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December 2, 2010

Australia commodity index hits record high in Nov – RBA

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Australia commodity index hits record high in Nov – RBA

 SYDNEY, Dec 1 (Reuters) – The Reserve Bank of Australia’s (RBA) index of commodity prices rose 0.9 percent in November, from October, to reach a fresh record high in a favourable omen for export earnings.

 The index was up 44 percent in special drawing right (SDR) terms, compared to November last year. The index reading of 121.3 surpassed the August peak of 121.1.

 In Australian dollar terms the index fell by 0.5 percent in November, but was up 31 percent for the year. The index also hit a record high in U.S. dollar terms, to be up 41 percent on November last year.

 Much of the rise in the past year reflected huge price increases for iron ore and coal, Australia’s two biggest export earners. That has boosted Australia’s terms of trade, lifting profits, investment, employment and tax receipts.

– Thomson Reuters –

November 30, 2010

South Australian businesses strongest in ‘growth, cashflow’ – survey

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South Australian businesses strongest in ‘growth, cashflow’ – survey

SOUTH Australian small-to-medium-sized enterprises had the nation’s strongest business conditions and equal-highest cash flow position in the September quarter.

The latest NAB SME quarterly survey shows business conditions in SA rose by one index point, to eight, in the three months to September 30.

Nationally, the index fell by an average of one index point.

SA and Western Australia reported the nation’s strongest cash flow position, at 11 points.

NAB state general manager nabbusiness Jacqui Colwell said the results showed SA’s small businesses continued to outperform their Australian counterparts.

“South Australian SMEs have maintained the highest, or equal highest, business conditions nationally for the past year,” she said.

“The SA economy is characterised by steady growth without the level of peaks and troughs experienced in other states.”

Ms Colwell said the September quarter results highlighted the effects of ongoing global economic uncertainty, speculation around interest rates and this year’s drawn-out federal election.

“(This) caused some business owners to defer investment plans, focus on reducing debt levels and (curb) discretionary spending,” she said.

The survey also reveals that confidence among SMEs for the December quarter has improved strongly.

The 12-month outlook was “optimistic” at 25 points.

Other key results from the survey show:

* Small businesses operating in the finance and accommodation sectors had the strongest cashflow positions, with 28 and 14 points respectively. Construction and retail were the weakest in this area.

* Cash flows and borrowing costs were the most critical issues for SMEs.

*Business services, finance and health were the strongest performing SME sectors in the September quarter.

“The period leading up to Christmas is critical for many industries, particularly the retail sector which, unlike the Australian tourism industry, can benefit from the appreciating dollar,” said Ms Colwell.

November 28, 2010

HSBC Eyes Australian Expansion

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HSBC Eyes Australian Expansion

SYDNEY—HSBC Holdings PLC, Europe’s biggest bank by stock-market value, will beef up its corporate-finance business in Australia, part of a strategy to increase its presence in an economy booming on the back of Asia’s demand for commodities, the lender’s local chief executive said.

“There’s a lot of interest in good corporate fundamentals coming out of Australia,” Paulo Maia, HSBC’s Australia head, said in an interview with The Wall Street Journal.

A greater emphasis in Australia comes as HSBC and other international lenders search for low-risk opportunities outside more traditional markets in the U.S. and Europe, which are recovering more slowly than Asia from the global financial crisis. Asia accounts for more than half the bank’s total earnings.

The bank plans to hire for its Australian debt capital markets team as well as expand its onshore leveraged acquisition and loan syndication operations, said Mr. Maia, who was previously deputy chief executive of the European bank’s Brazilian business.

HSBC particularly wants to tap into the growing market for leading local corporations and banks to borrow money offshore. Already this year, the volume of nonbank corporations issuing foreign-currency debt has grown by 35% to 13.97 billion Australian dollars (US$13.71 billion) split across 26 deals, according to Dealogic.

HSBC’s first-half pretax profits from Australia grew 28% compared with a year earlier to A$152 million. Still, that’s a slower rate of growth than seen at local rivals, including Commonwealth Bank of Australia, which in the same period recorded a 37% jump in pretax profits.

Compared with its Australia rivals, HSBC has a relatively small retail-branch network in the country. But Mr. Maia rulef out buying a smaller local bank to build its presence in big urban centers like Sydney, Melbourne and Brisbane.

“We haven’t been able to identify any bolt-on acquisitions that would make sense for us,” he said. “We want to play on the mass affluent; we don’t want to go too much downmarket.”

HSBC’s enthusiasm for Australia comes as the bank remains locked in a war of words with the British government over the rising cost of basing itself in Europe. The bank’s outgoing CEO, Michael Geoghegan, and his successor, Stuart Gulliver, have warned separately that new rules proposed to curb pay in the financial-services industry are putting it at a disadvantage to its U.S. rivals in international markets.

From The Wall Street Journal – WSJ.com

November 19, 2010

More rate rises on the cards, says OECD

More rate rises on the cards, says OECD

* Australia’s recovery ‘will need further rate rises’
* ‘Mining boom is fuelling economic recovery’
* OECD report forecasts economic growth

AUSTRALIA’S strong recovery from the global economic downturn, fuelled by the mining boom, means the Reserve Bank of Australia (RBA) will have to continue to raise its official cash rate, the Organisation for Economic Cooperation and Development (OECD) says.

The OECD also said the global recovery has become more hesitant, but low interest rates in many countries suggest this “soft patch” is unlikely to persist for too long.

In its semi-annual Economic Outlook report, released overnight, the OECD said Australia’s projected growth was likely to require a further tightening of monetary conditions to ensure that a non-inflationary recovery remained on track.

The OECD is forecasting Australian economic growth at 3.6 per cent in 2011 and 4.0 per cent in 2012, after 3.3 per cent in 2010.

“OECD projections include further tightening of monetary policy to moderate demand pressures and rein in the level of inflation, which is relatively high at the beginning of the cycle,” the Paris-based institution said

The RBA’s increase in the cash rate this month to 4.75 per cent was the seventh rise since October 2009.

The OECD expects inflation to remain near the top of end the RBA’s two to three per cent target band – 2.8 per cent in 2011 and 2.9 per cent in 2012.

More broadly among the 33 OECD countries, growth is forecast to expand by 2.3 per cent next year and 2.8 per cent in 2012, with inflation at a subdued 1.5 per cent and 1.4 per cent, respectively.

“The global recovery is continuing to recover, but progress has become more hesitant,” the think tank said.

“With monetary policies remaining accommodative even as fiscal consolidation becomes widespread, the present soft patch in output growth is not projected to persist for long.”

Australia’s unemployment rate is expected to fall below five per cent after mid-2011 and to 4.7 per cent in 2012, compared with 5.4 per cent as of October this year.

This is well below the expected OECD average of 8.1 per cent next year and 7.5 per cent the following year

The OECD said increased business investment should be the main engine room of Australian economic growth.

“The strength of demand from major Asian countries and the terms of trade will favour the mining sector, whose expansion should have a knock-on effect on the rest of the economy,” the OECD said.

“These developments will probably compensate for weaker (government) demand and stimulate job creation, which should support household incomes and consumption.”

The OECD said this positive outlook, associated with the development of China, could boost confidence and produce even stronger than expected growth in domestic demand.

“However, this scenario might also be adversely affected by renewed financial turbulence in the OECD area or by an unexpected slowdown in the Chinese economy,” it said.

As in a more in-depth analysis of Australia by the OECD released last Sunday, the latest report urged reforms in the housing and infrastructure sectors to reduce bottlenecks that the mining boom was likely to exacerbate

SOURCE: http://www.news.com.au/business/

October 21, 2010

Australian Dollar Pullback Will Be Buying Opportunity, ING Says

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Australian Dollar Pullback Will Be Buying Opportunity, ING Says

 

Australia’s dollar may fall to the low 90 U.S. cent level if the Federal Reserve disappoints investors looking for extra monetary stimulus, presenting an opportunity to buy the Aussie, ING Investment Management said.

A decline in Australia’s currency will enable investors to “reset” wagers on its longer-term appreciation, said Mark Robertson, a senior portfolio manager at the unit of the biggest Dutch financial services company. Fed policy makers will announce roughly $500 billion of Treasury purchases at their next meeting on Nov. 2-3, and indicate they are ready to buy more, Goldman Sachs Group Inc. said last week.

“There is a lot of expectation built into what the Fed’s going to do so it wouldn’t be surprising to see some near-term U.S. dollar strength on perhaps a winding back of some of those expectations,” said Robertson, who helps oversee the equivalent of $19 billion as part of a multi-strategies group in Sydney. A pullback in the Aussie “would be an opportunity to reset the portfolio with a little more Aussie dollar exposure,” he said.

ING Investment has been “overweight” the Australian currency since August, said Robertson, who forecasts it may strengthen to $1.10 over the next 12 to 18 months.

The Australian dollar, which briefly rose above parity with the U.S. dollar on Oct. 15, traded at 97.11 U.S. cents as of 11:35 a.m. in Sydney from 96.86 cents in New York yesterday. The currency has gained 9.9 percent in the past three months.

Fed Purchases

The U.S. dollar has dropped against all 16 of its most- traded counterparts in the past quarter amid mounting speculation the Fed will expand a program to purchase Treasuries. The central bank completed purchases of about $1.7 trillion of U.S. debt in March.

Chicago Fed President Charles Evans said yesterday the central bank will need to buy securities on a large scale several times to carry out his preferred strategy of aiming to raise inflation temporarily. Additional Treasury purchases can lower long-term interest rates, he said.

“There’s still going to be a very large and sustained increase in the amount of U.S. dollars in circulation, which has to be Aussie dollar positive,” Robertson said. “The Aussie is a bit like the price of gold, you don’t know how high it’s going to go but you just know it’s going higher.”

Gold rose to a record $1,387.35 an ounce on Oct. 14. The metal will average $1,400 next year, UBS AG analysts wrote in a report Oct. 18, increasing their forecast from $1,295.

China Rates

Australia’s dollar slid the most since June yesterday after China unexpectedly raised interest rates, sparking concern slowing growth in the Asian nation will damp demand for commodities. Australia, which is the largest shipper of iron ore and coal, counts China as its biggest trading partner.

“The rate hike will no doubt be a short-term negative for local and regional equity markets as it was slightly unexpected,” Robertson said. “The intentions behind the move should be seen as supportive of sustainable growth for China over the long term.”

Robertson forecasts that Australia’s benchmark interest rates will rise toward 5 and 5.5 percent over the next 12 months. Governor Glenn Stevens raised the key rate six times beginning October 2009 before beginning a five-month pause in June.

Analyst picks long-term strength

AMP Capital Investors chief economist Shane Oliver says while the Australian dollar is vulnerable to a correction, after rising so quickly since August, it is likely to hold around the parity level for the “next few years”, due to the strength of the economy and strong commodity prices.

“While the high $A will make life tough for trade exposed companies without a natural hedge, on balance it is more of a positive for the Australian economy. It is unambiguously positive for consumers and will help limit the extent to which interest rates have to rise,” Mr Oliver said.

Charts suggest the local currency could rise as high as $US1.0236 in coming weeks, the 161.8 per cent Fibonacci projection level of the currency’s fall between November 2009 and May 2010.

The Australian dollar has been the strongest major currency since the country skirted through the global financial crisis without falling into recession. In fact, its economy picked up steam, and the currency has surged 66 per cent since touching a low of $US0.6007 in October 2008.

Unlike other countries griping about excessive currency strength against a sliding dollar, Australia’s central bank has considered a stronger currency a natural outcome of the country’s booming resources trade and a tool for fighting inflation.

Travellers uncertain

Travellers at Sydney International Airport, who were heading on holidays on Saturday afternoon and those returning home to the US, expressed their surprise, delight and indifference to AAP.

Friends Helen Foulis and Debra Thorsen – who were flying to San Francisco, Las Vegas and New York for a two-week break – said the strong Aussie dollar was encouraging for their shopping trips.

“The shopping trips are going to be mega,” Ms Foulis said.

“Same for me, I’m going shopping for clothes, shoes, jeans,” Ms Thorsen said.

Christine Chong, who planned to visit friends and family in Los Angles, said the historic parity didn’t make much of a different to her.

“If you’re going to travel, you’ll travel,” she said.

“I don’t spend much anyway so it doesn’t make a difference.”

American business traveller Chris Phipps said the two currencies had been close for a long time.

“Being parity is like being at home and I’m going to spend the normal way,” he said.

October 5, 2010

Many banks expect that AUD/USD will rise to parity by the year-end

Filed under: Uncategorized — bigcapital @ 8:19 pm
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BNP Paribas is one of the largest global banking groups in the world, bet on Aussie’s strength.

Strategists at BNP Paribas are loyal to the forecast that Australian dollar will rise above the parity with the greenback to $1.0200 by end of the fourth quarter.

Technical analysts at RBS Morgans are quite bullish on Australian dollar expecting that the pair AUD/USD will advance to US$0.978 in coming months. Some traders even bet that Aussie’s going to strengthen to parity with its US counterpart.

Analysts at BNP Paribas SA in London expect that Australian currency will for the first time rise to parity with the greenback by the end of 2010 and trade at the level of $1.02. According to the specialists, this may happen as Australia’s economic growth is gaining pace, while the Federal Reserve intends for further monetary policy.

John Paulson Getting More Bullish On Stocks, Gold and Australian Dollar

Filed under: Uncategorized — bigcapital @ 8:16 pm
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Gregory Zuckerman of WSJ updated us on the performance of John Paulson’s hedge funds:

As stocks struggled during much of 2010, bullish hedge-fund managers like John Paulson looked like naive optimists.

They got their revenge in September. Mr. Paulson, who racked up losses during the first eight months of the year and was criticized for an upbeat view on markets, enjoyed gains of about 12.5% in his biggest fund in September, according to an investor. Those returns trounced the 8.8% gain for the Standard & Poor’s 500-stock index, its best September since 1939.

The truth is, despite the strong number for the month, the billionaire hedge fund had his moments of doubt, at least earlier on during the quarter. Read the reports we have had on him during the past two months:

When you manage $32 and run a leverage hedge fund, you will have reasons to be nervous too.

But nowadays, Paulson sounds once again more confident and more bullish. Speaking at the University Club in New York City recently.

Paulson gave similar assessments across asset classes such as stocks, bonds, real estate, and gold recently.

Here are the key points he made:

Paulson reiterated his bullish call on stocks, noting the historically large discrepancy between the equity earnings yield of 7-8% and the 10-year note yield of 2.6%.
Furthermore, because of his belief that the Federal Reserve will continue to implement quantitative easing measures, Paulson is expecting substantial inflation in the next several years. The noted hedge fund manager stated that low double-digit inflation is possible by 2012.
Accordingly, Paulson is shorting longer-dated treasuries through 5 and 7 year calls on the 30-year Treasury bond.
In light of pending inflation, Paulson stressed that investors do not want to own long-dated liabilities, but rather should issue them. One of the most efficient ways for people to take advantage of this is through mortgages on residential real estate, noting that now is the best time in 50 years to purchase a home.
As for the gold price, Paulson remains very bullish on the yellow metal, noting that the price of gold has been highly correlated to the monetary base for as long as his firm, Paulson & Co., has tracked the data.
Given his expectation for further money printing by the Fed – and that in 1980 the gold price rose by 100% more than the correlation implied – Paulson noted that the price of gold could hit $2,400 based only on monetary expansion, and as high as $4,000 per ounce based on a projected overshoot.
Lastly, he noted that 80% of his assets are denominated in gold – a strong indication of his disdain for fiat currencies.
In terms of the gold price, Paulson pointed to gold’s parabolic rise in 1980 and his expectations of a repeat performance.

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