Australian shares slip despite dollar rebound

A rebound in the Australian dollar was not enough to stop the selloff among banks and miners on the local sharemarket on Thursday.

The benchmark S&P/ASX 200 slipped 36.4 points, or 0.7 per cent, to 5297.7. The broader All Ordinaries lost 36 points, or 0.7 per cent to 5298.5.

The local market took its lead from a weak session on Wall Street, where the S&P 500 index fell for a third day on the back of soft economic data, while the small-cap heavy Russell-2000 index slipped into a technical correction, down more than 10 per cent from recent highs.

Local investors are still reeling from a rough September which saw the ASX 200 drop more than 6 per cent, while overseas investors have continued to leave the Australian market as the local currency remains under pressure.

A lower Australian dollar was a long-term positive as it helped boost exports, supporting a fair chunk of the local market, but short-term investors were losing money from the falling currency, Tribeca Asset Management portfolio manager Sean Fenton said.

“There is also concern of a rate rise in the US, down the track, so there has been a bit of an unwind of the carry trade and for Australia that’s pretty material in terms of some of the high-yield sectors that have seen flows from the carry trade offshore with a strong currency and high yields, along with self-managed super funds searching for yield,” Mr Fenton said.

The Australian dollar jumped as high as US88.16¢ on Thursday, following solid building approvals data, and moved further away from a near-four year low the currency plumbed on Wednesday.

Building approvals jumped 3 per cent in August, led by the fastest growth in apartments and townhouses in seven months.

Building materials company Boral rose 1.6 per cent to $5.03, while CSR dipped 2.4 per cent to $3.27.

Australian miners have also suffered as a weaker growth outlook for China weighs on the price of iron ore. But overnight on Wednesday, the price of the steel-making ingredient lifted 1.1 per cent to $US78.89 per tonne.

On Thursday, BHP Billiton fell 1 per cent to $33.65, Rio Tinto dropped 0.5 per cent to $58.94. Iron ore miner Fortescue Metals bucked the trend, adding 2.6 per cent to $3.55.

Despite a torrid September for banking shares, CIMB analyst John Buonaccorsi thinks there is more to come, cutting his recommendation for the sector to ‘underweight’, from ‘neutral’.

“Our estimate of their ‘new world’ intrinsic valuations are about 30 per cent below current share prices and the support from offshore yield investors will fade as the Australian dollar falls and US$ interest rates rise,” Buonaccorsi said.

Among the big four banks on Thursday, Commonwealth Bank fell 0.5 per cent to $75.81, while ANZ dipped 0.7 per cent to $31.22. Westpac lost 0.5 per cent to $32.29 and National Australia Bank finished 0.5 per cent lower at $32.68.

Australia’s financial sector was still awaiting the findings of the Murray Inquiry and there were concerns about what that would mean for banks’ capital requirements, Patersons Securities strategist Tony Farnham.

In corporate news, Treasury Wine Estates said that the company would continue to benefit from an oversupply of grapes in the Australian market. However, TWE shares were 1.6 per cent lower at $4.21 at close on Thursday.

The Australian Competition and Consumer Commission gave the green light for global online travel powerhouse Expedia to take over Wotif苏州美甲美睫培训学校, boosting its shares 6.5 per cent to $3.29.

Telstra shares fell 0.6 per cent to $5.35, with just one day to go before investors must decide whether to participate in the telecommunications company’s $1 billion share buyback. The cut off time is 7pm on Friday.

Market volatility is increasing and there are a number of macro events investors will need to keep an eye on.

“[Thursday night] We’ve got the ECB policy meeting, everyone is waiting to see to what extent they follow through with their asset backed securities and covered bonds QE program,” Mr Farnham said.

Friday’s non-farm payrolls numbers in the United States was also likely to spark speculation about when the US Federal Reserve would raise interest rates, Mr Farnham said.

“Yellen has been talking about the need to think about employment and that it’s not quite as strong as they’d like it to be.”

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Investors hedging their bets with a bar of gold or two

Neil Tremaine (pictured) of Guardian Vaults says gold can provide immediate liquidity. Photo: Eddie JimEvery month a property investor walks into Neil Tremaine’s gold vault and deposits $250,000 worth of bullion.

Why? The investor hopes it will act as a hedge against a plunge in an overheated property market.

He is not alone. Demand for the precious metal is growing among the super rich, who are snapping up gold coins and bars.

At Perth Mint – Australia’s only gold refinery and the world’s second biggest producer after China – sales of gold coins and minted bars rose to 68,781 ounces in September, their highest since October last year.

Minted bars, which range from 1 gram to 100 grams, took the lion’s share of the increase, rising 37 per cent to 12,238 ounces, with investors in Germany and the US the biggest buyers.

“The bigger the bar you buy, the lesser the premium per ounce, so what we are finding is the smarter investors are looking at the minted bars,” Perth Mint wholesale manager Neil Vance said.

“It’s at the price now … where some of the investors are coming back into the market again.”

The Perth Mint is not the only gold business to notice a surge in demand. The US Mint revealed this week that sales of gold coins more than doubled last month to 58,000 ounces, the highest since January.

The strong investor appetite comes after the gold price fell 6.1 per cent last month to $US1220.30 an ounce, its lowest level since January this year.

Mr Vance is surprised the price has continued to linger at nine-month lows, considering interest from investors is increasing and tensions in the Middle East are rising. (The gold price normally spikes during times of global uncertainty because it is traditionally considered a safe asset).

But Perth Mint’s analysis and strategy manager Bron Suchecki said demand for larger bars – 1 kilogram or more – needs to regain momentum before the world gold price starts to appreciate.

He is seeing promising signs with Asian buyers, who account for about 80 per cent of Perth Mint’s sales by volume, returning to the market.

Mr Suchecki said buyers from China and India buy the 1-kilogram bars, which are worth about $45,000 each and are melted down to make jewellery and other items.

“That demand has been off, probably up until the last month. Premiums were quite low and there wasn’t a lot of interest,” Mr Suchecki said.

“But as soon as prices weakened down to these $US1200 levels, we have seen a real pick-up in the demand for 1 kilogram bars out of China, so premiums have recovered quite strongly.”

Mr Tremaine, managing director of Guardian Vaults which operates in Melbourne and Sydney, said the 1 kilogram blocks were also popular with investors. Most of his clients store a mixture of those bars and coins and smaller blocks.

“The typical investor looks at it from an insurance perspective,” Mr Tremaine said.

“They like the smaller bars and coins because they can provide immediate liquidity in the event that something goes wrong and they have the bigger ones as an insurance policy.

“They hold them in case … the market collapses.”

He said one of his clients, a property investor, was buying about $250,000 of bullion a month as hedge against a plunge in the housing market.

National house prices have risen by 10 per cent in the past year, but by 12 per cent in Melbourne and 15 per cent in Sydney. The surge has prompted the Reserve Bank to start drafting new regulations to scoop some of the investor froth off the property market.

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Steve McMahon joins Racing NSW board selection panel

Industry participants have finally been given a say on who will sit on the Racing NSW board after Racing Industry Consultation Group chairman Steve McMahon  was added  to the panel that selects directors.

Racing Minister Troy Grant opened nominations for three places on the seven-strong board on Thursday as the terms of Alan Brown, Kevin Greene and Tony Hodgson expire on December 18. All three can reapply.

“This is a great opportunity to ensure we have the best possible board for Racing NSW,” Grant said. “Candidates  … will be recommended based on merit and in accordance with the eligibility and skills-based criteria prescribed in the Thoroughbred Racing Act.”

Expressions of interest  will be open until  October 31.

Former NSW Premier John Fahey will chair the selection panel.  Its third member is former NRMA president  Wendy Machin.

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State Coroner Ian Gray urges parole rule change after meat cleaver murder

The case of a prisoner on parole who slit his partner’s throat with a meat cleaver has prompted a call by Victoria’s State Coroner to change reporting requirements.

Prison psychologist Margaret Burton, 40, died after her partner and former client Jayson Hawkins attacked her in her Hoppers Crossing home in Melbourne’s west in June 2009.

State Coroner Ian Gray recommended on Thursday that criminals who are admitted to psychiatric wards while on parole should trigger a notification to authorities.

Ms Burton had treated Hawkins at Loddon Prison in Castlemaine and developed a close bond with him and his grandparents before he was released on parole in 2005.

She was forced to resign when prison staff noticed the pair out together around Castlemaine, but Ms Burton and Hawkins maintained their relationship after he breached parole conditions and went back to prison. He was again released in 2008.

Two weeks before he killed Ms Burton, Hawkins was involuntarily admitted to Werribee Mercy hospital for psychiatric care, where he stayed for eight days in a low-dependency unit.

He had spent most of his adult life in prison and had prior convictions for theft, intentionally causing serious injury and armed robbery.

On four previous occasions he had been released on parole only to fail to comply with conditions or to reoffend.

Hawkins was charged with Ms Burton’s murder, but killed himself before standing trial.

In his findings, Judge Gray said he was struck by the degree to which authorities had relied on parolees’ self-assessment when deciding whether they posed a risk to those around them.

“There is almost an inevitable likelihood of self-serving self-assessments,” he said.

A group of families who had loved ones killed by prisoners on parole said authorities had prioritised offenders completing their parole over the safety of people living with them and the broader community, and Judge Gray agreed.

He noted that Corrections Victoria had recently reviewed its risk-assessment tools and was now using a different regime.

Judge Gray recommended that if parolees were involuntarily admitted to hospital or in contact with an emergency department for psychiatric reasons, the Adult Parole Board should be notified.

Where known, the parole board should also be told about voluntary psychiatric hospital admissions or contact with emergency departments, he said.

Judge Gray said when a parolee’s mental health worsened, the Adult Parole Board should urgently consider the circumstances and the level of risk to the public, individuals and the parolee.

Mercy Health, which operates the Werribee hospital, told the coroner Hawkins suffered from a crisis, not psychosis, and there was no evidence during his hospital stay or discharge that he might harm himself or Ms Burton.

Judge Gray accepted that hospital staff had not acted explicitly below an acceptable standard of care, and he noted the health system had since started using a new risk-rating tool.

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Cherry farmers cautiously optimistic for bloominggood year

Local cherry growers are “cautiously optimistic” that the coming season will see the industry turn its fortunes around.

With cherry trees now in full bloom, conditions are almost as good as they could be, according to local grower Tom Eastlake.

He’s hoping it will mean a bumper season is ahead, after last year’s disappointing yields.

“I would say we are cautiously optimistic,” he said.

“We’re in the best position we could be at the moment.”

All signs point to market optimism as well.

While major barriers are currently in place to export to China, Tom thinks a breakthrough could be just around the corner.

Cherries grown on the mainland currently have to go through rigorous cold treatment protocols before export.

“Some people have been saying an agreement could come by the end of the year – I would almost believe that’s possible now,” he said.

But he said the progression depended on “other political forces at play”.

With the bumper season expected, Tom said there will be no shortage of picking jobs.

“As always, we’re going to need all the backpackers and itinerant workers we can get.”

Grower Scott Coupland agreed the season was looking up from last year, but hoped progress could be made on access to certain Asian export markets.

“The main challenges are the things going on with export… I think you’ve got to be optimistic, I think there will be some progress,” he said.

Young’s major export markets are the “open” markets of Hong Kong the Middle East and Singapore.

Scott hopes negotiations will mean local growers are competitive in the major Asian “protocol” markets of Thailand, China and Taiwan.

“Hopefully we will soon have a very good air freight protocol (in those markets),” he said.

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