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    Weekly Overview

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    The Greek elections resulted in a pro-bailout majority, but hard work remains to stabilize the country's finances. The Spanish bailout did not reassure markets and debt costs remain high. Italian debt yields also spiked. Australian GDP and employment grew more than expected in the recent quarter. The Lynas rare earths project in Malaysia appears close to receiving final operating approval after addressing additional regulatory conditions. Housing prices in Australia continue their long-term bear market with no signs of improvement yet.

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    Weekly Overview

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    The Greek elections resulted in a pro-bailout majority, but hard work remains to stabilize the country's finances. The Spanish bailout did not reassure markets and debt costs remain high. Italian debt yields also spiked. Australian GDP and employment grew more than expected in the recent quarter. The Lynas rare earths project in Malaysia appears close to receiving final operating approval after addressing additional regulatory conditions. Housing prices in Australia continue their long-term bear market with no signs of improvement yet.

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    The Greek elections resulted in a pro-bailout majority, but hard work remains to stabilize the country's finances. The Spanish bailout did not reassure markets and debt costs remain high. Italian debt yields also spiked. Australian GDP and employment grew more than expected in the recent quarter. The Lynas rare earths project in Malaysia appears close to receiving final operating approval after addressing additional regulatory conditions. Housing prices in Australia continue their long-term bear market with no signs of improvement yet.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    25 views4 pages

    Weekly Overview

    Uploaded by

    api-150779697
    The Greek elections resulted in a pro-bailout majority, but hard work remains to stabilize the country's finances. The Spanish bailout did not reassure markets and debt costs remain high. Italian debt yields also spiked. Australian GDP and employment grew more than expected in the recent quarter. The Lynas rare earths project in Malaysia appears close to receiving final operating approval after addressing additional regulatory conditions. Housing prices in Australia continue their long-term bear market with no signs of improvement yet.

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    of 4

    Weekly Market Update

    Robert Davies, Patersons Securities


    Follow me on Twitter @davies_robert

    18/06/2012 12:22:53 PM Page 1 of 4

    Weekly Overview
    Week ending 15 June 2012

    The Greek elections were held on the weekend with the pro-bailout parties winning a majority. While they havent put together a coalition government yet, its likely they will be successful. Now that the elections are won, they actually have to run the country. Hard work for sure. The Spanish bailout from last week wasnt received very well by the market with debt costs staying at high levels. Italy came into focus with yields on their debt spiking. The problem with the Spanish bailout is that the new loans will have priority over other creditors. Putting creditors at the back of the queue is not a good idea if you still need their assistance. With the bailout, we have Spain and Italy contributing into a fund which provides Spain with a loan to bailout its banks. It appears that the circus which doubles as European monetary management will continue for a considerable period of time. The Federal Reserve meets later this month with a decision expected on a third tranche of Quantitative Easing. If this goes ahead (likely in my view) it should have a positive effect on the Australian dollar reversing its recent decline. Should also provide a boost to US equities markets. From June 1st, Japan and China started direct currency trading without the intermediation of the US Dollar. This is a significant loss to the international credibility of the US Dollar as worlds reserve currency as it will not be used between the worlds 2nd and 3rd largest economies. Currently, 60% of the China/Japan trade is denominated in US Dollars. Japanese banks have also been approved to buy Chinese government bond issues. Chg (week)
    -0.1% 1.2% 1.1% 0.0% -3.1% 2.1% 2.9% -0.1% -1.1% 1.7% 1.1% -0.1%

    2011
    All Ords Index S&P 500 Shanghai RBA Cash Rate US Treasury Bond (10yr) Spot Gold Price Copper, spot Oil - WTI USD Index AUDUSD EURUSD USDCNY 4,111 1,258 2,199 4.25% 1.88% 1,563 344 99 80.23 1.022 1.294 6.299

    15 June
    4,107 1,342 2,307 3.50% 1.58% 1,626 338 84 81.55 1.008 1.265 6.368

    Chg (ytd)
    -0.1% 6.7% 4.9% -17.6% -16.0% 4.0% -1.6% -15.0% 1.6% -1.3% -2.3% 1.1%
    Not much movement YtD Outperforming

    200 year lows.a bubble perhaps Maintains uptrend Down Ytd on slowing China Low oil price = pressure on Iran Back over parity, what about QE3? EUR doing well..considering Renmimbi is weakening

    On the Economy
    Australias current account deficit came in at $14.89B in 1Q12, near market expectations, resulting in 0.5 perc. point drag on the quarters GDP Australias headline GDP increased by a much higher than expected 1.3% (chain weighted, seasonally adjusted) in the March 2012 quarter. Economists were forecasting a circa 0.6% number, Adding to the markets joy, the previously released December quarter increment was nudged higher to 0.6% (initially 0.4%). Employers added the largest number of workers in three months, driving the Australian dollar towards parity on speculation the stronger than expected labour force data would force the central bank to slow the pace of future interest rate cuts. Payrolls advanced 38,900 in May from the previous month, the Australian Bureau of Statistics said on Thursday. The jobless rate climbed to 5.1 per cent in May from a revised 5 per cent in April as more people looked for work, the report said. The participation rate climbed to 65.5 per cent from 65.2 per cent. Full-time employment increased by 46,100 and part-time employment decreased 7200, the report said. (Australian Financial Review)

    Weekly Market Update


    Robert Davies, Patersons Securities
    Follow me on Twitter @davies_robert

    18/06/2012 12:22:53 PM Page 2 of 4

    Technically Speaking (All Ords Index)


    The market has been fighting with the 4100 level. After dropping below, it rebounded on the lower interest rates and quality GDP and employment results two weeks ago. Now we are rallying on the Greek election result. However, we havent broker the trading range yet this morning. Weve had a hold / sell bias since February, but after a 10% correction since we peaked in april, and despite the negative news, I have to become more positive about the sharemarket simply on valuation terms. The dividend yields out of quality blue chip companies are outstanding and far in excess of term deposits. I continue to recommend a focus on high quality, dividend paying stocks to generate income from your investments. With continued bank deleveraging across most western economies, capital growth looks a far off prospect. You should be looking for high quality, high dividend paying stocks, such as Telstra, banks, utilities Overall, I see stocks as cheap relative to historical Price Earning ratios, the main near term growth catalyst to take them higher would be an Australian federal election, currently 18m away, but could be closer. Irregardless, you are not buying for capital growth at this point, strictly dividends and income.

    Weekly Stockwatch
    Lynas Corporation (LYC) (personal interest declared) has been waiting for the Malaysian government to issue its operating licence since February. It has been tied up with various protests, appeals, and investigations. This morning the Minister dismissed the appeal to the Atomic Energy Licensing Board, albeit with an additional two conditions. Lynas has said the following this morning
    Lynas has readily available solutions to satisfy the new conditions announced by the Minister. The next step will be the tabling and debate of the Parliamentary Select Committee's Report. Lynas looks forward to completion of the regulatory and political processes in Malaysia as soon as possible... The Malaysian Department of Environment, the International Atomic Energy Agency, the Malaysian Atomic Energy Licensing Board, and now the Minister of Science, Technology and Innovation have all scrutinised various aspects of Lynas plant and compliance with the required domestic and international standards, and all have found in favour of Lynas.

    This government approval and scrutiny process looks to be winding down and has so far been unequivocal in its support for Lynas manufacturing plant. The stock looks cheap and is on the verge of production. While its risky to buy before final government sign off, it can also be profitable.

    Weekly Market Update


    Robert Davies, Patersons Securities
    Follow me on Twitter @davies_robert

    18/06/2012 12:22:53 PM Page 3 of 4

    Chart of the Week


    From RP Data on the Australian housing market. I dont see any indication that the bear market in housing will change for many years.

    Weekly Market Update


    Robert Davies, Patersons Securities
    Follow me on Twitter @davies_robert

    18/06/2012 12:22:53 PM Page 4 of 4

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