Ramsay's glare catches the interest of KKR and associates
Hot on the heels of Macquarie sparking interest in the mid-market with its bid for Crown, KKR has brought in the big guns, teaming up with sovereign wealth funds and the local super funds for a $20 billion bid for Ramsay Healthcare. The bid was confirmed Wednesday and shares jumped 24%. The all-cash offer of $88 per share represents a 37% premium to Ramsay's pre-offer share price of $64.35. If successful, the biggest private hospital operator in Australia will join Sydney Airport, Spark Infrastructure and a string of other utilities in private ownership. Shares ended on Friday at $84.37, close to the bid in a potential sign of optimism about its prospects.
Netflix sheds subscribers and its chill as it contemplates ads
Having erased US$54 billion in market cap after sub-par results, the streaming behemoth is throwing their proverbial playbook out the window. In a turnabout, founder Reed Hastings, who used to be an ardent opponent to advertising, told investors Tuesday that the streaming giant was considering a new, lower-price plan with ads "in the next year or two." The reversal came as Netflix reported it lost 200,000 subscribers over the quarter and predicted more would follow.
The stock is down 63% this year. Ouch.
Rio Tinto makes a rough start
Last quarter iron ore production at Rio Tinto plunged to a seven-year low following covid restrictions and delayed mines. Exports of iron ore were down 8 per cent on the same time last year as delays at its new Gudai-Darri mine in the Pilbara hit, while worker shortages continued to bite. Management reiterated export guidance for the full year. They lost 2.8% on Wednesday. Rio Tinto’s portfolio of new replacement mines has been delayed by covid even as its older mines grow less efficient.
How about an unregulated product you regulate? ASX doesn’t seem to mind
Crypto backed exchange-traded funds will be available in the market starting next week after ASX clearinghouse (ASX Clear) approved new products on Tuesday. The offers from fund managers ETF Securities and Cosmos Asset Management pipped competitor BetaShares in the month-long race to provide punters with a way to gain exposure to Bitcoin and Ethereum via a local exchange. ASX Clear has been awaiting four clearing members to agree to the high margins needed for the crypto-ETFs. The other early mover, the BetaShares Crypto Innovators ETF that invests in "crypto leading" companies is down 57% since its launch in November last year.
IMF’s diamond in the rough: Australia, resource-rich
Australia is running against a global trend of decline in economic growth, the International Monetary Fund said. The IMF pointed to roaring commodity prices to raise its 2022 growth outlook for Australia to 4.2% from 4.1%. Meanwhile, world growth is now projected at 3.6 percent this year, a one-fifth reduction from the 4.4 percent forecast in January. The international watchdog based in D.C. placed the blame on the usual suspects: inflation, the war in Ukraine and vertiginous commodity prices.
Corporate America pierced the gloom
Data up to October 2023.
Corporate America pierced the gloom this week, with the first batch of quarterly earnings surpassing expectations on Wall Street. With about a fifth of the S&P 500 reporting so far, 80% beat analyst consensus, said Shane Oliver, chief economist at AMP Capital. Highlights include a profit beat at Tesla and a 20-year high in sales growth at Procter & Gamble, the owner of brands such as Orab B and Gillette.
Fed’s aggressive rate hike plan shakes up markets: Market recap
Australian shares had their own shortened week, with ANZAC day on the weekend.
The S&P/ASX 200 was 0.8% lower for the week at 7,473. On Friday, the index tumbled falling 1.57% in one day and dipping below its 20-day moving average.
Miners knocked the exchange lower on Friday, though all sectors were lower aside from an unyielding healthcare stocks and a flat consumer staples index. Australia's major iron ore plays fell heavily, led lower by BHP shares which fell 4.36% to settle at $48.49.
Overseas, the Hang Seng is down 4.04% and the FTSE 100 is up 0.15% for the past week. The S&P 500 fell 1.25% for the five days to Thursday’s close as investors deserted technology stocks.
Markets are watching two things, according to Firetrail Investments head of investment strategy Anthony Doyle: what's happening in the Ukraine war, and what's happening in the bond market.
“The US 10-year treasury yield spiked to the highest levels in more than three years and even in Australia, the 10-year yields sitting at 3.12%, the highest it’s been since 2015,” he says.
“A lot of that action is attributed to comments overnight from Federal Reserve Chairman Jerome Powell, who said he saw merit in ‘front-end loading’ interest rate increases. That adds to fears that central banks are poised to raise interest rates aggressively, and is rattling the bond market.”
Minutes released last week by the Reserve Bank of Australia indicated the timing of rate hikes would be moved forward. The market is now pricing a post election 0.5% cash rate hike for June but some see that coming in May with an eye on the CPI numbers set for release next week.
THE BOND MARKET: As of year-end, the bond market projects rates of less than 2.4%, but that sceptic Doyle is not as sure.
“That’s a bit aggressive given what consensus economists are looking for,” he says. “What we’re seeing in pricing here is really more a reflection of the aggressive talk coming from the Fed acknowledging they’re behind on inflation.”
Airlines were a bright spot
Airlines were a bright spot for the week. United Airlines stock rose 9 percent Thursday, after the company issued an optimistic outlook. The company was experiencing extremely high levels of demand, supported by the resumption of business and tourism travel, chief executive Scott Kirby said.
On the local market, technology stocks were caught up in speculation over higher interest rates. Buy now pay later provider Zip Co fell 4.6 per cent to $1.15 after unveiling its quarterly update on Thursday.
