Australia Focus : Not Exactly Ideal

AUD UPDATE

Biggest positive for the week would be the China – Australia FTA on 17 June to knock off the big drop in iron ore prices again.

“Australian businesses currently face charges of up to 40 percent on goods sent to China, but under the deal penalties on virtually all resources and energy products — a key plank in the trade relationship — will be abolished.

Duties will also be lifted on agricultural exports including wine, meat, seafood, and dairy products to feed China’s growing middle class.

In return, Australia will remove the existing five percent tariff on Chinese electronics and whitegoods, meaning cheaper goods for Australian consumers but some reduction in revenue.

China also won concessions on foreign investment, with the threshold for government review to be lifted in most areas apart from agricultural land and agribusiness.” http://www.thebull.com.au/articles/a/54310-australia-and-china-sign-bumper-free-trade-deal.html?utm_medium=twitter&utm_source=twitterfeed

Still to expect low growth with economists surveyed by Bloomberg reducing their growth forecast for the rest of the year into 2016 and markets now pricing in a high chance of another cut in the next 12 months. And I would say that the FTA would help keep inflation in check, if anything.

The other big news would be that Warren Buffet’s Berkshire is looking to buy a stake in at least one of the Australian banks, according to The Age newspapers in an interview with him after Berkshire took A$ 500 mio stake in IAG (Insurance Group Australia) to expand their presence in Australia. http://www.newsmax.com/Finance/Companies/warren-buffett-berkshire-hathaway-iag-insurance/2015/06/17/id/650899/

Note that it is just the banks because Woolworths was cut by Moody’s and S&P to a negative outlook while Qantas was raised to positive.

Not exactly ideal so its easier to look to China and the US for any clues given we do not have much to look forward to into the month and half year end.

I am now mostly neutral on the yields having got some bonds in the last fortnight. The currency remains a good range play target, the AUDSGD unexcepted to my 1.05 target.

Good luck and leaving with the prices …

aud bonds