's State Grid International Development Ltd. and government-owned Oman Oil Company SAOC will buy a 40 percent stake in REN for a combined $778 million. China's State Grid International Development Ltd. is paying $573 million for a 25 percent stake in REN, while Oman Oil Company SAOC is paying $205 million for a 15 percent share.
Why is Portugal putting such a strategic asset up for sale?
Easy – dictates from Brussels. Portugal is privatizing some state companies to comply with the terms of a $102 billion EU bailout that it received in 2011, with the revenue earmarked to help pay off some of the country’s huge debts.
But the REN purchase is only China’s latest foray into energy sectors of the Portuguese economy.
This is the difference between the onward forever brigade, and the realists. Kinda reminds you of Paulus requesting permission to stage an orderly retreat, and Hitler telling him to stand firm.
Hudson's "this is unacceptable" is typical of the arrogance, but we see it with those who bleat 'land supply' too. Yesterday's men.
Ryan managed a half-decent interview this morning
(Ken Rogoff, 9.25). The penultimate question, and answer, suggest some are getting it. She should have asked whether recovery was possible at all, given resource constraints, but I'll let her away this time. It must be an uncomfortable process realising your comfy existence is not a given. She'll get there, shes and honest journo, just starting from a conventional back-marker. If she put her John French anf Fatih Birol interviews with it......

I feel sorry fo Dunedin ratepayers. They've been saddled with $180 million+ of stadium debt, a stadium which has not to date held an event that covered it's own operating costs and possibly never will, and now they learn a substantial part of their city is likely to erode into the sea. Cr Hudson reminds me more of Canute than Paulus though.

Chinas response to the slowdown in exports was to increase subsidies to exporters.  China earns more then it spends, and is on it's way to prosperity, unlike the majority of developed nations.  China has massive amounts of money saved in the form of hard commodities like copper, rare earths, steel etc, and is buying physical assets of lasting value.  They are investing in infrastructure, green tech, and energy security.  These aspect reflect poorly on the performance of developed nations, and I suspect a lot of the negative press regarding China has a slightly green tinge to it.
The hard landings to watch out for, are going to come from the unsustainable economies fueled by debt.  China has proven that it can grow independent of global events.  It has a government that is not afraid to act, and has the resources to back it up.

My, oh my - when AlJazeera, the most important news source in the Middle East starts to run pieces on Peakoil entitled 'Oil: in perpetuity no more' you just know that the ground is shifting (well perhaps not for Timaru town clerks):
Its a pretty good piece.........

great link.

This is whats happened to gas prices in California over the last year

One Week Ago
One Month Ago
One Year Ago


Saudi claims it has/had considerable spare capacity, yet it seems it couldnt even match the loss of libya, 
"So the world has abruptly lost something like 1.3mbd of oil production between mid February and March."
"Note that the rise that's been going in since last fall has now been abruptly interrupted by the Libyan situation, and total oil production has fallen by about 0.5mbd.  This is about 0.6% of global production, but given that the world economy has been growing rapidly and needing about another 0.5mbd/month, the shortfall over what would have happened in a counterfactual world with no Middle Eastern unrest is more like 1.2% of global production."
So there are two possibilities, as per the article, Saudi has not increased on purpose...or they cannot, if the former, well others have not filled the gap either...
No wonder the oil price is where it is.

Thanks for the link Andy.
I will eagarly wait to see what DB will conjure up in rebuttal.

Thanks Gareth.
New Zealand Central Securities Depository Limited owns shares in FBL (about 296 m shares). One of many shareholders of course. 
New Zealand Central Securities Depository Limited has 100 shares allocated, with 100% of these held by Reserve Bank of New Zealand as the sole shareholder. 
I would expect most folk in NZ would be unaware that our Reserve Bank holds shares in the main company undertaking the contract to rebuild Christchurch. There seems so much that ordinary folk are unaware of.

Miss Astrid,
See above. You are just plain wrong.

Bernard many aspects of our economic life are plain wrong, but it does not stop them from becoming accepted policy/dogma. 
Depends, to a large degree, who gets to determine what's right for them. 

Thanks Bernard. Happy to be wrong and glad you chaps will put me right. Apologies for filling up comments with uselessness.

Miss Astrid
No worries. Keep the comments coming. If we can help with some info we will.

Obviously my comment here: “Funny conversation Astrid vs. Bernard” helped to keep an interesting conversation going, so Bernhard why was it deleted then ?

I'm a time traveller (astrid is an anagram of "tardis"); bound to get sidetracked at times and need to rely on Bernard and his brain.  

Back about 1998, Prof Deffeyes predicted a post-2005 downward saw-tooth. Wonder what he would make of this:

Its interesting, however consider that the "big" jump back up is purely right wing mantra / voodoo economics supporting a mega dead cat bounce.  Matt simmons suggested that it would take 3 of these before it dawned on the world that this was how it was going to be for ever.
So the Q I have to ask is, because the speculators and banksters are gambling with cheap money on the last bounce and because they think its just a temp glitch, is trend shallower looking than it will be in future...when it dawns on them that this isnt a temp suspect the answer is that will droop...the Q is then where do they put all their paper money....

Bernards explanation to Miss Astrid is just "plain wrong"

Taking Bernard explanation as correct for a moment, is it a good thing? Why should such a facility exist. It allows secretive behaviour. Does not sound like a good idea to me.
Porsche tried it with VW. they had secret ways of buying up the shares without the market knowing who they are. Why would the NZ government want to not only allow such a thing but actually facilitate it.
It allows some fund managers not to disclose their ownership so they don't 'move' the share price whenever they buy or sell.
Surely the price is supposed to be the sum of all information. This facility allows some information to be kept hidden. I canot see why the governemnt should be a facilitator of such things.
Bernards Explanation , may expalin what is happening but does not answer why we should allow it to happen. All sounds a bit insider, people in the know etc to be a good thing. A bit one rule for the rich and another for the rest of us. Didn't we get fed an article about the problems arising from that yesterday?

Plan B: Not even close.
Either BH knows and isn't telling, or he doesn't know and doesn't want to show it.

Plan B
Many thanks.
I welcome your challenge on this issue.
I'm no believer in the status quo and question as hard as I can.
But on this issue I do not see any conspiracy. The nominee companies are perfectly normal things and those shares are usually held by fund managers on behalf of Kiwisavers and the like.
The law forces anyone with more than 5% to say who they are.

Think Bernard, think.
In the daily hurly-burly of financial reporting insufficient distinction is made between Managed Funds and Fund Managers.
It's to do with "Title" and ownership and ticket clipping. Fund Managers (not the Funds themselves) make a lot of money on a monthly basis "writing" covered derivative contracts against those shareholdings. Then there are the fees derived from lending those shares which they couldn't do if the shares were held and registered in the names of the individual "Funds" themselves. Then there is lending to the short-sellers. These practices are facilitated by the exchanges operating "broker sponsored registers" which can be lent, versus "issuer sponsored registers" which can't be on-lent to hedge funds and short-sellers. A simple by-product of nominee holdings is anonymity. It has long been a contentious issue that during volatile times, Managed Funds commit self-inflicted damage by lending their shares to the very organisations that then sell against them. It is the Fund Managers that are the culprits not the Managed Fund.

I cant give you any authority for this, but is has been said in the past, Fund Managers have been known to make 8% per month writing covered derivatives. They get it right 10 times per year and wrong 2 times for a net of 8 profitable months. They make 1% fee per month for lending. The Fund Managers cannot do that if the shares are "issuer sponsored". Nominee Holdings are not issuer sponsored.

About 3 weeks ago the following from an insider was provided
Third to last paragraph
There is a view that index managers actually make a profit in excess of the market return due to (a) timing [i.e not chasing the noise] (b) overweight / under weight stocks by not re-balancing each day (or week), so at the end of the year they only pay a return equal to the Index - they keep the rest !!!. This view is certainly discussed on US sites such as and

really interesting stuff

so should the government of New Zealand help facilitate such behaviours here?

Dunno. Examine the names of the largest nominee companies. The Banks. And now think about why a bank would pay a such huge sum for GMI and why GMI was underperforming vis-a-vis the bank controlled funds. And wonder what can they do that GMI wasnt doing.

Just a day or three back the mayor in Marlborough wondered why residents were not too happy with his's a pointer to the cause...
4 jobs almost tossed on the scrapheap...nothing to do with council...!