What happened Wednesday

A review of things you need to know before you go home on Wednesday; ANZ gets competitive, Govt surplus grows, mortgage market very active, China panic grows, swap rates drop

8th Jul 15, 3:59pm by David Chaston

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

TODAY'S MORTGAGE RATE CHANGES
ANZ have launched a 4.89% one year 'special', matching ASB for this term. This compliments their 4.99% two year rate.

TODAY'S DEPOSIT RATE CHANGES
Cooperative Bank cut term deposit rates across the board.

A BIGGER SURPLUS
Treasury reported a NZ$1.176 bln Budget surplus today for the 11 mths to May. Taxes on corporate profits are collecting above forecast, but GST collections is below forecast. Government spending is running less than expected.

HOT MARKET
Mortgage approval data out today for last week is nothing short of stunning for this time of year. 6,673 new mortgage were approved worth $1.445 bln. That is at the same rate as we saw in the peak March period. And that is +28% above the same week a year ago.

OUR ACHILLES HEEL
Keyser Soze has pointed out that the RBNZ has updated its NZ household-debt-to-disposable-income ratio for March 2015 yesterday. That has now reached highest point ever - 162.2% - about a solid point worse than originally forecast. It has increased by +11.4% from 2012 Q1. and now above the previous peak reached in Q2 of 2009 of 161.2.

CHINA PANIC GROWS
China's stock market has fallen sharply again, and now half of listed stocks are suspended from trading. It plunged -8% in 3 minutes. China's stock market has a different profile from western markets; most activity is driven by individuals rather than institutions and pension funds. The NZX is also down, but by a modest -0.5%.

WHOLESALE RATES DROPS
NZ swap rates have fallen sharply today, following big falls on Wall Street last night. The falls are -2 to -10 bps and means the two year swap rate is now only 2.93%. The 90 day bank bill rate is up one bp to 3.19%.

NZ DOLLAR SLIPS
The NZ dollar has sunk slightly today. It is at 66.4 USc, at 89.5 AUc, and 60.5 euro cents. The TWI is still at 70.9. Check our real-time charts here.

You can now see an animation of this chart. Click on it, or click here.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

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15 Comments

by J.C. | 8th Jul 15, 5:24pm 1436333046

Another thing happened today. The Nikkei continues to get smashed. It might be off the radar for most Kiwis, but it shows some contagion.

by David Chaston | 8th Jul 15, 5:36pm 1436333774

Yes. Asian equities update: Nikkei 225 19851.45 (-2.58%), Hang Seng 23926.09 (-4.20%), Shanghai Comp 3582.50 (-3.88%).

by Zombie ponzi | 8th Jul 15, 7:25pm 1436340333

Shanghai comp closed down 5.9%. Panic stations...

by Andrewj | 8th Jul 15, 7:41pm 1436341283

The Shanghai Composite Index plunged 5.9 percent to 3,507.19 at the close. With at least 1,323 companies halted on mainland exchanges and another 710 falling by the 10 percent daily limit as of midday, sellers were locked out of 71 percent of the Chinese market. They turned to government bonds and Hong Kong shares to raise cash, sending China’s 10-year notes to their biggest drop in a month and sparking a 7.9 percent retreat in the Hang Seng Index.
http://www.bloomberg.com/news/articles/2015-07-08/china-stock-futures-p…

by cowboy | 8th Jul 15, 7:36pm 1436341019

With China and Nik is it volume of sales pushing prices down? (ie, are investors leaving the market and not rebuying) is the money hiding/paying off debt, or is it moving to better deals elsewhere? Is it it that trade has slowed and what is buy is light'n'low ? (ie lots of hold but not many people pouring in money - low optimism/expectation for growth)

by sharetrader | 8th Jul 15, 8:17pm 1436343458

all the evidence is the gamblers (retail investors) are trying to sell to cover their margin calls.
when I saw a Chinese documentary a couple of months ago about villagers coming in from their farms and buying and selling in the afternoon.
they had one lady in the village that was the guru telling them what to buy and when to sell.
no mention of how she worked out PE, yields, level of support, breakout range no normal investing terms just I am lucky, I thought this can only end well I would love to see the follow up

by tim12 | 8th Jul 15, 5:25pm 1436333129

The graph of our dollar's decline looks similar to the Chinese stock exchange. Might that reflect our over exposure to one market?

by Stephen Hulme | 8th Jul 15, 6:47pm 1436338029

Hard to deny, since the dairy auction prices exhibit a similar downward trajectory. Building an economic growth strategy underpinned by gold rush economics is always suspect.

by two otherguys | 8th Jul 15, 7:51pm 1436341913

Shanghai Composite Index closes down 6%

The index includes 700 suspended stocks which means they are still included in the index at their last traded price. That is holding the index up. Cunning huh? That's the function of an index. If it is assumed that those 700 suspended stocks are prominent leaders then the fall is probably far more serious than is being portrayed

by J.C. | 8th Jul 15, 8:07pm 1436342826

There is an ETF in Japan for the Top 50 stocks on the Shanghai exchange by capltalization, which trades on the TSE. It was down 6.94%.

by sharetrader | 8th Jul 15, 8:23pm 1436343838

there was talk about the Chinese opening up their stock markets to foreign investors, if they open them now I wonder how long it takes the communist party to put restrictions on so their companies don't become foreign controlled

by J.C. | 8th Jul 15, 9:13pm 1436346791

The Nomura ETF has been operating since 2007. Only open to Japanese investors.

by Andrewj | 8th Jul 15, 7:44pm 1436341445

Sigmar Gabriel, the German vice-chancellor and economy minister, said there could be no question of writing off Greek debt because other countries that have had loans such as Ireland, Portugal and Spain would demand equal treatment.

‘I really hope that the Greek government – if it wants to enter negotiations again – will accept that the other 18 member states of the euro can’t just go along with an unconditional haircut,’ he said.

‘How could we then refuse it to other member states? And what would it mean for the eurozone if we’d do it? It would blow the eurozone apart, for sure.’

Oh, yes, he used the “conditional” word, meaning that if Greece signs up for a permanent regime of reform, austerity and depression its paymasters in Brussels and Berlin might be open to an accounting double shuffle. That is, to having Greece’s crushing loans extended to 40 years from 25 years, its grace period on interest and principle repayments stretched beyond the current 2023 time frame and its interest rates pared to something less than 1.5%. On an NPV basis, this is supposed to be some big deal concession.

But who do these clowns think they are kidding? Some day all of this debt will have to be rolled over, and eventually the monetary mountebanks running the ECB and other central banks will be unable to prevent interest rates from normalizing.

So put an honest interest rate—–say 6% on a country that has been a chronic deadbeat for two centuries——-on its current $350 billion of fiscal debt and the pro forma interest computation rounds out to 10% of GDP. It is doubtful that even Art Laffer would claim Greece could grow out from under that kind of financial albatross.
http://davidstockmanscontracorner.com/first-was-a-head-fake-now-comes-e…

by Stephen Hulme | 8th Jul 15, 8:24pm 1436343870

Mortgage approval data out today for last week is nothing short of stunning for this time of year. 6,673 new mortgage were approved worth $1.445 bln. That is at the same rate as we saw in the peak March period. And that is +28% above the same week a year ago.

Maybe a regulator with teeth and uncaptured by vested interests is required - LOL They (banks) have no conception of the carnage leverage can inflict upon a financial system - are these banks oblivious to the unfolding Chinese margin stock purchase debacle?

Westpac Banking Corp. and Australia & New Zealand Banking Group Ltd. are further tightening lending to investors in residential real estate amid efforts to cool the housing market.

Westpac, the largest lender to landlords, said in a statement Wednesday it will lend a maximum of 80 percent of the value of a home to be rented out, down from 95 percent. ANZ Bank said it cut the loan-to-value ratio to 90 percent from 97 percent, and will introduce an interest rate “floor” to ensure borrowers can repay mortgages if borrowing costs rise.

The moves follow similar curbs by National Australia Bank Ltd. last month after pressure from the regulator to limit the growth in lending to investors. Home prices have surged 43 percent in Sydney since May 2012 amid record low interest rates, fueling concern of a property bubble in the nation’s largest city.. Read more

by profile | 8th Jul 15, 10:21pm 1436350875

More bad news for China.

Fracking to Make Manufacturing Cheaper in the U.S. than in China.

http://energyindepth.org/national/fracking-to-make-manufacturing-cheape…