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ASX up 1.2pc, bank CEO criticises ANZ’s Suncorp deal

Updated

ASX adds 1.2pc as tech leads rally

The S&P/ASX 200 closed 1.2 per cent higher on Monday to end the trading day at its highest level of the session, as the investor optimism that helped US and European shares rise on Friday spread to Australia.

Tech shares led among local blue chips with a 2.9 per cent advance, helped along by a 7.2 per cent advance for WiseTech Global.

The materials sector trailed only tech shares with its own robust performance on Monday to advance 2.4 per cent. Fortescue Metals Group jumped 3.4 per cent, BHP edged 2.4 per cent higher and Rio Tinto added 2.1 per cent.

Brainchip Holdings led within the blue-chip benchmark with a 13.9 per cent gain for the day, ahead of Pendal Group’s 9.3 per cent advance. The fund manager’s shares had fallen sharply late last week after disclosing outflows.

EML Payments added 7.4 per cent on a day that began with a confirmation that it had held takeover discussions with two separate entities last month, although the talks have now ceased with no deal.

Shares in Suncorp added 6.1 per cent after the group announced a deal to sell its banking division to ANZ for $4.9 billion.

Shares in Whitehaven Coal closed more than 5 per cent higher after the company said its earnings for the 2022 financial year would likely reach $3 billion.

Rich Lister Nick Politis tops up stake in Eagers Automotive

Simon Evans

Rich Lister Nick Politis has topped up his stake in Australia’s largest car dealership group Eagers Automotive as it acquires his privately owned dealerships in the Australian Capital Territory for $193 million.

Mr Politis, who was ranked No.51 on The Australian Financial Review Rich List in 2022 with an estimated wealth of $2.23 billion, has extensive private interests in the vehicle industry, as well as being the largest shareholder in ASX-listed Eagers Automotive.

A notice to the ASX on Monday showed he acquired an extra 10,000 shares in Eagers Automotive at $11.3359 on July 15, the same day as shareholders gave the green light to the acquisition of Mr Politis’ ACT dealerships.

It followed the purchase of similar-sized parcels in Eagers Automotive by Mr Politis on each of the previous three trading days on the ASX.

Read more here.

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ANZ bid for Suncorp Bank ‘a real test’ for regulator

Tom Richardson

Shareholders should not expect the competition regulator to wave through ANZ’s proposed $4.9 billion acquisition of Suncorp Bank – potentially the biggest banking deal in Australia in more than a decade, says Royal Bank of Canada’s equities boss Karen Jorritsma.

ANZ will raise $3.5 billion by selling shares at $18.90 on a 12.7 per cent discount to the bank’s last closing price of $21.64 to finance the deal, priced at 13.8 times Suncorp Bank’s profits to December 31.

“It’s going to be a real test,” Ms Jorritsma said of the Australian Competition and Consumer Commission’s view. “And people will watch the approach from the new chair [Gina Cass-Gottlieb] to see how it’s handled, given the sensitivity around the four major banks already having significant market share and pricing power.”

The deal could unlock value for Suncorp shareholders if the market assigned its core insurance business a higher profit multiple once the banking operations were sold, she said.

Read the full story here.

Regional bank CEO criticises ANZ’s Suncorp deal

Peter Lock, the chief executive of Toowoomba-based regional lender Heritage Bank, said ANZ’s proposed takeover of Suncorp’s banking division will do little to promote competition and further concentrate Australian banking in the country’s two largest cities.

“The takeover of Suncorp by ANZ will simply increase the power of the major banks in Australia. That’s not great news for banking consumers,” Mr Lock said.

“It’s even worse that we’re losing a Queensland-based bank, and the different perspective that brings. Having all the major banks based in Sydney and Melbourne means that there is a metropolitan perspective that dominates, when it’s not really representative of the rest of the country.

ANZ has agreed to pay $4.9 billion for Brisbane-based Suncorp’s banking unit. Shayne Elliott, chief executive of Melbourne-based ANZ, said Queensland was at the heart of the transaction and would remain important for the business.

Heritage Bank has agreed to merge with People’s Choice Credit Union and Mr Lock said the combination underscored the important role of the mutual model in Australian banking.

“If anyone thinks the takeover of Suncorp will be good news for Queensland, they need to think again. The pressure will be on to strip costs and generate more profits, to create a return for shareholders,” he said.

“Mutuals don’t have that conflict. Our customers are our owners, and we only exist to serve them and their communities.”

ASX climbs 1pc to session high

The S&P/ASX 200 traded 1 per cent higher by mid-afternoon in Sydney, compounding gains from earlier in the day to trade at the highest level of the session.

The advance bolstered a strong morning after the market opened 0.7 per cent higher, in part reflecting optimism that drove gains for US and European shares on Friday.

Brainchip Holdings led among blue chips, up 9.3 per cent, followed by Whitehaven Coal, which traded 6.7 per cent higher after updating guidance to indicate financial year 2022 earnings of $3 billion.

RBA had $37b bill for QE, Westpac’s Evans says

Vesna Poljak

Westpac chief economist Bill Evans estimated the Reserve Bank of Australia’s balance sheet has suffered $37 billion in losses from its bond purchasing, but the toll would have been higher had it capitulated and embraced unconventional monetary policy earlier.

It would have cost a further $11.6 billion had the RBA not adopted the more deliberate policy of implementing a yield target back in March 2020. Its formal quantitative easing, or QE, policy started in November 2020.

Westpac chief economist Bill Evans says “Boosting demand in the face of constrained supply is the classic scenario for pressuring inflation”.  

As global central banks quickly raise interest rates to tackle inflation, Mr Evans questioned whether they acted appropriately in deploying QE “at a time when supply was the dominant constraint to activity”.

The severity of today’s inflation challenge is a consequence of those policies.

“Boosting demand in the face of constrained supply is the classic scenario for pressuring inflation,” Mr Evans said.

However, the Westpac chief economist endorsed the Reserve Bank’s resolve in adopting its yield target in the face of widespread use of QE by other central banks, describing it as both cost-effective and imaginative.

The Reserve Bank has pledged a review of its pandemic response.

“Perhaps the RBA will be the first central bank to recognise that bond buying was not a necessary policy during Covid,” Mr Evans said. “All central banks are now facing the cost of their policies with massive mark to market losses on their balance sheets which are now materialising as negative cash flows and will extend for years to come.“

The value of the Reserve Bank’s purchases was $281 billion. Mark-to-market returns ascribe a present valuation to those bond holdings, adjusting for the sell-off in bond prices which has taken place against a backdrop of rising inflation and monetary tightening.

If held to maturity, a bond investor will always recover the face value of their investment separate to the benefit of coupon payments

China is pariah for global investors as policies backfire

Sofia Horta e Costa

After drawing foreign capital into China’s markets for years, President Xi Jinping is now facing the risk of a nasty period of financial deglobalisation. Investors point to one main reason why: Mr Xi’s own policies.

Money managers once enticed by China’s juicy yields and huge tech companies now say reasons to avoid the country outweigh incentives to buy.

They cite everything from unpredictable regulatory campaigns to economic damage caused by strict COVID-19 policies, not to mention growing risks stemming from a wobbly real-estate market and even Mr Xi’s coziness with Russian President Vladimir Putin.

It all marks a dramatic about-face for a market that had been developing into a magnet for investors from around the globe, a role that seemed to be China’s destiny as the world’s No. 2 economy.

“The supertanker of Western capital is starting to turn away from China,” said Matt Smith of Ruffer LLP, a $US31 billion ($45.6 billion) investment firm that recently shut its Hong Kong office after more than a decade because of shrinking demand for on-the-ground equity research. “It’s just easier to put China aside for now when you see no end in sight from COVID-zero and the return of geopolitical risk.”

Here’s more.

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Botox company Silk Laser buys Victoria’s Unique Laser

Simon Evans

Botox injections and beauty treatments group Silk Laser is stepping up its expansion on the eastern seaboard with the acquisition of Victorian group Unique Laser, which runs five outlets.

Silk Laser chief executive Martin Perelman said the entire industry is going through a consolidation phase with his company on the front foot.

“This acquisition aligns with Silk’s goal to increase its East Coast presence, particularly in Victoria,” he said.

But while Silk is pushing hard on a bigger is better approach, investors are feeling the pain from a share price which is substantially below that of its public float in December 2020.

Silk raised $83.5 million in an initial public offer that was priced at $3.45 per share. The stock reached a high of $4.91 last October, but it now languishes about the $2.20 mark.

Here’s the full story.

Australian households ‘well-placed’ to deal with economic challenges: ANZ

Andrew Hobbs

ANZ CEO Shayne Elliott acknowledges the difficult economic times facing the bank’s customers in Australia but says it is a good time to buy Suncorp’s banking arm.

Despite the challenges, Elliott says on a conference call that “households continue to be very well-placed”.

“This is time from our perspective to step forward and not step back,” Elliott says. “Our job is to help customers deal with difficult times.”

He adds that: “things will get tough but we feel really good about our capacity to help customers get through them.”

Elliott repeated that every bit of Suncorp’s banking arm has a place at ANZ.

“Every part of Suncorp bank has a natural home at ANZ,” he says. “This is not about adding complexity, this is really about natural scale.

“We are really respectful of the opportunity we have been given by Suncorp Group.”

That’s the end of the conference call.

ANZ ‘very confident’ of a fair ACCC hearing

Andrew Hobbs

Executives at ANZ and Suncorp say they will be respectful of the regulator process in seeing approval for the deal to sell Suncorp’s banking arm to ANZ.

“We are very confident we are going to get a fair hearing” from the Australian Competition and Consumer Commission, ANZ CEO Shayne Elliott says on a conference call.

Suncorp chairman Christine McLoughlin says the two banks “obviously have to be very respectful of the processes”.

Elliott stressed the fact that ANZ was the smallest of the big banks and also currently was underrepresented in Queensland.

McLoughlin says the companies will prefer to take up their case for the deal with the ACCC directly rather than through the media.

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