Investment Matters

What matters this week

With a lull of company specific news following the conclusion of reporting season, focus has returned to macro items.  Of note:

  • the AUD has fallen quite considerably since its recent high, in quite a short period of time - 0.7714 on 23-Feb-17, to 0.7504 currently
  • the oil price has had an even more aggressive decline - this week the price started at US$53.20 (WTI), to US$49.62 as we go to press, -6.7%
  • as expected, on Tuesday the RBA (Australia's central bank) left the cash rate unchanged at 1.5%. 

In relation to the latter, it might soon be superseded by another country's central bank's actions, namely that of the USA.  This week's commentary from US Federal Reserve members, along with strong US economic data, resulted in a sharp increase in the market's expectation for a March rate increase.  It matters to Australia because Australia's banks (and thus Australia's mortgage holders) are dependent on the overseas wholesale debt markets for part of their funding, which the US rate significantly influences.

Moving to company specific news - riders of the Dreamworld's BuzzSaw were hanging in suspension for about 1/2 hour on Monday (along with management and Ardent Leisure shareholders, owner of Dreamworld).  Thankfully the riders were rescued unharmed.  Ardent released a park attendance update on Tuesday, which showed a recovery in attendances after last October's tragedy.  The market viewed this positively (+10.2% for the week).

The monopoly that is airports (each of Sydney, Melbourne, Brisbane, and Perth) are under attack by the duopoly of the major airlines.  It's a sector that can hardly be held up as the bastion of efficient market competition.  To be fair, maybe the airlines do have a valid gripe - anyone paid for airport parking lately?  And it isn't just QANTAS and Virgin Australia complaining - also Regional Express (REX) and Air New Zealand.

One of the larger share price falls of the week was Navitas, provider of education services.  It announced it is unlikely to receive renewal of a number of long-standing government contracts to provide English education classes for immigrants.  The company's share price fell 14.9% on the day of the announcement, and another 3.8% the following day.

The ACCC (Australia's competition regulator) looks set to approve (with some concessions) the merger between Tatts and Tabcorp.  A draft ruling indicated fewer substantive issues than people were expecting.  Although this will form a gambling behemoth, the environment is rapidly changing with technology and online gambling.

And finally, the banks continue to be in the spotlight, with Westpac's CEO Brian Hartzer appearing in front of government's banking enquiry.  He indicated apartment prices in Melbourne and Sydney that were targeted at overseas buyers are forming a bit of a glut.  A bubble?  Who would have thought.