The week in finance - 09.11.2018

Wknd_Josh_Frydenberg

Words by Paul Rickard

Led by solid gains with financial stocks, the Australian sharemarket continued to recover from its October drubbing. By the close on Friday, it had added a net 73 points or 1.24% over the week to finish at 5922.

It was a busy week for the major banks. Commonwealth Bank held its Annual General Meeting and provided a first quarter trading update, while Westpac announced its full year profit. This came it at $8.1bn, unchanged from the previous year. Both updates largely met expectations, but with bank stocks looking cheap, buyers pounced. By the end of the week, each of the ANZ, CBA and Westpac had put on more than 3%. Going against the trend was NAB, which went ex a dividend of 99c and lost a net 31c over the week to close at $24.90.

Rio enjoyed support as its off-market share buyback came to an end and tenderers looked to replace shares through on-market purchases. Despite commodity prices remaining reasonably flat, Rio added 3.7% to close at $81.23. With the oil price easing back to around US$60 per barrel (now down 20% from its high only a few months’ ago), BHP fell 9c while Woodside finished 1.2% lower at $33.77.

Treasurer Josh Frydenberg announced his intention to block Hong Kong-based CK Group's proposed $13 billion acquisition of the east coast gas pipeline owner APA on “national interest” grounds. APA’s shares closed at $8.88, down 8.8% over the week. In other company news, the operator of real estate listings website realestae.com, REA Group, delivered a better than expected quarterly trading update. Its shares finished 8.7% higher at  $80.50.

The Reserve Bank met on Tuesday (Melbourne Cup day) and kept the cash rate unchanged at 1.5%. In a robust assessment of the Australian economy, it forecast economic growth to average around 3.5% this year and in 2019, and unemployment to fall to a decade low of 4.75%.

The Australian dollar rose marginally against the US dollar to 72.4 US cents.

Brickbats and Bouquets

The Treasurer was busy with announcements this week, including the reappointment of  Wayne Byres as the Chairman of the banking, insurance and superannuation regulator APRA for another 5 year term. While warmly welcomed in the markets, the appointment did raise a couple of eyebrows given that his current term doesn’t expire until July next year and it comes ahead of the Royal Commission’s review of the performance of APRA. We will offer Wayne a congratulatory bouquet.

Also receiving a bouquet is Telstra’s Chief Financial Officer, Robyn Denholm, who is stepping down at Telstra to take over from Elon Musk as Chairman of electric car company Tesla.

No brickbats this week. Malcolm Turnbull came close with his attack on his “crazy colleagues” on the ABC’s Q&A program on Thursday night, but otherwise, managed not to add any new fuel to the fire. This all said, Bill Shorten is just counting down the days. 

That’s the week.

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