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A review of things you need to know before you go home on Friday; falling yields and rising asset valuations; finco lawyer guilty; Meridian quits the US; Augusta grows; HSBC cuts

A review of things you need to know before you go home on Friday; falling yields and rising asset valuations; finco lawyer guilty; Meridian quits the US; Augusta grows; HSBC cuts
For Friday, May 16, 2014. <a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

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

FALLING INTEREST RATES
The trend today is for lower interest rates. The UST 10yr benchmark was down sharply overnight and New Zealand wholesale rates followed (see below). Then some institutions announced retail changes, including reductions during today. Details of these are below as well.

MERIDIAN QUITS ITS US SOLAR BUSINESS
Meridian Energy today sold the last part of Meridian Energy USA, a business it bought in 2009 for US$5.4 million. No word on the price it sold for.

CHCH CITY ASSET SALE OPTIONS
The Cameron Partners report has been leaked. It shows that the three largest Christchurch City Council assets could net the city $1.4 billion. As yields fall, that will tend to raise the potential valuations of these assets.

BELGRAVE LAWYER GUILTY OF FRAUD
The SFO has secured a guilty verdict in its prosecution of the Belgrave Finance lawyer over the failure of that finance company.

BIG PROPERTY FUND
Today, Augusta completed its takeover of KCL and a small Bayleys syndication. That makes $118 mln in direct assets, and a business with a portfolio of 150 commercial properties worth $800 million. Falling bond yields tend to spruik commercial property values.

GOVT BOND YIELDS FALL
Latest Government bond tender of $200 million received bids for $566 million with an average weighted yield of 4.11% which is lower than the 4.40% at the previous bond auction.

TERM DEPOSIT RATE CHANGES
Westpac dropped its 4 month special, reverting 3.50% from 4%. Asset Finance dropped its 3 and 4 year rates by 25 bps, but raised its 9 and 12 month rates by 25 bps. Liberty Financial cut 10 bps for its offers from 3 mths to 1 year, and raised rates for terms 18 months to 5 years by 5 to 40 bps. Heartland Bank raised its 1 year rate to 4.50%, up by 25 bps.

PERSONAL LOAN RATE REDUCTION
BNZ dropped its Advanced personal loan interest rate from 18.2% down to 17.85%, a drop of 35 bps.

HSBC SETS NEW 3YR HOME LOAN BENCHMARK
HSBC has cut its 3 year fixed mortgage rate to 5.99%, undercutting the previous market standard of 6.25% which had been adopted by most other banks.

WHOLESALE RATES DOWN
Swap rates were all down again today by up to 5 bps flattening the curve noticeably. This follows the sharp reductions in New York early this morning. The 90 day bank bill rate was unchanged at 3.39%.

OUR CURRENCY
The NZ dollar has been basically unchanged during the day with no Budget reaction. The NZD is still at 86.5 USc, 92.4 AUc and the TWI is at 80.4.

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15 Comments

Goodman falls

 

Wilmar is controlled by a Malaysian billionaire whose nephew Kuok Khoon Hong has been one of the key players on the bidding side.

First Pacific is headed by Indonesian tycoon Anthony Salim.

Wilmar and First Pacific were threatening to walk away if the company did not make a decision by 8pm on Friday.


Read more: http://www.smh.com.au/business/goodman-fielder-accepts-revised-137b-asian-takeover-offer-20140516-38fb0.html#ixzz31sXTYGTE

The move came soon after a veiled warning by Goodman chief Chris Delany at The Australian’s Global Food Forum, when he noted that “more and more and more of the ownership of the food manufacturing assets have moved into multinational hands’’.

He said that while he had spent a good part of his career at multinationals “so I don’t think that’s a bad thing’’, he noted one of the outcomes was “more and more ... ­research and development and technical functions have moved offshore’’.

The Goodman board has previously opposed the overtures, saying the suitors were being “opportunistic” and undervaluing the company.

http://www.theaustralian.com.au/business/companies/goodman-fielder-suitors-seal-takeover-deal/story-fn91v9q3-1226919735935#

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In 1989 the directors of Goodman Fielder rejected a takeover bid by Ranks Hovis McDougall ( UK ) as opportunistic , and undervaluing the company ....

 

... 25 years ago GFW shareholders would've received $US 2.4 billion for their investment ...

 

Today, a quarter of a century later, their directors are willingly accepting little more than half of that amount !!!

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Fine thankyou , Henry , doing just fine : but enjoying a period reading more of other's opinions , and spending less time flapping me own Gummy gums ... all goody good with you and the Tull clan ?

 

... enjoyed the links ....

 

Cheers champ !

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oh the kids are fine, although all hell broke loose this morning when one lost the reed for the chanter......

 

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OECD report on housing affordability paints New Zealand as the least affordable place to buy a house .... or to put that another way , our housing bubble is the biggest in the developed word .....

 

.... they claim Kiwi houses are 70 % overpriced compared to the rental returns on them , or 45 % overpriced compared to our wages  ....

 

.... close behind us in the unaffordability sadistics are Australia and Norway ...

 

Japan and Portugal are deemed to be the cheapest property markets in the OECD ...

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John Key must have been taken by surprise, he was on morning report this morning (audio will be on the website soon I'm sure) insisting that worst in the OECD is not a crisis, it is a testament to NZ's economic strength, and the possibility of large scale migration pushing up house price shouldn't be seen as a problem but rather showed how great things are.

It doesn't help that the next story in the 7am headlines was the Glvernment cuts to the social housing budget because the free market was now in position to meet demand.

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John Key Audio

http://podcast.radionz.co.nz/mnr/mnr-20140519-0709-john_key_talks_housi…

 

Step 1: Insist it isn't a crisis, it is a triumph. try and change the subject.

Step 2: Blame the formerly unemployed people who have just got jobs for buying the houses.

Step 3: Blame Labour.

Step 4: Make dodgy numerical comparison. If anyone can't see what is wrong with comparing the percentage increase under 9 years of Labour with the subsequent percentage increase under 6 years of National, hand in your I can comment on numbers card right now.

Step 5: Describe the potential immigration boost as a natural function of the market, suggesting the Government has no control over it.

Step 6: Threaten that house prices might collaspe if they did anything about it, so people don't want it addressed.

I mean honestly, did the people who media managed National's budget so well then take a few days off.

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doh....mp3....copyright issues...grrr.

Unfortunately I dont think most ppl will care, in fact I dont think ppl want it cured, they just want it to keep going up but if not in the game get Govn funded "help" to get on the preceived gravy train of profit for no work.

I just wish other ppls stupidity couldnt effect me as a tax payer with virtually no debt. However I know the moral hazard is being ignored and I'll be expected to bail ppl out.

regards

 

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Radio NZ have both .mp3 and open .ogg formats on their website.

Footnote: as I understand it the international patent (not copyright) issues affecting mp3 do not apply in NZ because of our approach to software patents.

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Yes NZ THE second MOST EXPENSIVE country to own a house relative to income.

BUT our poor old landlords have to suffer the poorest returns on their investment. Oh dear!

Nice graphic in the Telegraph http://www.telegraph.co.uk/finance/personalfinance/houseprices/10827469/House-prices-countries-with-the-cheapest-and-most-expensive-property-markets.html

 

Country Annual rise in real terms Price vs rents Price vs wages

Australia 6.6% (2013) 145 128

Belgium 0.7% (2013) 158 147

Canada 5.2% (Q1 2014) 166 131

France -2.2% (2013) 129 128

Germany 5.1% (2013) 91 83

Greece -7% (2013) 84 103

Ireland 4.3pc (2013) 96 92

Italy -5.5% (2013) 93 108

Japan -1.9% (2013) 62 63

Netherlands -1.4% (Q1 2014) 104 117

New Zealand 8.2% (2013) 170 132

Norway -2.6% (Q1 2014) 164 122

Portugal -1.5% (Q1 2014) 83 94

Spain -4.9% (2013) 104 107

UK 3.5% (2013) 134 125

US 6.6% (2013) 104 90

Euro area -0.9% 106 107

Total OECD 2.8% 106 95

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to be fair, ROI is a bit more complicated as countries Tax structures can effect that. In particular the Australasian fondness for negative gearing springs to mind as changing the Price/Rents ROI equation.

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Well all I can say is that you paid too much for that hovel or you would have had plenty left over to upgrade it.

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A one way ticket is the cheapest

;o)

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Your conclusion is not correct.

The index (170 for price to wage for nz) that you conclude makes returns for landlords the worse is an index that compares current price to rent to long term average.

So for NZ, we are 70% above long term average for price to rent ratio.  Or put another way, yields significantly poorer than what has been experienced in the past.

NZ yields compared to other countries are actually pretty good.  Granted auck not so much (or at all). 

Also you compare yields to an expected capitalization rate of investing in an equally risky venture.

NZ in the past has been 'emerging' and risky, and needed to have higher interest rates to attract foreign capital (seen as low value of NZD in past relative to interest rates).

NZ has become significantly more attractive to foreign capital inflows, and no longer needs very high interest rates to attract them. This is seen by higher NZD since mid 2000's. The capitalization rate has been significantly lowered as NZ has become more attractive and less risky over time.  So yields can be supported at lower levels, and prehaps a price to rent of 150 on the index compared to historical levels is the new normal.

 

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