The Australian sharemarket is expected to open lower on Monday, 1 July 2024, as investors brace for upcoming elections in the UK and France, as well as ongoing global uncertainty.
The S&P/ASX 200 Index is forecast to drop 0.5% or 35 points to 7732.5 at the start of trade, mirroring the S&P 500's 0.4% decline. Australian investors will be among the first to react to the French elections' first round on Sunday (Monday AEST), followed by the UK election on Thursday (Friday AEST).
"The outcome of the elections in the UK is much less certain than that in France, with our base case being a 100-seat Labour majority," noted Barclays economists.
Locally, investors will focus on several important releases this week:
NAB forecasts a 0.2% rise in May retail sales, while the market expects building approvals to increase by 1.7%. The goods trade balance is projected to show a surplus of $6-7 billion for May.
In the US, a shortened week due to Independence Day will culminate with the release of non-farm payrolls data on Friday (Saturday AEST). Early consensus suggests slower but still robust payrolls growth, with the unemployment rate expected to remain at 4%.
As global events unfold, Australian investors should remain vigilant and prepared for potential market volatility in the coming week.
As of 1 July 2024, Australia's resources sector may face indirect consequences from the growing push by Europe and the United States to boost domestic manufacturing at China's expense, Canberra officials warn.
The Industry Department's economists highlight that interventions by various governments in trade with China could impact the direction and quantity of Australian resource and energy exports. These measures may potentially weaken Chinese manufacturers' competitiveness, leading to costlier and reduced exports from Australia to North America and Europe.
"The immediate impact of the move will be muted, mattering most for batteries used for stationary storage purposes," the economists stated in their quarterly outlook.
China remains Australia's largest resources buyer, accounting for 35% of sales (A$156 billion) in the last financial year. In contrast, Europe made up just 3% of Australia's resource sales by volume, while the US didn't feature among major export destinations.
Both the European Union and the Biden administration have prioritised domestic manufacturing support. The EU's manufacturing share dropped from 24% in 2008 to 16% in 2022, while China's rose to 31%. The US has implemented measures like the A$550 billion Inflation Reduction Act and increased tariffs on Chinese imports.
Despite these challenges, the Industry Department notes that demand for critical minerals in major markets like Europe and China "is likely to rise strongly". However, the upcoming US presidential election could significantly impact the demand for Australian critical minerals in the short term.
Resources Minister Madeleine King emphasised the importance of supporting growth in Australia's emerging critical minerals sector, which the government plans to bolster through a production tax credit.
US private equity firm Proterra Investment Partners is set to cash in on its Australian agricultural investments, listing its One Tree Agriculture portfolio for over $250 million. This move comes as the company aims to capitalise on growing food demand and farmland productivity.
The One Tree Agriculture portfolio spans 23,595 hectares across the NSW-Queensland border, comprising:
With over 90% arable land, the portfolio is primed for crops like wheat, barley, chickpeas, canola, and mung beans. The majority is set up for dryland farming, with a small portion dedicated to irrigation.
Proterra's approach involves acquiring underperforming properties, optimising them through productivity improvements and technology, and selling them as high-yielding operations. Becs Willson, Proterra's Australian managing director, highlighted the portfolio's potential:
"One Tree Agriculture is set to deliver its biggest winter crop with just under 17,000 hectares of well-established plantings."
LAWD's Danny Thomas, appointed to manage the sale, noted the portfolio's appeal to various investors:
"One Tree's capacity to produce large amounts of grain will appeal to domestic and international institutional investors, corporate farming groups, local cropping businesses seeking expansion, or syndications of local family farmers."
As food security concerns grow globally, this sale represents a significant opportunity in the Australian agricultural sector. However, the article notes that while offshore investors are keen, domestic institutional investors remain cautious about entering the market.
As of 1 July 2024, the hospitality empire of former KPMG dealmaker Jon Adgemis continues to navigate choppy financial waters. Despite a recent refinancing deal with Deutsche Bank, new developments suggest the group's troubles are far from over.
In a surprising move, Deutsche Bank has reportedly traded its positions in five Public Hospitality Group assets to US private credit group Muzinich. This transaction effectively eliminates Deutsche Bank's exposure to a pool of partially refurbished assets within the pubs and hotel roll-up.
"Muzinich has now invested approximately $100 million, moving from a junior to a senior position in the debt stack," an insider revealed.
The $400 million refinancing agreement with Deutsche Bank, announced in May to save Adgemis's hotel empire from collapse, appears to be on shaky ground. The deal, which requires Adgemis to sell assets to clear debts, is yet to be finalised.
Major lender Gemi Investments faces its own challenges, with significant investor redemptions due to ongoing coverage of Public Hospitality Group's troubles. Meanwhile, Archibald Capital and Justin Epstein, a minority shareholder in Gemi, are reportedly attempting to protect their interests by blocking other financiers from entering the debt stack.
The situation remains fluid, with multiple parties vying for control or protection of their investments in Adgemis's assets. The predicament stems from Adgemis's strategy of borrowing heavily at high-interest rates to fund renovations and expansions, many of which have fallen behind schedule.
As the dust settles, it's clear that the fate of Public Hospitality Group hangs in the balance, with creditors, lenders, and investors all closely watching the unfolding drama in the Australian hospitality sector.
In a move that highlights the growing importance of online education in Australia, the Ripple Group, home to two of the country's leading online training businesses, has been put on the market. This development comes as Australians increasingly turn to digital platforms for upskilling and professional development.
The sale includes Open Colleges, a century-old distance education provider, and Alffie, Australia's largest online employment training and compliance platform. Both are majority-owned by Peter Murphy's Melbourne family office, Pan Group, and are being marketed by boutique firm Blackpeak Capital.
"The two businesses are said to make about $10 million a year in earnings before interest, tax, depreciation and amortisation."
This sale reflects the worldwide shift in how education is created, delivered, and consumed. A recent Coursera analysis of 100 million learners, including 1.1 million Australians, revealed a surge in online upskilling to keep pace with digital transformation, inflation, and global instability.
Private equity firms are likely targets for the sale, given their history of investing in education assets. Recent examples include Providence Equity Partners' investment in Study Group and Next Capital's stake in Scentia Education.
The timing of the sale is particularly favourable, with both major political parties pledging to improve recognition of short online courses, further boosting the sector's appeal.
As Australia's premier design firm, Woods Bagot, celebrates its 150th anniversary, it's setting its sights on international growth. The company's new CEO, Sarah Kay, reveals plans to boost overseas revenue and expand service offerings.
Despite dominating the Australian market, Woods Bagot aims to increase its global footprint. Kay predicts that within five years, over 60% of the firm's revenue will come from international operations.
"We have a very big market share in one of the world's smallest markets, being Australia," Kay told The Australian Financial Review. "What we are investing in is having a larger market share in the world's larger markets."
Key to this expansion is the London-based Customs Bureau, a luxury hotel design specialist launched in 2022. The firm is also growing its urban planning and branding consultancy, Era Co, to offer clients more comprehensive solutions.
However, breaking into markets like New York presents unique challenges. Kay notes that the city's self-contained property market often overlooks global expertise.
Woods Bagot reported a 7.7% revenue increase to $252.5 million in FY2023. Despite frequent approaches, the company plans to remain independent, resisting the trend of private equity investment in the architecture and engineering sector.
As Woods Bagot embarks on this new chapter, it aims to balance its rich Australian heritage with a bold international future, ensuring its legacy continues for another 150 years.
In a heated legal battle, mining giant BHP has accused London law firm Pogust Goodhead of lacking transparency regarding the number of claimants in a massive £36 billion ($68 billion) class action lawsuit. The case, set to go to trial in October 2024, stems from the devastating 2015 Mariana dam disaster in Brazil.
BHP's counsel, Shaheed Fatima KC, questioned the fluctuating number of claimants, which initially swelled to over 700,000 but recently dropped to "more than 600,000". The mining company is seeking clarity on these figures and attempting to strike out 33,000 claimants added in September 2023.
"So there were 100,000 claimants that were lost somewhere?" - Shaheed Fatima KC, BHP's counsel
While the court rejected BHP's attempt to strike out the additional claimants, it has given Pogust Goodhead until 31 October to ratify certain claims or face their removal. BHP denies all claims in the class action, labelling the lawsuit as an abuse of process.
Tom Goodhead, Pogust Goodhead's global managing partner, criticised BHP's tactics as a "desperate attempt" to delay proceedings, potentially costing the company £1.8 billion.
Separately, BHP and Vale have proposed a 127 billion reais ($34 billion) settlement to Brazilian authorities as reparations for the disaster. Local prosecutors are pushing for an increase to 137 billion reais ($36 billion) over a 20-year agreement.
As the legal drama unfolds, the victims of the Mariana dam disaster, which claimed 19 lives and left hundreds homeless, continue to await fair compensation nearly nine years after the tragic event.
As Guzman y Gomez (GYG) celebrates its recent ASX debut, investors are eyeing its ambitious growth plans with both excitement and caution. The Mexican-themed fast-food chain aims to expand from 185 to 1,000 stores in Australia over the next two decades, a target that rivals McDonald's current footprint.
GYG's success hinges on maintaining a profitable and satisfied franchise network. However, the Australian franchising sector, worth $135.2 billion, has faced scrutiny due to past scandals involving major players like 7-Eleven and Domino's Pizza.
"The main winners of stock market listings are the founders, large shareholders and select multi-unit franchisees," says Michael Fraser of Diligence Research, highlighting potential conflicts between shareholder interests and franchisee wellbeing.
Steven Marks, GYG's founder and co-CEO, insists their model is different. "We don't take rebates. We obviously take royalties from them and that's it," he states, emphasising transparency and support for franchisees.
Opening a new GYG restaurant now costs between $1.8 million and $2 million, up from $700,000 to $1.1 million in 2020. The company expects franchisees to achieve a 30% return on investment, compared to 50-55% for corporate restaurants.
GYG's growth strategy relies on new restaurant openings, existing restaurant sales growth, and margin improvement. As the company navigates its ambitious expansion plans, maintaining a delicate balance between shareholder expectations and franchisee profitability will be crucial for long-term success.
In a surprising twist to the ongoing PwC Australia saga, it's been revealed that CEO Kevin Burrowes is receiving a hefty $4 million annual package, with a significant portion coming from PwC International. This disclosure, made during a recent partners' meeting, contradicts earlier statements and raises fresh concerns about transparency.
Burrowes, brought in to manage the crisis at PwC Australia, had previously reported his salary as $2.8 million to Senate inquiries. The newly disclosed figure includes an additional $1.2 million for "network" services, effectively boosting his package by 42%.
"It's not like $4 million (plus a possible bonus) is extortionate. It's the type of coin that cadaver No.2 Tom Seymour was on when all this blew up ($4.8 million)."
This revelation adds complexity to PwC's refusal to release the Linklaters report, which details the firm's international involvement in the tax scandal. The Senate continues to press for its disclosure, highlighting the global nature of the controversy.
Multiple investigations into PwC continue, including probes by the Australian Federal Police, the Tax Practitioners Board, and Chartered Accountants ANZ. These inquiries underscore the seriousness of the situation and the need for full transparency.
As the PwC crisis unfolds, questions persist about the extent of global involvement and the true nature of Burrowes' role. With at least 10 ongoing investigations, the pressure on PwC to come clean is mounting.
As of 1 July 2024, Asian regulators have intensified their scrutiny of popular hedge fund trading strategies in response to recent stock market declines. While aimed at stabilising markets, these measures have sparked concerns about potential impacts on market liquidity and attractiveness.
Thailand has introduced new oversight for high-frequency trades, while China is set to implement real-time monitoring of programmed trading. These moves follow South Korea's extension of its short-selling ban until March 2025.
"The current trend of regulators tightening the regulation of high frequency trading is somewhat understandable but also worrying," said Gary Dugan, chief executive of the Global CIO Office.
Critics argue that these restrictions could hamper market liquidity and efficiency. In China, quantitative hedge funds saw a drop in assets during the first quarter of 2024. Similarly, South Korean quant funds are exploring opportunities in other markets like Japan and Hong Kong.
However, some industry experts welcome the changes. George Molina, head of trading for Templeton Global Investments, believes the rules were "needed to adjust for what were arguably loopholes in the system".
As artificial intelligence continues to reshape trading strategies, regulators face growing challenges in balancing investor protection with market efficiency. Charu Chanana, a strategist at Saxo Markets, suggests that "regulation in Asia will likely be slow to respond to developments in AI, and precautionary measures may therefore remain more stringent".
The long-term effects of these regulatory changes on Asian markets remain to be seen, as governments strive to maintain stability while preserving their appeal to global investors.