As of 29 June 2024, UBS has regained its dominant position in mergers and acquisitions (M&A) in Australia and New Zealand for the first half of the year, displacing Bank of America. Meanwhile, Goldman Sachs has surged to the top of the equity capital markets (ECM) league tables, according to Dealogic data.
Wall Street investment banks outperformed smaller brokers in the equities markets, with Goldman Sachs and Morgan Stanley finishing first and second in ECM rankings. This marks a significant improvement from their sixth and eighth positions last year, respectively.
"On the path to reopening, we'll have some great stretches but also some pockets of volatility caused by markets, macro or even some deals," said Yuta Kambe, head of local equity capital markets for Bank of America.
While M&A volumes fell to US$43 billion from nearly US$50 billion in the same period last year, activity has picked up since April. Corporate M&A has emerged as a bright spot, with companies using share-based deals to pursue targets.
Nick Brown, UBS' head of M&A for Asia-Pacific, noted, "Another big thematic has been the use of shares as consideration in transactions, reflecting strategic buyers being active and looking to enable value creation for both bidder and target shareholders."
Despite inflation concerns, dealmakers remain optimistic about the next six months. Emma-Jane Newton, head of investment banking coverage and advisory at Deutsche Bank, suggested that companies might focus on portfolio optimisation to unlock value in the face of stubborn inflation.
As private equity firms seek returns for their investors, the market may see increased exit activity in the latter half of the year, potentially driving further M&A and ECM transactions.
In a landmark decision on 29 June 2024, Treasurer Jim Chalmers approved ANZ's acquisition of Suncorp Bank, marking a significant shift in Australia's banking landscape. This move, which adds about 2.5% market share in home loans to ANZ, comes with a raft of conditions that could reshape the future of regional banking.
The approval comes with stringent conditions, including funding Queensland renewable energy projects, maintaining Australia Post's Bank@Post services, and preserving jobs. These requirements underscore the deal's significance and mirror similar conditions imposed during the global financial crisis.
"It's an on-balance call," Chalmers stated, acknowledging the changing banking sector dynamics.
While the deal strengthens ANZ's position, it raises questions about the future of regional banks like Bank of Queensland and Bendigo and Adelaide Bank. The treasurer's decision suggests that further consolidation among the Big Four is unlikely in the near term.
ANZ CEO Shayne Elliott remains optimistic about the acquisition, which will increase the bank's customer base by 20% and boost its presence in south-east Queensland. However, the added restrictions and commitments may pose challenges in realising the deal's full potential.
As the Australian banking sector evolves, the ANZ-Suncorp deal sets a precedent for future acquisitions and highlights the ongoing struggle for smaller banks to compete in an increasingly concentrated market.
Meta, the parent company of Facebook and Instagram, is considering blocking news content on its Australian platforms if forced to pay news organisations for their content. This move escalates the ongoing dispute between Meta, the Australian government, and local media companies.
Mia Garlick, Meta's regional policy director, told a parliamentary committee that "all options were on the table" regarding a potential news ban. This approach mirrors Meta's actions in Canada in 2023 after similar laws were introduced.
"Every other law – tax laws, safety laws, privacy laws – we work to comply with. It's just compliance would look slightly different in relation to this law if it's fully enacted," said Garlick.
Assistant Treasurer Stephen Jones emphasised that the government would not be intimidated by multinational companies threatening to avoid Australian laws. The decision to designate Meta under the code is still under consideration.
Media companies warn that Meta's refusal to negotiate new content deals, worth approximately $70 million annually, could lead to job losses and even closures of some mastheads. A news ban on Facebook and Instagram would further reduce publishers' traffic and potentially impact their revenue and readership.
The dispute highlights the ongoing tension between tech giants and traditional media outlets, as well as the challenges of regulating digital platforms in the rapidly evolving media landscape.
Leading economists are sounding the alarm on Australia's economic outlook, with many predicting a 50% chance of recession due to stubborn inflation. This comes as the Reserve Bank of Australia (RBA) grapples with the possibility of further interest rate hikes.
Judo Bank economic adviser Warren Hogan predicts the RBA will need to raise the cash rate to at least 4.85%, with unemployment potentially rising above 5%. This could result in over 100,000 additional Australians out of work.
"There's likely to be a technical recession as growth stalls," Mr Hogan warned. "We will be struggling to keep unemployment under 5 per cent."
The recent jump in annual inflation to 4% for May has increased the likelihood of interest rate hikes in the coming months. Money market traders are pricing in a 60% chance of a rate rise by September.
University of NSW economics professor Richard Holden puts the odds of a recession at 50-60%, while former RBA economist Jonathan Kearns estimates the risk between 30-60%.
The timing of potential rate hikes could prove politically challenging for the Albanese government, with a federal election due by May next year. Economic experts warn that upcoming tax cuts and increased government spending may add to inflationary pressures.
As the RBA faces tough decisions, Australians are urged to prepare for potential economic headwinds in the coming months.
The Australian sharemarket has recorded another year of solid gains, with the ASX 200 jumping 7.8% in the 2024 financial year. This follows a 9.7% rise in FY2023, outpacing the decade-average gain of 4.8%.
The Australian market's performance, while strong, lagged behind the US, where the S&P 500 rose 23% and the Nasdaq Composite soared 30%, fuelled by the AI boom.
"The experience over the past two years is another reminder of the importance of remaining patient and not getting distracted by shorter-term noise," said Chant West senior investment research manager Mano Mohankumar.
Experts warn of potential challenges ahead, including geopolitical tensions, elections, and uncertain interest rate trajectories. AMP's Shane Oliver suggests "more constrained and more volatile returns" are likely in the coming financial year.
Despite these risks, the Australian sharemarket remains a consistent performer, having risen in seven out of the past ten years with returns well above cash rates.
Despite global economic challenges, Australian superannuation funds are poised to deliver impressive returns for the 2023-24 financial year. With average returns hovering around 9%, investors can expect results that outpace both historical averages and inflation.
The ASX 200 is up approximately 8%, with total returns (including dividends) around 12%. Commonwealth Bank has been a standout performer, with its share price surging nearly 27% this year.
"It's looking very good for all super funds this weekend with only hours to go, just be careful with expectations going forward. Almost every single asset category is in positive territory," says Chant West's Mano Mohankumar.
Growth-oriented funds are expected to outperform conservative options, potentially delivering twice the returns. However, commercial property remains a weak spot, with some assets selling at significant discounts.
While these results are cause for celebration, experts caution against expecting such high returns consistently. Investors should review their fund's performance and fee structure to ensure they're maximising their returns.
As the 2023-24 financial year draws to a close, Australian super fund members can take comfort in another year of strong performance, bolstering their retirement savings despite global economic uncertainty.
As the 2024 financial year draws to a close, Australian tech companies have emerged as the clear winners on the ASX 200, while last year's lithium darlings have suffered a dramatic fall from grace.
Medical technology firm Pro Medicus topped the ASX 200 performers list with an impressive 118.3% gain. The company's US radiology imaging software business has been the driving force behind its success, pushing its market cap to nearly $15 billion.
Hot on its heels was dual-listed family safety app Life360, which saw its shares skyrocket by 115.4%. The San Francisco-based company has experienced phenomenal growth, with its user base expanding to 66 million worldwide.
"The tech sector has ridden high on a broader international bull run," noted market analyst Sarah Thompson.
In a dramatic reversal of fortunes, last year's lithium stars have become this year's biggest losers. A supply glut and slower-than-expected demand have hammered the sector:
Hunter Green director Charlie Green summed it up: "The bubble burst for the EV stocks."
Gold miners bucked the resources downturn, with Red 5 up 89.5% and West African Resources soaring 86.1%. Industrial property giant Goodman Group also shone, climbing 73.1%.
On the flip side, gambling stocks continued to struggle. Star Entertainment Group fell 54.1%, while Tabcorp Holdings dropped 36.9%.
As we enter FY25, all eyes will be on whether tech can maintain its momentum and if the resources sector can stage a comeback.
In a significant shake-up of Australia's banking landscape, the federal government has given the green light to ANZ's $4.9 billion acquisition of Suncorp Bank. This move, set to finalise by July's end, will catapult ANZ past NAB to become the third-largest player in the mortgage market.
ANZ CEO Shayne Elliott acknowledged the risks but emphasised the bank's dealmaking experience. "We are not naïve, we understand it is really difficult," he said. "ANZ is the product of years and years of integrations and acquisitions."
"It will make us a more effective competitor." - Shayne Elliott, ANZ CEO
The approval comes with several conditions, including:
While some analysts question the deal's execution and potential benefits, others see it as a strategic move for both ANZ and Suncorp. The transaction marks a significant shift in Australia's banking sector, with potential ripple effects for customers, employees, and shareholders alike.
On 28 June 2024, US stocks closed lower despite encouraging inflation figures, which hinted at potential interest rate cuts. The market's reaction highlights the complex interplay between economic data and investor sentiment.
The 'Magnificent Seven' tech stocks faced a late sell-off:
The core Personal Consumption Expenditures (PCE) price index, a key inflation indicator, rose by just 0.08% month-on-month. This data strengthens the case for potential rate cuts by the US Federal Reserve.
"The May PCE Price Index came in slightly below market predictions, indicating to investors that inflation continues to slow and setting up the Fed for a potential interest rate cut later this year," said John Kerschner, head of US securitised products at Janus Henderson Investors.
Investors are now focusing on upcoming US labour market reports. The probability of a rate cut in September remains between 60% and 70%, according to CME futures.
Despite the day's losses, the NYSE Fang+ Index has gained over 13% this quarter, showcasing the tech sector's resilience.
ASX futures were down 35 points or 0.5% to 7737 near 7am AEST, suggesting a cautious start for the Australian market. The Australian dollar strengthened 0.4% to 66.70 US cents.
In a positive turn for the US economy, the Federal Reserve's preferred inflation measure showed a slowdown in May 2024, strengthening the argument for potential interest rate cuts later this year.
This combination of slower inflation and robust spending has provided relief to Fed officials, who were concerned about recent signs of economic slowdown.
"The economy is moving in the right direction, with persistent growth, moderating inflation, and a more normal balance in the job market," said Bill Adams, chief economist at Comerica Bank.
The data suggests that inflation might be heading back to normal levels without causing significant harm to consumers. This could pave the way for the Fed to consider lowering interest rates, possibly as early as September.
Despite higher borrowing costs, household demand has remained strong. Inflation-adjusted spending on services rose 0.1%, while spending on merchandise increased 0.6%. Solid wage growth continues to fuel consumer spending, with wages and salaries rising 0.7%.
However, some economists remain cautious about the sustainability of this trend. The upcoming employment report on 5 July will provide further insights into income growth and its impact on the economy.