In this video, Matt Murphy (Managing Director – Prime Accounting & Business Advisory) speaks about how to reflect on 2020 and reforecast for the coming new year. The session covers the following topics:

• what topics have been covered in our forum so far
  
• what to do in uncertain times
  
• areas to focus on when building your business plan for 2021

If this content is helpful and you’d like to access more videos & resources like this, please click below.
Resources

This video and post are provided by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

Legislation was passed last week to amend how the Export Market Development Grant (EMDG) will be administered and calculated, draft rules have been released and Administrative guidelines are still being developed.  

Below is a summary of planned changes.

Those of you familiar with the program will be aware that historically you would apply for relevant activity that occurred in the past year. The changes reorient the EMDG to a more traditional grants scheme with upfront funding agreements for eligible exporters.

The key differences in new program are:

1. Likely annual application window will only be 4-6 weeks. In 2021, you can continue to apply under the existing program for export activity conducted in July 2020 – June  2021 and simultaneously under the new program for proposed export activity from 1 July 2021.
2. Applicants will be broken into tiers and those tiers will determine how much funding you are eligible for:
   • Tier 1: New to export – maximum $40,000 each year for two years;
   • Tier 2: Expanding export promotion activity – maximum $80,000 each year for three years;
   • Tier 3: Making a strategic shift – maximum $150,000 each year for three years; and
   • Tier 4: Representative Bodies – maximum of $150,000.
3. Abolition of the export earnings test.
4. Applicants have a financial turnover of less than $20m the financial year before your application.

You can also distinguish which tier your business falls into based on the following:

Tier 1: New to export

This tier will require that you demonstrate that you are ready to export through relevant training or through your understanding of what it takes to export.

Tier 2: Expanding export promotion activity

This tier will require that you demonstrate you have a plan to expand your marketing for your product and that you have already exported your product or service.

Tier 3: Making a strategic shift

This tier will require that you demonstrate you have a plan to expand your marketing for your product by making a strategic shift.

Tier 4: Representative Bodies

This tier will require that you demonstrate you have a plan to market your members products (if you are applying for funding to undertake marketing). Your plan must be for the products your members have a designated connection.

Alternatively demonstrate that you have the skills and experience to train members to become ready to export (if you are applying for funding to undertake training).

Once approved you will enter into an agreement with the government.The agreement will identify:

• What your product is;
• What the purpose of your marketing is;
• How much your grant is for; and
• Potential – individual eligible expenses you agreed you would have.

Approved applicants will need to demonstrate that they have spent money on eligible expenses to support their export plans. The agreement will set out when you get the money. Austrade may ask for information in relation to expenditure to support the milestone payments.

Prime is watching these changes and the associated guideline development closely.

If you would like more information, please contact Stuart Thomson at – stuartt@primefinancial.com.au.

This post is provided by Prime Accounting and Business Advisory Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. This post is not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this post. All information is subject to change without notice. We and each party providing material displayed in this post disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of information or material in this post. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation.

In this Wealth Forum, we speak in length about Australian Equities & Market Update, presented by Simon Madder – Managing Director & CEO, Marcus Bogdan – Australian Equities Specialist, Mark Johnson – Chairman of Investment Committee & Partner and Cameron Morcher – Partner.

Presenters:

• Marcus Bogdan – Australian Equities Specialist
• Simon Madder – Managing Director & CEO
• Mark Johnson – Chairman of Investment Committee & Partner
• Cameron Morcher – Partner

Slide deck:

• Australian Equities & Market Update

The information in this recording and article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this recording and article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this recording and article. Information in this recording and article is current at the date of this recording and article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Perhaps the Santa Claus share market rally has come early this year? The ASX200 was positive for its sixth consecutive week last week, rising +0.13%.

To give a little context, the ASX200 rose for six straight weeks throughout May and into June this year and then you have to go back to April 2018 for the last time.

It has certainly been a strong run and the Australian share market has iron ore and the miners to thank.

The iron ore price has now climbed +32% since the beginning of November to US $156/tonne driven by strong demand from China, a recent production downgrade from Brazilian powerhouse Vale and renewed optimism for 2021 demand for the commodity.

Steady demand has seen investment Bank UBS boost its iron ore price forecasts for next year by close to 20%. Admittedly their current price targets are materially below the current market price, however, the bank cited growth in Chinese steel output and a recovery in ex-China demand as the reason for the upgrade.

Understandably miners have been incredibly strong with the sector rising +2% last week and having climbed +17% since the beginning of November.

Fortescue (FMG) continued to surge higher on the back of this increased demand adding +11% as it celebrated the first delivery of ore at its Eliwana processing facility. BHP (BHP) advanced a further +3% and Rio Tinto (RIO) +2.5% despite an inquiry into its Juukan Gorge disaster likely to drag on into 2021.

Another strong performer last week was Link Administration Holdings (LNK) which rose +12% after receiving a second takeover offer from SS&C Technology at $5.65 per share. This was a 14% premium to LNKs previous closing price and 25c per share higher than the previous offer from Pacific Equity Partners.

Finally, Healius (HLS) climbed +8% to trade close to a 4-year high after announcing a $200m on-market share buy-back following the sale of its Medical Centres business for $483m. HLS remains a core holding in the Prime Australian Equity Growth SMA and has now materially de-geared its balance sheet.  

Business Confidence

Business conditions and confidence rose in November, continuing to suggest a rapid rebound in the economy as restrictions are eased and state borders open up.

Victoria continues to play a significant part in this renewed optimism, however surprisingly Victoria was one of only two states to report a deterioration in conditions for the month. We expect this to be short lived as the impact of severe lockdowns wear off.

Overall, both confidence and conditions are now above average and stronger than the pre-pandemic period.

Encouragingly, other lead indicators improved in the month: capacity utilisation saw a large gain and forward orders turned positive, the latter suggesting that the pipeline of work has begun to build. That said, there is some way to go before a full recovery is reached

Capacity utilisation remains below its long-run average, while the capex and employment indexes remain in negative territory.

Even with the significant improvement in trading conditions and profitability, businesses will likely need to see a sustained improvement in forward orders and a complete recovery in capacity utilisation before renewed hiring and investment plans are put in place.

Consumer confidence hits 10-year high

Adding to the positive news was consumer confidence data released on Wednesday.

For a fourth consecutive month consumer confidence climbed higher and is now at its highest level since October 2010.

The Consumer Sentiment Index climbed 4.1% in December following the news that Australia’s technical recession was over and on promising news that a COVID-19 vaccine was not far away.

Of the five key sub indices used to calculate the Consumer Sentiment Index four rose. The only category to fall was the ‘time to buy a dwelling’ index which demonstrates home buyers are starting to question whether it is the right time to jump into the market.

Perhaps the main reason for this hesitation is the knowledge that national property values have not fallen the 10-20% analysts and economists had forecasted throughout the height of the downturn.

US stimulus deadlock

Sometimes it really does feel like we go round and round in circles.

Having been unable for months to agree on a coronavirus stimulus package, only to make steady progress in the last two weeks and be on the verge of announcing a stimulus bill, US Congress are once again deadlocked over the quantum of the package.

The latest bipartisan stimulus proposal continues to stumble with House Democrats, Senate Republicans and the White House unable to come to terms.

Republican Senate leaders last week rejected a $908b aid package once again making the 18^th December budget deadline look very unlikely.

Last week the Senate approved a one-week stopgap bill securing additional time for negotiators although looking at recent events it remains unlikely that lawmakers will be able to negotiate all the relevant and necessary laws in order to pass this bill in one week.

A resolution here is crucial because a number of government policies that are currently protecting Americans from the economic impact of the pandemic are set to expire in the coming weeks meaning up to 12 million workers could lose jobless benefits.

Vaccine

It seems international vaccines are the way forward for Australia’s response to COVID-19 immunisation, after news on Friday that CSL and the University of Queensland are halting development of their COVID-19 vaccine and will no longer progress to phase 2 and phase 3 clinical trials.

The news follows a CSL announcement on Friday that whilst the vaccine created a robust response to the virus and had a strong safety profile the antibodies it generated interfered with HIV diagnostic assays and created a false positive on certain HIV tests.

As a result of the Queensland candidate’s failure, Australia plans to increase its planned production and purchase of the AstraZeneca vaccine from 33.8 million to 53.8 million doses.

In other important vaccine news the US Food and Drug Administration (FDA) has approved emergency use of the coronavirus vaccine developed by Pfizer in conjunction with Germany’s BioNTech.

The first shots are expected to be administered within days and means the US will join Britain, Canada, Mexico, Saudi Arabia and Bahrain as nations who have already approved the vaccine with the US set to review Moderna’s vaccine later this week.

Looking ahead

On behalf of the Prime Investment Committee and the wider Prime community, we would like to take this opportunity to wish you all a healthy and happy festive season.

We would like to thank you all for your continued support in what has been an extremely challenging 2020.

We are looking forward to reconnecting with you all in 2021 and wish you all well over the next few weeks.

Monday 14th December – Friday 18th December 2020

• Monday: CN House Price Index (NOV)
• Tuesday: AU RBA Meeting Minutes, CN Unemployment Rate (NOV), Retail Sales (NOV)  
• Wednesday: AU Westpac Leading Index (NOV), UK Inflation Rate (NOV), US Retail Sales (NOV)
• Thursday: AU Unemployment Rate (NOV), UK BoE Interest Rate Decision, US Building Permits (NOV)
• Friday: N/A

Friday 11th December, 5pm values

Friday 11th December, closing values

Key dividends

Monday 14th December – Friday 18th December 2020

• Monday: Div Ex-Date – WBCPE (WBCPE); Div Pay-Date – BENPG (BENPG), CWNHB (CWNHB), Soul Pattinson (SOL)
• Tuesday: Div Pay-Date – Amcor (AMC), CBAPD (CBAPD), CBAPE (CBAPE), CBAPF (CBAPF), CBAPG (CBAPG), CBAPH (CBAPH), CBAPI (CBAPI), Qualitas Real Estate Income Fund (QRI)
• Wednesday: Div Pay-Date – Betashares Legg Mason Australian Bond Fund (BNDS)
• Thursday: Div Pay-Date – NABPB (NABPB), NABPF (NABPF), Pendal Group (PDL), ResMed (RMD)
• Friday: Div Pay-Date – Westpac (WBC)

Contact

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

The ASX continued its march higher into Christmas rallying for a fifth consecutive week.

Having recorded its best month on record in November (+10%) the ASX200 was positive four out of five days last week.

Incredibly the ASX200 now trades -0.75% down for the calendar year. To think the local market has managed to trade flat given the year 2020 has proven to be is truly remarkable.

If you consider that global equity markets as represented by the MSCI International World Index in AUD terms have recorded +8% gains year to date the ASX has actually underperformed, however, given the circumstances I think most investors would largely consider this underperformance ‘acceptable.’

As a reminder equity markets do not always trade rationally – they are the sum of the infinite wisdom of all market participants who deal in them – so trying to reconcile how some equity markets such as the US equity market has climbed +15% in a year that has seen unemployment spike and economic growth plummet may be a futile exercise.

In our view the ‘why’ is more important than the ‘how’ and consumer spending which accounts for 68% of the US economy has been undoubtedly boosted by government stimulus packages which included a US$600 weekly unemployment subsidy and a one-off US$1200 cheque to households.  

With US Congress announcing last Friday that approximately US$900b of further stimulus is on track to be delivered we see this positive momentum continuing into 2021.

Miners bounce as iron ore surges

The mining sector rocketed higher last week climbing +5.3% on the back of strong gains in the spot price for iron ore.

Not since the end of May has the sector recorded a stronger weekly gain and the iron ore heavyweights in Fortescue (FMG), BHP (BHP) and Rio Tinto (RIO) all took full advantage rallying between 7-11%.

Iron ore climbed +5% after Brazilian producer Vale downgraded production forecasts. Coupled with strong steel demand coming from China which has seen port inventories run down through heavy investment in infrastructure and further optimism that 2021 will see renewed demand, the commodity spiked to trade at a 6-year high of US$136/tonne. 

Also benefitting from the iron ore price was the AUD which jumped to US74.50¢, a level not seen since July 2018.

BHP is currently the highest conviction position in the Prime Australian Growth SMA with a portfolio weight of over 9%. We think the outlook for iron ore remains strong as evidenced by last Thursday’s direct equity recommendation to purchase BHP. However, with the stock closing on Friday at $41.50 we believe investors are best placed to purchase the stock at a limit price of $37.00.

Price action swings in roundabouts and the opportunity to purchase the stock at $37.00 on a FY22 forward P/E of 12x and a free cash flow yield of 8% is compelling.

Vaccine

It seems like every week for the past month we have been closely monitoring and writing about the global progress of vaccine developments.

Well, in what largely feels like it has ‘flown under the radar’ the United Kingdom have become the first country to approve a COVID-19 vaccine that has been tested in a large clinical trial.

Perhaps the rest of the world is adopting a ‘wait and see’ approach in terms of the effectiveness of the UKs vaccine rollout, however, it feels as if this momentous occasion was somewhat ignored.

Interestingly the UK government sided and approved the Pfizer-BioNTech Vaccine and not the Oxford University-AstraZeneca vaccine so perhaps that in itself is telling.

Only last week did pharmaceutical company AstraZeneca confirm its vaccine was up to 90% effective. However, a ‘dosing’ error recently discovered some clinical trial participants were mistakenly given a half dose rather than a full dose and produced a better immune response.

Clearly this creates significant doubts over the initial efficacy of the results and ultimately serves as a reminder to us all that each pharmaceutical company is simply racing to get to the finish line first.

Regardless, the Pfizer-BioNTech vaccine approval is a big positive and the UK equity market rallied +3% last week on the back of it.

Local data

Confirmation that Australia has exited recession territory was received last week with September quarter GDP posting a +3.3% jump which offset almost half of the -7% collapse in the previous quarter.

The September quarter rebound exceeded economist expectations of a +2.5% gain. Household consumption bounced +7.9% after falling -12.1% in the June quarter which translates to an annual consumption decline of -6.5% vs -12.7% in June.

Despite the positive data, the economy has still contracted -3.8% in the 12 months to September, so whilst we are moving in the right direction, or in Treasurer Frydenberg’s words “cause for optimism and hope”, there remains plenty of ‘recovery’ left ahead of us.

Key to the strength in the September quarter was a jump in consumption (makes up approximately 60% of GDP), which was driven by a +9.8% increase in services spending as hotels, cafes and restaurants reopened. In other news building approvals for private sector houses rose +3.8% in October to a 20-year high. Strong demand for detached housing following the relaxation of COVID-19 restrictions and record low interest rates continue to provide support for the housing sector with large increases in dwelling approvals in NSW and WA driving these gains.

Final RBA meeting for 2020

The final RBA meeting for 2020 saw official cash rates left unchanged including the 0.10% target yield on 3-year Australian Government bonds, the Term Funding Facility and the government bond purchase program announced last month.

Despite vaccine progress and better than expected recent data, the RBA expect the recovery to be uneven and dependant on significant policy support. The RBAs base case is for GDP to return to pre-pandemic levels at the end of 2021 implying a 5% increase next year and a 4% rise in 2022.

The RBA continues to view addressing the high rate of unemployment as a priority. Despite strong growth in employment numbers in October the unemployment rate increased to 7% as more people re-joined the workforce. The RBA expects further increases in the medium term as this trend continues.

Given the outlook for both employment and inflation, monetary and fiscal support will be required for some time and the RBA stated it will not increase the cash rate until actual inflation is sustainably within the 2-3% band which the RBA believes is at least 3 years away.

For this to occur, wages growth will have to be materially higher than it is currently which will require significant gains in employment and a return to a tight labour market. The RBA intends to keep the size of the bond purchase program under review and stated importantly it is prepared to do more to stimulate the economy if necessary.

US Non-farm payrolls

In the words of incoming president Joe Biden, November’s jobs report was “grim.”

US nonfarm payrolls rose by 245,000 in November after rising by 610,000 in October. This was the smallest gain since the jobs recovery started in May and the fifth consecutive monthly slowdown in jobs growth. Of the 22.2 million jobs lost due to the pandemic, only 12.3 million have been recovered thus far.

Put simply only just over half of the jobs lost to the pandemic have been recovered

The Labor Department’s closely watched employment report on Friday also showed 3.9 million people have been out of work for at least six months, with many giving up, a sign of a lack of confidence in the labour market.

The slowing down in the jobs recovery appears to have been exacerbated by the onset of winter and a resurgence of the virus so the likelihood of a stimulus bill passing in the next week is high.

Biden said the stimulus bill would be the first step and committed to delivering additional relief once he takes office in January next year.

Looking ahead

Next week will be the final weekly market update for 2020. We look forward to seeing you again in 2021 and wish you all a healthy and happy festive season.

Monday 7th December – Friday 11th December 2020

• Monday: AU ANZ Job Advertisement (NOV), CN Balance of Trade (NOV)
• Tuesday: AU NAB Business Confidence (NOV), Building Permits (OCT), US NFIB Business Optimism Index (NOV)  
• Wednesday: AU Westpac Consumer Confidence (DEC), CN Inflation Rate (NOV)
• Thursday: US Inflation Rate (NOV), Weekly Jobless Claims
• Friday: N/A

Friday 4th December, 5pm values

Friday 4th December, closing values

Key dividends

Monday 7th December – Friday 11th December 2020

• Monday: Div Ex-Date – Collins Foods Limited (CKF); Div Pay-Date – Perpetual Credit Trust (PCI)
• Tuesday: Div Ex-Date – NABPF (NABPF); Div Pay-Date – CSR Limited (CSR), Metrics Master Income Trust (MXT), Metrics; Income Opportunities Trust (MOT)
• Wednesday: Div Ex-Date – WBCPI (WBCPI)
• Thursday: Div Ex-Date – ANZPG (ANZPG), ANZPH (ANZPH), Select Harvests (SHV); Div Pay-Date – GrainCorp Limited (GNC), NAB (NAB)
• Friday: Div Ex-Date – WBCPH (WBCPH)

Contact

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Prime’s Capital team was thrilled to act as Limepay’s Corporate Advisor for its successful pre IPO capital raise.

Buy now, pay later (BNPL) provider Limepay is capitalising on the sector’s recent market momentum, banking $21 million ahead of an initial public offering planned for mid-2021. Founded in 2018, Limepay is a payments company offering a unified checkout solution, delivering full payment processing and a white labelled BNPL for merchants (W-BNPL).

Unlike other BNPL providers the Limepay payment solution enables merchants to maintain full control of the customer experience from cart to checkout, targeting higher conversion at checkout, increased basket sizes and sustainable lifetime customer value. This unique offering is resonating strongly with large brands, some of Limepay’s key customers include Accor, EB Games, Puma and Sportitude.

To read the full AFR article, please referhere.

In the meantime, if you have any questions about Limepay and this initiative, please feel free to reach out to the Prime Capital team via the “contact us” button below.
Contact Us

The information in this article contains general advice and is provided by Primestock Wealth Management Pty Ltd (Primestock Wealth) AFSL No. 240277. This advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs.

The ASX200 will today record its best monthly return since the index was created in 2000.

Quite unbelievable to think November’s equity market returns are going to post gains of +12%.

Whilst no one could have predicted the rapid pace at which global equity markets would recover from their March lows and many may still argue that share market valuations far exceed economic fundamentals, the important reminder here is that we are long-term investors by nature.

Equity markets have long traded up, down and sideways and whilst volatility and market dislocation can create value opportunities for investors so too does playing the long game and staying invested.

One of my favourite quotes from legendary investor Warren Buffet reads “the best way to make money is to make it slowly.”

Sure, there are cunning investors out there who doubled down on positions in March when markets seemed stretched and oversold. However, there is just as much merit in holding on to existing positions and riding out the volatility.

Those who raised cash levels throughout the March lows crystallised their losses and left themselves no opportunity to recapture any of the underperformance if markets rallied.

Markets did just that.

After falling 36% peak-to-trough the ASX200 has now recaptured 28% of that initial fall – staying invested and recognising that short term gyrations in markets are normal has rewarded the long-term investor and in this instance has generated a return on investment of 28%.

It is easier said in hindsight but we like to think the lessons of 2020 serve as an important reminder to investors to have long term objectives and investment goals.

To think the ASX200 is only down -1% in 2020 is a pretty remarkable outcome.

Stay invested over the long term and make money slowly.

The AUD

The Australian dollar climbed to a near 2-year high last week trading just short of US74c.

Part of the reason for the AUD strength vs the USD has been the ability of Australia to contain the spread of the virus compared to the United States which is seeing daily COVID-19 infections surpass 200,000 with the death toll nearing 270,000.

Recent strength in commodity prices has been a factor with the iron ore spot price reaching $US127/tonne last week whilst copper and other industrial metals continue to trade well.

Another major reason behind the AUD strength is USD weakness.

Whilst the US economy continues to recover the growth rate is starting to slow. The consumer sentiment index fell to 77 in a preliminary November reading from 81.8 marking its first decline in four months and hitting its lowest point since August.

Additionally, Q3 GDP in the US was worse than expected and jobless claims for the week just ended rose to 778,000 which was above expectations.

It’s a big week of data this week with the RBA board meeting on Tuesday, Q3 GDP data (expected to show a 3-4% bounce from the June quarter’s -7% fall) and US nonfarm payrolls due on Friday (expected to show unemployment at 6.8%).

Further vaccine progress

Pharmaceutical company AstraZeneca confirmed that late-stage trials showed its coronavirus vaccine was up to 90% effective providing further hope that the race to find a vaccine is heating up.

AstraZeneca also claimed its vaccine is currently proving to be cheaper and easier to distribute than some of its rivals with results based on trials in the UK and Brazil of a vaccine developed by Oxford University.

Understandably travel and transport sectors have been major beneficiaries of the last few weeks’ vaccine developments.

Flight Centre (FLT), Webjet (WEB) and Corporate Travel (CTD) all rose 6-7% last week while Qantas (QAN) bounced +5%. All four stocks have rallied between 30-60% in November.

The move towards a ‘global reopening’ extends beyond just tourism stocks.

Crude oil prices are nearing their highest levels since early March having rallied +27% in November and another +5% last week.

Progress on the vaccine front has led to an increased demand for oil with lockdowns restricting mobility and movement likely to be lifted sooner rather than later should vaccine trials continue to show promising results.

ASX

Energy stocks (+6%) and miners (+3%) drove the ASX +1% higher last week on the back of strong gains in the price of oil and other major commodities.

BHP (BHP) posted +7% gains and Fortescue (FMG) +10% on improved commodities whilst Pendal Group (PDL) jumped +14% after head of defensive strategy and bonds, Vimal Gor, announced PDL would be investing in Bitcoin.

Other positive performers last week included Healius (HLS), formerly called Primary Health Care, which rallied +4.5% after selling its medical centres business to BGH Capital for $483m.

The transaction simplifies the HLS portfolio and allows HLS to focus on market leading diagnostics and day hospital businesses whilst reducing net debt and freeing up capital for future investment.

Petroleum operator Ampol (ALD) climbed +8% after announcing a $300m off-market buyback following the sale of its convenience retail property portfolio for $635m.

ALD a 49% stake in its freehold retail convenience sites to Charter Hall and Singapore’s GIC, delivering net cash proceeds of $635 million compared to prior guidance of $612 million.

Tensions with China

Unfortunately, it was not all positive with news the Chinese government will place tariffs on all Australian wine imports.

The tariffs which began on Saturday and range from between 107% – 212% are a devastating blow to Australia’s wine export industry of which China accounts for nearly 40% and is by far the biggest global market target.

Essentially these tariffs double to triple the cost of Australian wine in China rendering it significantly less viable in what is a hugely popular Chinese market.

Disappointingly the tariffs follow on from recently implemented tariffs on Australian beef and barley and points to a further deterioration in diplomatic relations between the two nations.

Winemaker and ASX listed giant Treasury Wine Estates (TWE) fell -11% on Friday before entering a trading halt which it expects to lift on Tuesday this week once it has had an opportunity to update its shareholders on the impact the these tariffs are likely to have on its business.

Looking ahead

Monday 30th November – Friday 4th December 2020

• Monday: AU Business Inventories Q3, Private Sector Credit (OCT), CN Non Manufacturing PMI (NOV)
• Tuesday: AU RBA Interest Rate Decision, Group Manufacturing Index (NOV), CN Caixin Manufacturing PMI (NOV)  
• Wednesday: AU GDP Growth Rate Q3, Capital Expenditure Q3, US ISM Manufacturing New Orders (NOV), Construction Spending (OCT)
• Thursday: AU Balance of Trade (OCT), Home Loans (OCT), US Initial Jobless Claims (NOV)
• Friday: US Non Farm Payrolls (NOV), Valance of Trade (OCT)

Friday 27th November, 5pm values

Friday 27th November, closing values

Key dividends

Monday 30th November – Friday 4th December 2020

• Monday: Div Ex-Date – Metrics Master Income Trust (MXT), Metrics Income Opportunities Trust (MOT)
• Tuesday: Div Ex-Date – Aristocrat Leisure (ALL), Legg Mason Australian Bond Fund (BNDS), NABPB (NABPB)
• Wednesday: Div Ex-Date – BENPF (BENPF), SUNPF (SUNPF), SUNPG (SUNPG), SUNPH (SUNPH)
• Thursday: Div Ex-Date – Pendal Group (PDL), Fisher & Paykel (FPH)
• Friday: Div Ex-Date – CBAPD (CBAPD), CBAPE (CBAPE), CBAPF (CBAPF), CBAPG (CBAPG), CBAPH (CBAPH), CBAPI (CBAPI) Div Pay-Date – WBCPF (WBCPF)

Contact

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

Premier Daniel Andrews and Treasurer Tim Pallas recently released a very big spending budget in an attempt to restart the Victorian economy.

The budget covers health, education, tourism, infrastructure, the environment, housing and public order. The impact of the pandemic on the Victorian economy has been significant, with Victoria’s state final demand falling by 8.5% in the June quarter. The budget is designed to create 400,000 jobs over the next 5 years.

We have summarised below the components of the budget that we thought the business owners of Prime clients will be interested in knowing more about.

The full budget summary is availablehere.

Payroll tax and employee support

• The deferral of payroll tax for businesses with payrolls of up to $10 million for the full 2020-21 financial year.
• An increase in the threshold for paying payroll tax on an annual basis from $40 000 to $100 000.
• A Secure Work Pilot Scheme to provide sick leave for casual staff – this two‑year pilot will provide up to five days of sick and carers pay at the national minimum wage for casual or insecure workers in priority industries.

The Jobs Plan includes an allocation of $836 million in payroll tax relief to encourage employees to hire new workers, called the New Jobs Tax Credit. The new jobs tax credit will be available to small and medium enterprises to increase employment by re-hiring staff, restoring staff hours or supporting new jobs. For the next two years, eligible businesses will receive a tax credit of 10 cents for every dollar of Victorian taxable wages above the previous year’s.

This means that not only will eligible businesses pay no payroll tax on these increased wages – they will get a refund of tax already paid. The more they increase wages and employment in Victoria, the less payroll tax they will pay.

New investment funds including:

• Venture Growth Fund ($25.7 million). The Fund will be run by Invest Victoria for injection of late-stage capital into revenue positive startups.
• Angel Sidecar Fund ($10 million). To help female start-up founders access capital. The fund is to be run by LaunchVic. The fund will run over 3 years and provide up to $250,000 co-investment into each early stage start up. The fund will invest along side private investment.
• Industry Recovery and Growth Fund ($40 million). Funding focused on facilitating private sector investment in advanced manufacturing. This includes targeted investments in high growth sectors like food manufacturing and pharmaceuticals.
• Victorian Startup Capital Fund, ($61 million). Aims to unlock private capital to support innovative, high-growth startups and entrepreneurs.
• $80 million on a package of targeted investment incentives to attract the best and brightest international companies to Victoria.

Support for exporters

This includes funding for pilot virtual trade missions, establishing a Freight Stabilisation Fund and Global Gateway vouchers to assist exporters identify new export markets.

Business Grants

Cash grants to support small and medium sized businesses. This includes:

• $822 million for the third round of the Business Support Fund, building on the first two rounds which provided funding totalling $1.8 billion of support.
• Grants of up to $50 000 for local business groups and chambers of commerce, to assist members to transition to COVID Normal.
• An investment of $44 million to equip businesses to thrive in COVID Normal. This includes $20 million for small businesses to access off-the-shelf digital programs, training and work-shops designed to help businesses adapt to online operations.
• The $100 million Sole Trader Support Fund to help sole traders in affected sectors.

Research and technology

The Breakthrough Fund will be allocated $2 billion to help support research and development adoption and commercialisation, supporting 15 700 jobs over 10 years. This investment will focus on priority industries, including medical research, health and life sciences, agri food, advanced manufacturing, clean energy and digital technologies. A long term investment strategy will be developed by a partnership between industry, research, philanthropic and finance sectors. It will support projects delivered with knowledge institutes and industry stakeholders, anchored at key innovation and employment precincts, including Parkville, Arden Macauley, Fishermans Bend, Latrobe Bundoora and Monash Clayton.

A further $50 million for research and development loans. The initiative will provide loan support to SME’s that are eligible for the R&D tax incentive program to borrow their entitlements at low rates of interest. Further details of the initiative arehere.

Clean energy initiatives

Supporting new renewable energy zones through grid investment, delivery of the Victorian Big Battery, upgrades to transmission networks and new clean energy generation projects to be facilitated. Total funding of $682 million will also attract and fast-track investment in innovative energy projects that will deliver transformational benefits to Victoria, with consumers able to benefit from these projects from 2025.

Areas of interest to business owners

• Providing stamp duty waivers of up to 50 per cent for residential property transactions and up to $1 million and land tax discounts for build to rent projects until 30 June 2021.
• $500 million for mobile blackspots and business broadband connectivity.

If you think that any of the above areas are applicable to your business and would like to discuss further about how we can help you, please email us as per contact information below:

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

An irregular start to the trading week saw an ASX ‘market glitch’ prevent trading, which ultimately led to the suspension of daily activity at 10:25am last Monday morning.

However, the ‘shortened’ week did little to thwart investor optimism with the ASX rising every day except for Friday when it closed flat.

In fact, the first three weeks of November has the ASX200 on track to record its largest monthly gains since the index was established in March 2000.

Hardly a statistic you expect to see in a year crippled by a global pandemic.

But the numbers don’t lie and the ASX200 climbed +2.1% last week to take its monthly return to +10.3%.

Banks were the major driver of returns rallying +6.2% after APRAs chairman indicated the cap limiting banks’ dividend payments may be withdrawn soon as the economy recovers from the COVID-19 contraction.

Clearly this was well received by investors who suffered through ANZ and WBCs announcement to suspend their half-year dividend payments earlier this year, while NAB paid a significantly reduced half-year dividend at the same time it also raised equity.

Commonwealth Bank (CBA) was the best performing major bank last week, climbing +9.4% after APRA announced it was halving its $1b capital penalty imposed in May 2018 for corporate governance failures.

Vaccine developments

As winter in the northern hemisphere draws near, the gravity of the COVID-19 situation escalates.

We know this, particularly as Australians, because we have endured a COVID-19 winter. The potential damage in the northern hemisphere in the coming months remains a major concern.

America’s daily coronavirus infection rates have almost doubled in the past three weeks with 195,000 new positive cases announced last Friday, taking its total number of confirmed cases through 12 million. On top of this, Thursday’s death toll exceeded 2,000 – a statistic not seen since early May. 

Meanwhile in Europe, France is still seeing around 20,000 new infections per day with schools remaining open despite the country being in lockdown, the UK is likewise registering around 20,000 cases per day, which is down 50% from its peak 11 days ago whilst Italy is approaching all-time highs with 34,000 cases.

This is why further vaccine developments can’t come soon enough.

Further confirmation on a possible vaccine was released last week, with US vaccine developer Moderna reporting its candidate was proving more than 94% effective.

Last week, Pfizer and BioNTech reported its vaccine was running at 90% efficacy.

Positively, Moderna provided more extensive information than Pfizer, highlighting that its vaccine not only protected against disease, but against people becoming severely ill from COVID-19.

Importantly, Moderna’s trial also showed its vaccine remained stable and transportable in conventional refrigerators for a month and ordinary freezers for six months, which is a significant improvement on Pfizer’s, which requires transport and storage to occur in -70 degrees celsius.

We are not there yet, but we are making progress and with each development equity markets will continue to take comfort.

Economic data

It was a big week locally, with unemployment data and preliminary retail sales data headlining amongst other data prints.

We know from last week’s Business Confidence survey that business confidence has returned to its highest level since mid-2019 so it is perhaps little surprise that 179,000 jobs were created in October – as employers become more confident they are inclined to increase capital expenditure and employ more staff.

The headline unemployment figure rose from 6.9% to 7%, however this was a function of a higher participation rate. More people are actively seeking work, which saw the participation rate rise from 64.9% to 65.8%. This only lags the pre-COVID participation rate by 0.4%.

To round out these strong figures the underemployment rate – people who are working but looking for more hours – dropped from 11.4% to 10.4%.

It is hard not to be optimistic when you consider:

• There are more people actively looking for work
• Those who are working and wanting more work are starting to get more shifts
• 179,000 jobs were created in October.

Preliminary retail sales data for October bounced +1.6% in October compared to the prior month as Victoria’s exit from 100+ days of lockdown drove the national data.

Retail sales in Victoria rose +5.2% from September with clothing, footwear and personal accessories leading the way. The re-opening of cafés and restaurants for dine-in experiences is likely to provide a further boost for spending in November and in the lead-up to Christmas.

The data is preliminary and the official release can be amended but at face value is another good result.

Finally, the Westpac leading index saw its strongest rise in four decades.

The six-month annualised growth rate which indicates the likely pace of economic activity relative to trend three to nine months into the future, rose to +3.25% in October, indicating that growth in the Australian economy will be significantly above trend in both the September and December quarters.

Of course, this mainly reflects the severity of the preceding contraction which saw the index growth rate drop to an extreme low of -5.5% in April, but it is further confirmation that the immediate future looks a little brighter.

US Retail Sales

Retail sales in the US were weak, increasing by +0.3% compared to expectations of +0.5% and looking to slow even more.

Reductions in spending due to COVID-19 and declining household incomes due to Americans losing government financial support are likely to drive similarly weak sales in the coming months, despite Christmas shopping season approaching.

On top of this sales data for September was revised downwards to reflect a +1.6% gain instead of the previously reported +1.9%.

Hoping this sales trend will be short lived is e-commerce giant Amazon (AMZN), who continues to diversify its already diversified business by announcing the launch of a digital pharmacy which will sell prescription medication.

AMZNs foray into the healthcare sector will see its customers able to order generic and prescription medication through its online pharmacy with Amazon Prime members able to receive two-day deliveries and doctors able to send prescriptions directly to AMZNs pharmacy services.

Whilst AMZN shares fell -1% for the week, shares in pharma giant CVS Health (CVS) fell -6.5%.

Best performer last week

Unibail-Rodamco-Westfield (URW) added +25% last week to extend the previous week’s gain of 31%. As hopes of a COVID-19 vaccine continue to grow, shopping centres whose business models have been dramatically impacted by the virus continue to be well bid by investors.

Vicinity Centres (VCX) and Scentre Group (SCG) have both climbed +15% in the past fortnight and 30-40% for the month.

Looking ahead

Monday 23rd November – Friday 27th November 2020

• Monday: AU Markit Manufacturing PMI (NOV)
• Tuesday: US Markit Manufacturing PMI (NOV)  
• Wednesday: AU Construction Work Q3, US Durable Goods Orders (OCT)
• Thursday: AU Private Capital Expenditure Q3, US Personal Spending (OCT)
• Friday: US Existing Home Sales (OCT)

Friday 20th November, 5pm values

Friday 20th November, closing values

Key dividends

Monday 23rd November – Friday 27th November 2020

• Monday: Div Ex-Date – Amcor (AMC), Elders Limited (ELD); Div Pay-Date – CGFPB (CGFPB), Janus Henderson Group (JHG)
• Tuesday: Div Ex-Date – N/A
• Wednesday: Div Ex-Date – GrainCorp Limited (GNC), OFX Group (OFX), WBCPF (WBCPF); Div Pay-Date – Brickworks Limited (BKW), Bank of Queensland (BOQ), CGFPA (CGFPA)
• Thursday: Div Ex-Date – ALS Limited (ALQ)
• Friday: Div Pay-Date – WAM Capital Limited (WAM)

Contact

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.