The ASX is firmly in the red at lunchtime, with banks the worst performers by a wide margin on the third day of an inquiry into the sector.
The S&P/ASX 200 index lost 24 points, or 0.4 per cent, to 5910 while the All Ordinaries declined 25 points to 6017. The Australian dollar was at US78.84¢.
The royal commission into the financial sector is hearing evidence about mortgage broker misconduct today and banks were taking 19 points off the index, as CBA fell 0.9 per cent, Westpac lost 1 per cent, while ANZ and NAB fell 1.1 per cent each.
Miners were providing a bit of support for the index, with Rio Tinto up 0.9 per cent and BHP up 0.3 pr cent. Rare earths firm Lynas rose 2.5 per cent and graphite extractor Syrah Resources climbed 2.3 per cent, also helping to limit downside.
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Here’s another development in the accelerating trend to in-house investing across Australia’s giant pension funds, as executives look to boost member returns and cut costs in a low-yield world.
The $43 billion Construction & Building Unions Superannuation fund is boosting a team to make direct infrastructure investments as it seeks to bring more of its asset management in-house.
CBUS is seeking to bolster its team of five by hiring another three people this year as the fund aims to have 30 percent of its infrastructure portfolio invested directly, head of infrastructure Diana Callebaut said in an interview.
While the Melbourne-based fund had invested in external infrastructure managers, over the past 18 months it has started bulking up its own teams.
The country’s largest fund, the $130 billion AustralianSuper last year said it ultimately expects to manage half of its assets itself.
An adverse outcome from the bank sector inquiry may lead to a smaller buyback from ANZ, according to Morgan Stanley’s banking team.
They noted that ANZ is on track to complete its $1.5 billion buyback in May and suggested that ANZ could undertake a further $4 billion of buybacks over the next two years.
However, the analysts said that any buyback may be smaller than their $4 billion forecast, for the following reasons:
– if management targets a higher capital buffer
– business loan growth accelerates
– profitability is weaker than forecast-
– or there are adverse outcomes from bank sector inquiries.
ANZ should resume growing dividend payments in fiscal 2019 but a special dividend is unlikely as ANZ’s Australian franking credits were below $200 million at the end of 2017, well below the peer average of $1.1 billion, the analysts said.
ANZ shares were down 1.1 per cent, a slightly worse performance than its big four peers, which were all down by around 1 per cent.
The hits keep on coming for the banks which are facing a third straight day of questioning by the royal commission into the financial sector.
The commission is hearing evidence about mortgage broker misconduct today and CBA, Westpac and NAB are all down 1 per cent while ANZ is down 1.1 per cent.
Earlier, the consumer watchdog said there are “signs of less-than-vigorous price competition” on mortgages between Australia’s big four banks making it difficult for customers to compare rates.
Australian Competition and Consumer Commission chairman Rod Sims said the organisation’s interim report into mortgage pricing also found banks favour new borrowers over existing customers.
“The discounting by the big banks lacks transparency and it’s almost impossible for customers to obtain accurate interest rate comparisons without investing a great deal of time and effort,” Mr Sims said.
Wesfarmers shares are climbing today and were recently up 0.9 per cent to $41.25.
Credit Suisse upgraded the conglomerate owner of supermarket chain Coles to outperform from neutral today and also lifted its target price on the firm to $44.89 from $40.65 a share.
The broker said that their upgrade to Wesfarmers’ rating was a relative value call.
It was based on an upgrade to their valuation of Bunnings Australia New Zealand, the likelihood that the under-performance of Bunnings UK and Ireland will be dealt with within the next six months and implied under-valuation of Coles.
“With an ex-Bunnings UK FY18E price to earnings multiple of 15 times and clear catalyst for re-rating, the risk-reward appears favourable for Wesfarmers,” the broker said.
The average top chief executive in Australia is earning $5.2 million, a figure not seen since before the global financial crisis.
A new report that analyses data from Australia’s top 100 companies shows that the average chief executive pay dropped from $5.5 million before the GFC to $4.7 million in 2011. But it has steadily crept back to $5.2 million.
Australia’s highest reported CEO salary peaked at $33.5 million before the GFC, fell to $11.8 million in 2011 and bounced back to $21.6 million in 2017.
The report has found that while average earnings have less than doubled since 2000, the pay packets of executives at National Australia Bank and the Commonwealth Bank have more than tripled.
The report is being released to coincide with the 10th anniversary of the collapse of Bear Stearns, the fifth largest investment bank in the US, which had some of the world’s highest paid executives.
Report author David Richardson, a senior research fellow at left-wing think tank the Australia Institute, will on Thursday release the report, which analyses executive pay 10 years on from the GFC.
Shares softened in early trading on Thursday after a soft retail sales figure pulled down Wall Street overnight.
The S&P/ASX 200 index edged down 4 points, or 0.1 per cent, to 5931 while the All Ordinaries slipped by the same amount in points and percentage terms to trade at 6037.
The Australian dollar reached US78.80¢.
Wall Street ended in the red overnight after an unexpected fall in February retail sales raised some questions over the future path of the US economy.
Banks fell in the US and Australian banks were leading the ASX down on Thursday. An inquiry into the sector continues today.
ANZ and NAB fell 0.6 per cent each while Westpac was lower by 0.3 per cent and CBA dipped 0.1 per cent.
Elsewhere in the financial sector, QBE shares were down 1 per cent and AMP shares lost 0.9 per cent.
A2 declined 1.1 per cent but airline Qantas rose 1.3 per cent.
Miners saw a bit of buying as the sector continued to welcome yesterday’s strong data from China, with BHP up 0.4 per cent and Rio Tinto up 0.5 per cent.
Macquarie’s economics team of Justin Fabo and Ric Deverell say they now expect the RBA to remain on hold until early 2019.
While the economy is improving, the unemployment rate remains too high, and wages and price inflation too low for the 25 basis points of rate hikes pencilled in for August and November this year, the economists said.
“Monetary policy should be set on the path of least regret. That path, in our view, is now to err on the side of supporting growth for longer to gain more confidence that inflation will once again spend more time in the 2 per cent to 3 per cent target than not.”
The royal commission into the financial sector is underway again, with the third substantive day of hearings starting at 9.45am.
Wednesday wrapped up the inquiry’s two-day examination of NAB’s fraudulent loan scheme, which involved 60 bankers, 20 of whom have since left the bank, and affected 1300 customers – all have yet to be compensated.
The Hayne royal commission will hear evidence about mortgage broker misconduct on Thursday. First up is Daniel Huggins of the Commonwealth Bank. He will be followed by three Aussie Home Loans brokers: Giles Boddy, Lynda Harris and David Smith.