China's Yili wants to buy more NZ dairy assets; China grows UST holdings; trade in fake grows; Aussie investors face FONGO; UST 10yr 2.60%; oil and gold unchanged; NZ$1 = 68.5 USc; TWI-5 = 73

China's Yili wants to buy more NZ dairy assets; China grows UST holdings; trade in fake grows; Aussie investors face FONGO; UST 10yr 2.60%; oil and gold unchanged; NZ$1 = 68.5 USc; TWI-5 = 73

Here's our summary of key events overnight that affect New Zealand, with news our second largest dairy co-operative may be about to be sold.

The board of Westland Co-operative Dairy Company has signed a conditional agreement to sell the struggling business to China-based Inner Mongolia Yili. The deal price values the business at NZ$588 mln. Yili owns South Canterbury-based Oceania Dairy, into which it has invested more than $650 mln. Westland's board says it 'engaged 25 other' potential buyers in the sale process before choosing Yili. Farmer shareholders will need to approve, as will the High Court. Like all co-operatives, Westland has struggled with its ability to invest in the business and to build any meaningful retained earnings for such investment.

China is not selling out of its holdings in US Treasury debt. In fact, if anything, it is building them. For a second straight month in January after five months of declines, and amid trade negotiations between the two largest economies, their holdings rose to US$1.1 tln.

A new report on counterfeit goods by the OECD found trade in fakes has increased over the past three years and now represents 3.3% of world trade, or more than NZ$800 bln in annual flows. The internet enables it.

In Europe, the two largest banks in Germany have taken their merger plans public. But it is not exactly a match that many are enthusiastic about.

In Norway, their central bank is about to review interest rates and a hike is expected to take it to 1.0%. That will make it the second such rise in the past six months.

In Australia, analysts are anticipating that the fear of not getting out is about to take hold in some key property markets, and that listings in Melbourne and Sydney will rise as investors rush to sell. The investor metrics that accepted wafer-thin investment returns in a rising market, won't accept them in a falling market.

In world equity markets, the direction - like the currency and bonds markets - is sideways. Most however are maintaining a minor set of gains in trading so far today.

The UST 10yr yield is little-changed at 2.60%. Their 2-10 curve is still at +15 bps while their negative 1-5 curve is now at -10 bps. The Aussie Govt 10yr is down -1 bp to 1.97%, the China Govt 10yr is also lower by -1 bp at 3.15%, while the NZ Govt 10 yr is unchanged at 2.10%.

Gold is also unchanged at US$1,302.

US oil prices are marginally firmer, now just over US$59/bbl while the Brent benchmark is just over US$67.50/bbl.

The Kiwi dollar is at 68.5 USc and little-changed as well overnight. On the cross rates we are marginally weaker at 96.5 AUc. Against the euro we are still at 60.4 euro cents. That holds the TWI-5 at 73.

Bitcoin is unchanged at US$3,968. This rate is charted in the exchange rate set below. The first market exchange to trade in bitcoin futures has pulled the plug on the market.

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

Daily exchange rates

Select chart tabs »

The 'US$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'AU$' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'TWI' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥en' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '¥uan' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The '€uro' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'GBP' chart will be drawn here.
Loading...
Daily benchmark rate
Source: RBNZ
The 'Bitcoin' chart will be drawn here.
Loading...
USD 
NZD
End of day UTC
Source: CoinDesk

Please note that commenting will be re-opened soon, allowing only moderated comments at first. There may be a delay until each comment is released. Normal service which allows comment conversation should be return soon. Please stay on the subject of the article.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

12 Comments

Comment Filter

Highlight new comments in the last hr(s).
17
up

Here we go again, one step closer to China having control of out dairy industry.

11
up

Slowly yet surely it'll be Chinese companies using Chinese expat workers selling NZ dairy to consumers in China.

Amid all the criticism of Fonterra is the call for more competition in the dairy industry - well this is what the competition looks like. This is what the NZ public wants, so this is what it may get - if the shareholders of Westland vote for it.

Really good investment by Southern Pastures.

In Australia, analysts are anticipating that the fear of not getting out is about to take hold in somne key property markets and that listings in Melbourne and Sydney will rise as investors rush to sell. The investor metrics that accepted wafer-thin investment returns in a rising market, won't accept them in a falling market.

Regarding sale of Westland Co-operative Dairy Company.
This appears to be the same company - Westland Milk Products - that Shane Jones' Provincial Growth Fund lent $9.9 million last November. (Note: different company name but same CEO - but correct me if I am wrong)
So the PGF hasn't ensured the continuing viability of this company.
I assume and hope that the $9.9 million loan will be repaid on sale of WCDC goes ahead. It would not seem the idea of the PGF that the Chinese buyer be a beneficiary of a loan for which the terms were kept confidential but one can take to be far more favourable than open market commercial rates.

However a condition of the loan was that it would have to be immediately repaid if there was a change of ownership structure. https://www.stuff.co.nz/business/farming/110942336/government-ignored-tr...
The pgf loan was never going to ensure the continued viability of Westland. It was never meant to either.

CO
Great to hear.
Thanks

So why did the PGF invest in Westland? Smells fishier now that they are up for sale.

Interesting times in Aussie.

The Leninist banker's ramp political system is just at the point where the RBA, having enabled a mega boom by lax standards (eg bank equity of 2% against household mortgages, disguised as 25% risk weighting on 8% net equity) decides to tighten into a downturn. The RBA stops lending against foreign income, stops interest only lending, changes the rules on loan to value ratios. House prices start falling. The RBA says "No one saw it coming" and lowers interest rates, but cannot relax credit standards because Bankers have been demonised for doing what they incentivised to do, ie lend recklessly. House prices collapse.

So far the Aussies seem to be doing ok, as the vast number of cranes are still finishing constructing new apartment blocks, until the money runs out. Soon they will either finish the building and the developer goes broke, or just stop building. Unemployment then spikes as thousands of building industry workers lose their jobs.

Meanwhile the Aussie miners are expanding and making serious money, as the lower Aussie dollar makes their produce insanely profitable. Enterprising electricians with real skills move from NZ to Aus to build mines.