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1.Market Observations

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16 Feb 2019 (AFR) – S&P says housing biggest risk for banks as Fitch downgrades NAB

(16 February 2019, AFR, p24, by James Eyers) ‘The main risk facing banks is the housing downturn and not the banking royal commission, which will make lenders cautious but have no lasting impact on reputations or funding costs, credit experts say. “We see a scenario where the rapid unwind [of housing] is the most plausible … Continue reading

16 Feb 2019 (AFR) – Reporting season: Earnings boost fund managers’ optimism

(16 February 2019, AFR, p22, by Sarah Turner and Vesna Poljak) ‘Solid trading updates and signs of stability in financial conditions have investors feeling more confident about the earnings outlook for Australian companies. “Reporting season is 37 per cent of the way through by market cap and so far most of the results are in … Continue reading

16 Feb 2019 (AFR) – Interest-only loans worth $230 billion ‘trap’ 650,000, warns Morgan Stanley

(16 February 2019, AFR, p1, by Duncan Hughes) ‘About 650,000 borrowers with loans totalling around $230 billion are ‘trapped’ in their interest-only loans and could struggle to refinance, forcing many to sell into already deteriorating property markets, according to investment bank Morgan Stanley. Borrowers will need to extend the interest-only period, switch to a principal … Continue reading

16 Feb 2019 (AFR) – ASX: Weaker earnings outlook pushes ASX lower

(16 February 2019, AFR, p33, by William McInnes) ‘Australian shares closed the week lower after a major week of earnings saw a number of weaker outlook statements weigh on investor sentiment. The S&P/ASX 200 Index closed 5.4 points, or 0.1 per cent, lower for the week at 6066.1 while the broader All Ordinaries actually rose … Continue reading

15 Feb 2019 (AFR) – Spain hurtles toward new elections as PM Pedro Sánchez loses budget vote

(15 February 2019, AFR, p13, by Raphael Minder) ‘Madrid | The Spanish government is teetering on the brink of collapse as the dispute over the status of the prosperous northeastern region of Catalonia stymied passage of a national budget and threatened to usher in another round of protracted political uncertainty. Prime Minister Pedro Sánchez, one … Continue reading

15 Feb 2019 (AFR) – WA farmers reap $7b grain harvest, big tax bill

(15 February 2019, AFR, p10, by Brad Thompson) ‘Farmers in Western Australia are facing tax headaches that have highlighted shortcomings in government and bank initiatives aimed at helping them cope with seasonal volatility after celebrating what is being hailed as the most profitable year on record. The Grain Industry Association of WA has declared the … Continue reading

15 Feb 2019 (AFR) – Goldman Sachs downgrades outlook, pushes out RBA hike

(15 February 2019, AFR, p3, by Matthew Cranston and Natasha Gillezeau) ‘Goldman Sachs has downgraded its economic growth forecast and pushed out when it expects the Reserve Bank might hike interest rates because of weakening business surveys, falling house prices and global growth jitters. Goldman Sachs chief economist Andrew Boak said the outlook for the … Continue reading

14 Feb 2019 (AFR) – Reserve Bank of New Zealand keeps cash rate at 1.75 pc, kiwi jumps

(14 February 2019, AFR, p27, by Sarah Turner) ‘The Reserve Bank of New Zealand has kept its key cash rate at a record low 1.75 per cent, and sees interest rates being on hold longer than it had expected.’ Read more at (might need AFR login access, or try:

14 Feb 2019 (AFR) – Worst Brexit fears become reality

(14 February 2019, AFR, p26, by Ferdinando Giugliano) ‘When Britain voted to leave the EU in June 2016, most economists expected the country’s economy to decelerate sharply. The slowdown has finally arrived. The sudden drop in economic activity at the end of 2018 raises the stakes for the British political class, which has been dithering … Continue reading

14 Feb 2019 (AFR) – Carsales hit by mixed result at home, but international revs up

(14 February 2019, AFR, p19, by Max Mason) ‘Carsales chief executive Cameron McIntyre has blamed the banking royal commission for disappointing results in the company’s advertising and car finance divisions and says it is too early to tell when they will bounce back.’ Read more at (might need AFR login access, or try:

14 Feb 2019 (AFR) – Bapcor belted as slowdown hits mechanics’ workshops

(14 February 2019, AFR, p19, by Simon Evans) ‘The economic slowdown in Australia triggered by falling house prices has now filtered through to mechanics’ workshops, undermining profit growth for Australia’s biggest car parts supplier, Bapcor, which suffered a share price plunge of 10 per cent.’ Read more at (might need AFR login access, or … Continue reading

14 Feb 2019 (AFR) – Further hit to Australian property as China intensifies capital controls

(14 February 2019, AFR, p11, by Michael Smith and Su-Lin Tan) ‘Shanghai/Sydney | China has introduced jail terms for operators of “underground banks” illegally helping tens of thousands of its citizens transfer money out of the country to buy property overseas, in a move developers warn is a big blow to Australia’s real estate market.’ … Continue reading

14 Feb 2019 (AFR) – Sydney vacancy rates rise 40pc since January 2018, SQM says

(14 February 2019, AFR, p29, by Ingrid Fuary-Wagner) ‘Investors who own residential property in Sydney are feeling the pinch as vacancy rates rise and rents fall with no immediate relief on the horizon. The number of vacant properties for rent in Sydney jumped 40 per cent from 15,775 last January to 22,426 this year and … Continue reading

14 Feb 2019 (AFR) – Five things we learned from profits on Wednesday, February 13

(14 February 2019, AFR, p27, by James Thomson) ‘It seems the RBA was right. The upbeat mood from the first weeks of earnings season was shaken on Wednesday, a diverse range of companies warning of economic weakness from political uncertainty, tightening credit conditions, falling house prices, rising fuel prices and global trade tensions. Just days … Continue reading

13 Feb 2019 (AFR) – Sydney rents are retreating, good news for tenants, bad news for owners

(13 February 2019, AFR, p36, by Su-Lin Tan) ‘The refurbished one-bedroom apartment at 30/4-8 Waters Road in the popular lower north shore suburb of Neutral Bay in Sydney was priced at $550 a week at the start of January. With little tenant interest, its rent came down to $530 and then to $500 by early … Continue reading

13 Feb 2019 (AFR) – Credit crunch: Loans to housing investors drop to seven-year low in December

(13 February 2019, AFR, p35, by Michael Bleby and Matthew Cranston) ‘The fastest retreat of both first home buyers and investors in almost seven years in December has worsened the housing outlook, with investment bank UBS expecting prices to fall further than it previously predicted. The investment bank downgraded its peak-to-trough forecast for Australian housing … Continue reading

13 Feb 2019 (AFR) – China says consumption growth likely to slow further this year

(13 February 2019, AFR, p13, by Yawen Chen, Stella Qiu and Ryan Woo) ‘Beijing | Consumption growth in China is “very likely” to slow further this year as the economy cools, the commerce ministry said on Tuesday, underlining the rising risks facing the Asian giant as it navigates a trade war with the United States.‘ … Continue reading

13 Feb 2019 (AFR) – ‘No doubt’: Brexit uncertainty has sapped the British economy

(13 February 2019, AFR, p12, by Hans van Leeuwen) ‘London | Brexit gloom has dragged Britain’s economy to its slowest rate of growth since the global financial crisis, as falling investment and declining manufacturing and construction output kept growth to a meagre 0.2 per cent. Full-year growth in 2018 was 1.4 per cent, the slowest … Continue reading

13 Feb 2019 (AFR) – Retail drags business conditions to barely recover from December lows: NAB

(13 February 2019, AFR, p9, by Matthew Cranston) ‘Interest rates will remain on hold until 2020, according to NAB, after the bank’s latest survey showed business conditions barely rebounded in January after December saw the biggest monthly fall since the global financial crisis. Business conditions rose 4 points to 7 index points in January, but … Continue reading

13 Feb 2019 (AFR) – Bargain hunter property investors bounce back as prices fall and yields rise

(13 February 2019, AFR, p3, by Duncan Hughes) ‘Property investors are chasing falling prices, bargain-basement fixed rates, rising rental yields and bigger discounts as they rush to beat a Labor government’s negative gearing changes, agents and analysts said. Anecdotal accounts from real estate agents, representing sellers, and brokers’ agents, representing buyers, reveal growing interest from … Continue reading

13 Feb 2019 (TheAge) – Rate cut calls grow as home loans fall at their fastest rate since GFC

(13 February 2019, The Age, p7, by Shane Wright) ‘The sharpest fall in home loans since the depths of the global financial crisis has prompted calls for the Reserve Bank to slice interest rates and cast doubt over the state of the budget leading into the federal election. As the NAB said the Reserve may … Continue reading

13 Feb 2019 (AFR online) – The 9 bad habits of highly ineffective investors

[COMMENT: Now many people will not necessarily agree with all of the items below (especially the one about timing the market because many of us know that you can), but it is one set of opinions from one ‘expert’. ] (13 February 2019, AFR online, by Shane Oliver) ‘In the upside-down world logic that applies … Continue reading

12 Feb 2019 (AFR) – Why unwinding QE is turning out to be the hard part

(12 February 2019, AFR, p43, by Adrian Blundell-Wignall) ‘In January the US Fed put on hold its previously flagged program of rate rises and gradual balance sheet reduction. Mario Draghi laid the groundwork for doing the same in Europe. The markets liked it. For a decade policy makers and financial markets have had consistent needs: … Continue reading

12 Feb 2019 (AFR) – Weak consumer sentiment slams developer – AVJennings profit plunges 90pc as settlements stall

(12 February 2019, AFR, p36, by Larry Schlesinger) ‘AVJennings managing director Peter Summers says “consumer confidence” rather than market fundamentals is to blame for the company posting its worst half-year results in six years. Mr Summers, who celebrated 10 years at the helm of the 87-year-old Australian developer this month, described the market for land, … Continue reading

12 Feb 2019 (AFR) – Financials fall in major day for results after Bendigo and Adelaide disappoints

(12 February 2019, AFR, p30, by Vesna Poljak) ‘Australian shares fell on Monday dragged lower by financials stocks as Bendigo and Adelaide Bank’s weaker-than-anticipated first-half numbers took the wind out of the high-flying banking sector. The regional lender declined 6.8 per cent to $10.39 and led the big four banks down with it. Bank of … Continue reading

12 Feb 2019 (AFR) – China’s holiday spending growth slows, underlining tough start to 2019

(12 February 2019, AFR, p14, by Xiaoqing Pi) ‘Beijing | The downward pressure on China’s consumption persisted over the Lunar New Year holiday, the annual festival when people travel, shop, and give gifts or money. People in China spent 1.01 trillion yuan ($210 billion) at restaurants, shopping malls and online outlets over the the week-long … Continue reading

11 Feb 2019 (AFR) – ‘Beware the bounce’: clearance rates firm as volumes dwindle

(11 February 2019, AFR, p8, by Nick Lenaghan) ‘While auction clearance rates have ticked up from their lows last year, including in the biggest markets of Sydney and Melbourne, veteran analysts remain wary of the early bounce. In the first set of auction results since the Reserve Bank of Australia shifted its stance on the … Continue reading

9 Feb 2019 (AFR) – Banking Royal Commission: now you will get what you pay for in financial advice

(9 February 2019, AFR, p30, by Ben Smythe) ‘As highlighted in the royal commission, people paid a lot of money for what they thought was financial advice. But in fact what they were paying for were expensive financial products (in-house superannuation, managed fund funds etc) with little or no financial advice that was specific to … Continue reading

9 Feb 2019 (AFR) – Banking royal commission: what it means for you

(9 February 2019, AFR, p28, by Nicole Pedersen-McKinnon) ‘Get set for changes to how you pay your financial planner, get a mortgage and what you do with your super when you move jobs.’ ‘One of the few unresolved consumer questions about the royal commission report Kenneth Hayne delivered to the government this week is: “Who … Continue reading

9 Feb 2019 (AFR) – Mortgage brokers brace for shake-out as boom turns to bust

(9 February 2019, AFR, p22, by James Eyers and Duncan Hughes) ‘From the moment Matt Comyn and Kenneth Hayne agreed mortgage brokers get a lot of money for not much work, an industry that had been on a three-decade tear was in a lot of trouble. It was mid-November, during the banking royal commission’s hearings … Continue reading