Yovich & Co. Weekly Update - 18 June 2012

Jun 18, 2012 | Commentary

This Week's Themes

  • The RBNZ Governor Alan Bollard kept the OCR at 2.5%. The uncertainty surrounding the economic climate in Europe has prompted Bollard to stick with stimulatory monetary policy for longer.
  • Expectations that the U.S. Fed will employ another round of Quantitative Easing to spur growth increased leading to a rally in the Dow Jones.
  • Markets firmed ahead of the Greek election as traders speculated that the New Democracy party would form a government with their pro bailout and austerity policies.
  • Early indications from the Greek election have the New Democracy Party winning the right to form a coalition. This is positive for Europe in general, with the mandate being given to continue with austerity and accept the bail out. Markets are reacting positively.

Company News

Meridian Energy, likely to be the second in line for partial privatisation, has committed $169 million to a new Wellington wind farm. The 26 turbine development will produce energy at the lower end of the cost scale, comparable with the cost of Geo-thermal energy. Parliament is expected to conclude the third reading of the legislation to give the go ahead to the Asset sales this week.

Nuplex (NPX.nz) has raised $US105 million in an American private placement which has stabilised their balance sheet after buying Viverso last year. The long term notes extend the maturity profile of their debt and provide more certainty around their funding.

Fairfax (FXJ.asx) confirmed the sell down of Trade Me (TME.nz), raising $A160 million in a move to reduce the debt burden on the struggling media company. Fairfax has recently announced a cut to its earnings guidance by 18% while Trade Me continues to produce solid earnings and dividends. Fairfax retains a controlling stake in Trade Me.

Other News

  • Bids have been invited for permits to mine in Northland. In a region with relatively high unemployment and recent record immigration of workers to Australia, this might be an opportunity to create jobs locally and provide economic growth.
  • Looking forward for the week, domestically there will be interest in the economic release for GDP in the March Quarter.
  • While internationally, the focus will still be on Greece and the final outcome of the coalition and how markets react to the formed government.
  • G20 leaders are meeting this week in Mexico with conversations centering on the impact that the persistent economic crises in Europe is having on global growth.

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Jarrod Goodall



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