Investment Matters

What Matters this week

Rare earths producer Lynas (+15.6%) is one of few companies benefiting as we continue to stumble towards Thucydides’s Trap (NB: rare earths are key elements used in magnets). The company is one of the few rare earth producers outside of China and has purportedly tendered the US Army to build a rare earths processing facility in the US. It is believed that the US Army will pay up to two-thirds of the cost of the facility, which will likely produce heavy rare earths required for weaponry.

The Australian Financial Review's always colourful Joe Aston revealed that Afterpay (-3.4%) may be “Afterpaying” its expenses - spending now and paying later. The columnist detailed how Afterpay has remunerating many of its consultants, lobbyists and potentially new merchants by way of options rather than cash. More financial ambiguity makes more flexible valuations and a prettier cash flow statement.

In line with the RBNZ’s concessions last week (with respect to capital requirements) APRA rolled over once again. It decided to keep the counter cyclical capital buffer (a buffer of capital banks are to hold due to heightened periods of systemic risk) at zero. The justification: low credit growth, recent growth in house prices and increased entity costs due to operational risk events and misconduct (i.e. let’s take it easy on the banks, they already up to their ears in Royal Commission related mess after all).

IOOF (-0.6%) has finally received approval from the Australian Prudential Regulation Authority (APRA) to acquire ANZ’s financial planning business OnePath. After several years, a royal commission and purge of its board, it seems APRA is now satisfied they can be trusted with the keys.

A2 Milk’s (+1.0%) Jayne Hrdlicka stunned many this week by stepping down from her role as CEO. And the reason will always be one of three: “succession” an “orderly transition” or “family commitments”. This time it was the latter – the amount of travel required for the role “unanticipated” by Hrdlicka who has been in the role for 18 months. The market was sceptical too, with the company down 4% on the day.

Lastly, we may be saying goodbye to another retail icon. This week, another iconic retailer has closed its doors in Harris Scarfe, entering voluntary administration. Just another one to add to a long list (Roger David, Dimmeys, Toys R Us, Payless Shoes, Topshop Australia, Gap, Esprit).