In this recording, Matt Murphy (Managing Director – Prime Accounting & Business Advisory) and Bernard Stapleton (Director – SV Strategic Solutions) discussed tips for small businesses. The session covers the following topics:

• The reason why he started his business AgDNA, what was the purpose and problem he was trying to address
• What challenges he faced as a business owner and what solutions worked best to overcome those hurdles
• What are the secrets of building a successful business
• How he prepare for the sale of his business AgDNA, and what strategies worked for a smooth transition

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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.

Markets stronger with more stimulus a possibility.

Global equity markets climbed higher last week as the run in to the end of the March quarter provided an opportunity for portfolios and fund managers to adjust exposures and allocations.

The MSCI World Index advanced +2.3% in AUD terms and has so far rallied +5% for the month on the back of additional fiscal stimulus in the US which continues to be deployed in an effort to combat the negative impacts of COVID-19.

Consumer spending in the US in February fell by the most in 10 months as a cold snap swamped many parts of the country preventing consumers from leaving their homes and physically spending.

Consumer spending accounts for more than two thirds of US economic activity so February’s -1% fall following January’s +3.4% rebound was severe having not experienced such a poor month since non-essential businesses were closed to slow the spread of COVID-19 in April last year.

Despite the weak data, economists had largely predicted this would occur as the second round of stimulus cheques to middle and lower income households faded.

The positive news is that this is widely regarded to be a temporary correction with activity anticipated to rebound in March as the northern hemisphere emerges from the depths of Winter and the White House’s most recent $1.9t stimulus package hits the bank accounts of many Americans.

On an annualised basis inflation remains soft with the personal consumption expenditures (PCE) index rising +1.4% through February. We expect this data will improve in the coming months as we drop off last year’s weak recordings from February and March.

Whilst the data looks likely to improve with the economy forecast to grow by up to +7.5% this quarter after last quarter’s +4.3% expansion, there is still a long way to go. The Federal Reserve reiterated that whilst the economy is “much improved” unemployment and subdued inflation mean the recovery is far from complete.

Is more stimulus coming?

Details emerged of yet another economic package being drafted by Biden’s economic advisors this week, just weeks after the US$1.9 trillion economic stimulus package was passed earlier in March.

The latest proposal could see upwards of US$3 trillion and aims to boost the economy through investment in infrastructure, education, and combating climate change. 

The proposal if passed will likely include two parts – key domestic economic issues in what is being called the “care economy” and the other on infrastructure and clean energy.

The $3 trillion package would like face heavy opposition from Republicans for increasing liquidity in markets, but it would almost immediately put a stop to investor concerns that the economy is beginning to overheat and that fiscal support is likely to be withdrawn in the short term.

Weekly Wrap

The Australian dollar fell -1.5% last week having now retreated from 80c just over a month ago to trade 76.5c against the USD. Part of last week’s weakness can be attributed to investors who have loosened expectations for higher interest rates domestically.

The recent pull back in the price iron ore which has fallen from $178/tonne to $161/tonne throughout March has also contributed to some of this AUD weakness.

Pleasingly, the PRIME International Growth SMA recently switched some of our hedged international equity exposure to unhedged believing the AUD was looking relatively full around the 80c level.  

Yields on 10-year Australian Commonwealth Government bonds tightened from 1.80% to 1.65% as further commentary from the Reserve Bank of Australia showed the likelihood of any rate rise before 2023 to be minimal.

The ASX200 added +1.7% last week rising four out of five days.

Best performing sectors were healthcare which rose +5% and telcos which climbed +3%.

Telstra (TLS) was a notable outperformer last week climbing +6% to trade a 7-month high following its corporate restructure announcement.

TLS announced its intention to unlock value for shareholders by separating into four autonomous divisions by December, each housing a different portfolio of assets being InfraCo Towers, InfraCo Fixed, ServeCo and Telstra International.

Another reason the TLS share price has rallied 10% in the past fortnight is due to its attractive 16c per share dividend. Rising bond yields makes companies with strong dividends and free cash flows like TLS more attractive to shareholders.

Also worth mentioning was the $8bn takeover bid for Crown Resorts (CWN) which received a bid from US investment manager Blackstone.

The indicative bid price of $11.85 per share represented a 20% premium to the previous closing price of CWN shares prior to the offer and is subject to a number of conditions.

We believe it is in shareholders best interests to sell CWN holdings at current market prices. The Victorian government’s inquiry into Crown along with the potential for the offer to be withdrawn are key risks that we believe outweigh any potential that a higher bidder emerges.

On a disappointing note, TPG Telecom (TPG) saw its director and chairman David Teoh announce his retirement on Friday.

Teoh, who founded the company in 1986 as an IT company before providing mobile an internet services resigned effective immediately in order to pursue other interests. Naturally, TPG shares were sold off on Friday falling -7.4%.

Looking ahead

There will be no update next week due to the Easter break, but we wish you all well and will see you back in a fortnight.

Monday 29th March 2021 – Friday 2nd April 2021

• Monday: UK Bank of England Consumer Credit (FEB)
• Tuesday: N/A
• Wednesday: AU Private Sector Credit (FEB), CN Non-Manufacturing PMI (MAR), US House Price Index (JAN), UK GDP Growth Rate Q4
• Thursday: AU Balance of Trade (FEB), Retail Sales (FEB), CN Caixin Manufacturing PMI (MAR), US Weekly Jobless Claims
• Friday: US Non Farm Payrolls (MAR)

Friday 26th March, 5pm values

Friday 26th March, closing values

Key dividends

Monday 29th March 2021 – Friday 2nd April 2021

• Monday: Div Ex-Date – NABPD (NABPD), Reece Limited (REH)
• Tuesday: Div Ex-Date – Charter Hall Long Wale REIT (CLW), Cromwell Property Group (CMW), Qualitas Real Estate Income Trust (QRI)
  Div Pay-Date – BlueScope Steel Limited (BSL), Commonwealth Bank of Australia (CBA), Insurance Australia Group (IAG), Northern Star Resources (NST), WBCPG (WBCPG)
• Wednesday: Div Ex-Date – Metrics Master Income Trust (MXT), Metrics Income Opportunities Trust (MOT)
  Div Pay-Date – Bendigo Bank (BEN), Ramsay Healthcare (RHC), Wesfarmers (WES)
• Thursday: Div Ex-Date – Ardea Real Outcome Fund (XARO)
  Div Pay-Date – CSL (CSL), Suncorp Group Limited (SUN)
• Friday: N/A

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.

Dovish policy continues and employment data surprises.

Central bank policy meetings were in abundance last week with the Federal Reserve, Band of England and Bank of Japan all sitting.

But it was very much a case of same story different week.

As we have come to expect, central banks continue to sing from the same hymn sheet declaring interest rates are set to remain at historic lows until inflation and employment are sustainably tracking their desired targets.

No matter how much confidence or direction central banks continue to provide, bond markets continue to slide with yields on 10 Year US Treasury Notes now at 14-month highs of 1.72%.

Bond markets and investors are seemingly calling out this central bank rhetoric which says that economic fundamentals have a long way to go, instead believing that economies are recovering at a faster rate than central banks are willing to admit.

It is somewhat counterintuitive because investors are reducing exposure to bonds and other fixed income assets believing interest rates will eventually rise (2023/2024) at which time these higher yielding products will become more attractive for inclusion in defensive portfolios.

Investing and portfolio management should always be long-term focused. Volatility and market drawdowns are some of the pitfalls investors need to deal with as they seek to grow their asset base.

Despite the selloff in bond markets (the benchmark Bloomberg Ausbond Composite Bond Index is currently down -3% for 2021) we remain fully committed to the fixed income allocations of portfolios given the diversification it provides.  

A -3% drawdown in equity portfolios tends to occur far more quickly than a -3% fall in bond markets.

We continue to navigate this challenging environment by favouring bond funds that have limited duration risk which minimises the negative effect that rising interest rates will have on bond prices.

The Ardea Real Outcome Fund (HOW0098AU/XARO) has returned +4.1% in the past 12 months and remains our preferred exposure in this space.

What did the central banks say?

The Federal Reserve kept rates unchanged but said it was becoming more upbeat about the future of the US economy increasing its expectations for 2021 growth to be around 6.5%.

This is a material upgrade from the Federal Reserve’s previous expectation of around 4.2% with the latest round of government stimulus (US$1.9t) a key driver in the higher revaluation.

Further boosting sentiment, the Fed expect unemployment to fall to 3.5% in 2023 which would take the overall figure back to pre-pandemic and fifty-year lows.

Despite a few more members of the Federal Open Market Committee (FOMC) becoming more hawkish on the future direction of rates, the Federal Reserve maintains that inflation is unlikely to surpass 2% by 2023 which remains below its target.

Essentially this means that current rates and accommodative monetary policy remains in place until either the Federal Reserve’s inflation expectations rise or actual inflation rises.

Current indications suggest this will likely be some time in 2023.

The Bank of England (BoE) likewise kept rates on hold at 0.1% and agreed to maintain its target stock of asset purchases at £895b.

The dovish tone set by the Federal Reserve was mirrored by the BoE which also upgraded its outlook for the UK economy.

The BoE said that news surrounding “near-term economic activity had been positive” and that “recent plans for the easing of restrictions on activity may be consistent with a slightly stronger outlook for consumption growth.”

The critical statement suggesting the BoE remains committed to its dovish monetary policy stance was clear when it said the short-term prospect may have improved but little has changed in the medium term.

Finally, the Bank of Japan (BoJ) left rates unchanged at -0.1% whilst agreeing to adjust its monetary easing program to respond to the pandemic and keep on track towards its goal of 2% inflation.

It is clear that central banks believe we are moving in the right direction, but rate hikes remain some time away. Economies are rebounding nicely following the coronavirus downturn, however, the expansionary phase we currently find ourselves in has further runway before policy settings are likely to be adjusted.

Employment Data beats

Locally, employment data released last week shocked everyone in a good way.

Expectations had been for the unemployment rate to fall to 6.3% in February so the 5.8% unemployment rate released from the Australian Bureau of Statistics (ABS) was a complete shock.

The economy added 88,700 jobs, exceeding expectations of 30,000 jobs meaning the employment market grew by nearly three times expectations. This was undeniably an incredibly strong figure with the number of employed Australians now reaching pre-COVID levels.

The participation rate held steady at 66.1%.

Certainly, the winding back of the JobKeeper wage subsidy at the end of this month will have a material impact on employment data going forward so we would caution against anyone thinking that we are close to returning to full employment.

We will have a better concept of the ‘true’ employment market in a few months when JobKeeper has fully rolled off and any month-to-month fluctuations have stabilised somewhat.

ASX Weekly Wrap

The ASX200 underperformed the global benchmark last week falling -0.9% relative to the MSCI International World Index which fell -0.3% in AUD terms.

Iron ore prices dipped -6% to trade US$162/tonne which led to miners selling off -4% whilst oil prices fared little better falling -6% with Brent oil retreating to $64/barrel.

In a more ‘risk-off’ week for equities traditional ‘defensive sectors’ such as utilities (+2.2%) and telcos (+1.8%) led the market higher whilst consumer discretionary stocks advanced +1.1%.

The best performing stock in the PRIME Australian Equities Growth SMA last week was Telstra (TLS) which rallied +4.6%.

Whilst there was limited news on TLS specifically it was a case of investors rotating away from growth stocks (specifically the tech sector) and finding other avenues to invest their capital.

TLS is a known ‘bond proxy’ so rising bond yields tend to see increased flows in TLS as rising bond yields make companies who have positive cash flows and free cash flows more attractive.

Importantly for TLS investors, the 8c distribution comprising a fully franked 5c interim dividend payment and further fully franked 3c special dividend payment will hit cash accounts this Friday.

On the flip side the worst performing stock in client portfolios was BHP Group (BHP) which fell -6% on account of the slide in the iron ore price.  

Looking ahead

Monday 22th March 2021 – Friday 26th March 2021

• Monday: US Chicago Fed National Activity Index (FEB)
• Tuesday: US Existing Home Sales (FEB), UK Unemployment Rate (JAN)
• Wednesday: AU Markit Manufacturing PMI (MAR), US New Home Sales (FEB), Durable Goods Orders (FEB), UK Inflation Rate (FEB)
• Thursday: US GDP Growth Rate Q4, Weekly Jobless Claims
• Friday: US PCE Price Index (FEB)

Friday 19th March, 5pm values

Friday 19th March, closing values

Key dividends

Monday 22th March 2021 – Friday 26th March 2021

• Monday: Div Ex-Date – Blackmores Limited (BKL), NRW Holdings Limited (NWH)
  Div Pay-Date – ANZPG (ANZPG), ANZPH (ANZPH), WBCPF (WBCPF), WBCPH (WBCPH), WBCPJ (WBCPJ)
• Tuesday: Div Ex-Date – Carsales.com Limited (CAR)
  Div Pay-Date – Altium Limited (ALU), BHP Group Limited (BHP), Challenger Limited (CGF), REA Group (REA), Sims Limited (SGM), WBCPE (WBCPE)
• Wednesday: Div Ex-Date – Virtus Health Limited (VRT)
  Div Pay-Date – ANZPE (ANZPE), ANZPF (ANZPF), ASX Limited (ASX), Fortescue Metals Group (FMG), Sonic Healthcare (SHL), Woodside Petroleum (WPL)
• Thursday: Div Ex-Date – Cochlear Limited (COH), Healius (HLS)
  Div Pay-Date – Downer EDI Limited (DOW), Medibank Private Limited (MPL), Newcrest Mining (NCM), Oil Search Limited (OSH), Santos Limited (STO)
• Friday: Div Pay-Date – AGL Energy Limited (AGL), L1 Capital (LSF), Origin Energy (ORG), Telstra Corporation (TLS)

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.

More stimulus, improving outlook & portfolio considerations.

Global equity markets rallied for a third straight week last week climbing +1.8% on the back of a third round of fiscal stimulus being passed in the US House of Representatives.

The US$1.9t stimulus package seeks to provide those Americans impacted by the COVID-19 pandemic with a one-off US$1,400 cheque as well as extending the US$300 weekly emergency unemployment benefits into early September.

This latest round of fiscal stimulus drove the S&P 500 higher rising +2.6% whilst the Dow Jones Index traded record highs rising +4% and the Nasdaq climbed +3%.

Further boosting sentiment was a better-than-expected US jobs report which continues to point to further signs of recovery in the underlying economy. Payrolls increased by 379,000 in February compared to expectations of a 200,000 rise whilst January’s payrolls were revised upwards in another sign of strength.

It was a very strong set of numbers with February’s employment close to doubling expectations and culminated in the unemployment rate falling to 6.2% from a previous recording of 6.3%.

Since the beginning of February bond yields have been a central theme to market commentary having widened from just over 1% for six consecutive weeks to now yield 1.62%.

The rationale for the widening in bond yields is quite straight forward.

Investors believe the economy is tracking ahead of central bank expectations and the likely response from central banks, in this case the Federal Reserve, will be to wind back on its accommodative monetary policy and raise interest rates.

We continue to see the risk of this occurring in the near term as low.

The Federal Reserve is on record stating that unemployment and inflation have a long way to go before they are sustainably meeting their targets and interest rate hikes are highly unlikely. Remember it was not long ago that Fed Chair Jay Powell stated, “we are not even thinking about thinking about raising rates.”

Further supporting our theory was the release of core inflation data in the US last week which rose +0.1% and was below estimates suggesting broader inflationary pressures are not a near term threat.

We remain very conscious of the widening in bond yields given interest rates and risk-free rates are key determinants of future values for equities. However, we remain confident the outlook for equities remains strong with the latest stimulus cheques a likely benefit for business and service industries.

Australian outlook

The domestic outlook continues to look bright.

Not only was reporting season overwhelmingly positive on an earnings and dividend front but strengthening business conditions and upward revisions to GDP forecasts paint an optimistic future.

Last week we saw business confidence rise to its highest level since early 2010 whilst business conditions returned to multi-year highs after slipping in the previous month with trading, profitability and employment conditions all marking solid improvements

Conditions remain very strong in retail, wholesale, mining and professional services, while construction, personal services and transport conditions continue to lag.

Elsewhere, capacity utilisation and capex continue to rise and have now exceeded pre-virus levels and their long-run averages – an encouraging sign that the turnaround in business conditions and steady improvement in confidence is translating to higher capacity utilisation and increased investment.

The outcome of such encouraging data translates into GDP uplifts.

Westpac has brought forward its COVID economic recovery assessment lifting its 2021 GDP growth forecast to 4.5% from 4%.

Key components of growth being household consumption, business investment and dwelling construction were all surprisingly strong in the previous quarter’s GDP accounts and based on this momentum have been upgraded. WBC expect 1.6% growth in March 2021 which would exceed December’s growth by 0.4%.

ASX Weekly Wrap

The ASX200 underperformed the global benchmark last week but still managed to record gains of +0.8%.

Travel and tourism stocks were well bid following the Federal Government’s announcement of a $1.2b tourism package to support Australian aviation and smaller regional destinations.

Corporate Travel (CTD) rose +14% whilst Flight Centre (FLT) and Webjet (WEB) were also major beneficiaries rising +8% and Qantas (QAN) added +4%.

Consumer discretionary stocks was the best performing sector in the market rising +4% ahead of industrials which climbed +3.7% higher.

The best performing stock in the PRIME Australian Equities Growth SMA last week was News Corporation (NWS) which rallied +7% and which goes ex-dividend 9c per share today.

Whilst there was limited news out last week Executive Chair Rupert Murdoch did acquire an additional 500,000 shares via trust which always bodes well for investor sentiment.

Following on from a very strong set of numbers reported in last month which showed Q2 net income of US$261m well ahead of forecasts, NWS shares have now rallied +29% in the past two months.

Whilst we remain confident in NWS’s ability to continue executing on its strategy, we took the opportunity following the strong share price rally to reduce 1% of our exposure.

Stocks to consider

With half year reporting season all wrapped up we are now able to look more closely at some stocks that we think performed well on an earnings basis but which for some reasons did not see the share price rallies that we thought their results deserved.

Stocks at the top of our list include Waypoint (WPR), Brambles (BXB) and Woolworths (WOW).

WPR shares fell -7% in February despite what we interpreted as a decent set of numbers. WPR is a $1.8b real estate investment trust that owns 474 retail petrol and convenience stores operating under the Coles Express banner.

What attracts us to WPR besides its relative underperformance to the market in the last two months is that it has one of the longest weighted average lease expiries (WALE) in the ASX200 at approximately 11 years and its service stores are running at 100% occupancy.

WPR generates attractive cash flows and has 3% annual rental revenue increases built into its lease agreements.

The stock offers up an attractive dividend yield of around 6.6% at current levels and a very conservatively geared balance sheet. We think this is one of the stocks that has been left behind throughout reporting season.

Of the others BXB was -6% weaker during February despite group revenues climbing +7%. We thought the result was overall quite positive with underlying profit rising +7% despite higher operating costs due to the rising costs of inputs.

BXB is a stock that we believe is well leveraged to a continued reopening of the global economy through its global pallets business CHEP.

Finally, Woolworths (WOW) shares fell -3.6% following the 1H release and we thought this was overly harsh. The strength of the WOW franchise and the upcoming spinout of its Endeavour drinks business are likely catalysts to see the stock rerate higher.

WOW modestly underperformed the index and its elevated levels of online sales growth prove this is a business that has certainly emerged from COVID in a structurally stronger position.  

Looking ahead

Monday 15th March 2021 – Friday 19th March 2021

• Monday: AU RBA Speech, New Home Sales (FEB), CN House Price Index (FEB), Retail Sales (FEB)
• Tuesday: AU RBA Meeting Minutes, House Price Index Q4, US Retail Sales (FEB)
• Wednesday: AU Westpac Leading Index (FEB), US Industrial Production (FEB), Building Permits (FEB)
• Thursday: AU Unemployment Rate, US Federal Reserve Interest Rate Decision, UK BoE Interest Rate Decision
• Friday: N/A

Friday 12th March, 5pm values

Friday 12th March, closing values

Key dividends

Monday 15th March 2021 – Friday 19th March 2021

• Monday: Div Ex-Date – ANZPE (ANZPE), ANZPF (ANZPF), Chorus Limited (CNU)
  Div Pay-Date – CBAPD (CBAPD), CBAPE (CBAPE), CBAPF (CBAPF), CBAPG (CBAPG), CBAPH (CBAPH), CBAPI (CBAPI)
• Tuesday: Div Ex-Date – News Corporation (NWS), TPG Telecom (TPG)
  Div Pay-Date – Amcor (AMC), Alumina Limited (AWC), Legg Mason Western Asset Bond Fund (BNDS), Qualitas Real Estate Income Fund (QRI)
• Wednesday: Div Ex-Date – BWX Limited (BWX)
  Div Pay-Date – NABPH (NABPH), VG1 (VG1)
• Thursday: Div Pay-Date – Computershare Limited (CPU), Platinum Asset Management (PTM), ResMed Inc (RMD), WBCPI (WBCPI)
• Friday: Div Pay-Date – Iress Limited (IRE), Jumbo Interactive (JIN)

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.

In this Wealth Forum, we spoke in length about Reporting Season Review and Portfolio Positioning Update, presented by Simon Madder – Managing Director & CEO, Marcus Bogdan – Australian Equities Specialist, Mark Johnson – Chairman of Investment Committee & Partner, Cameron Morcher – Partner and Guy Silbert – Investment Manager.

Presenters:

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

Slide deck:

• Reporting Season Review & Portfolio Positioning 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.

Dividend season, rates on hold and post reporting season wrap up.

A slightly earlier edition of the Weekly Market Update this week with the Labour Day public holiday in Victoria next Monday.

The ASX200 outperformed global equities to the close of trade on Thursday rising +1.3% compared to the MSCI World Index which fell -0.2% in AUD terms.  

Having been on track to return an impressive +2% gain for the week the ASX slipped -0.8% on Thursday as another rise in global bond yields saw growth stocks, in particular tech stocks fall further.

It is worth mentioning Thursday’s negative return of -0.8% occurred on the same day that many of the market’s largest companies went ex-dividend.

Given shares typically fall by the value of the dividend when they trade ex-dividend, the ASX200 return is actually more favourable than this number suggests.

For context, the ASX200 Accumulation Index which assumes dividends are reinvested (thereby negating the impact of a company going ex-dividend) fell -0.5% on Thursday.

Some of the bigger names to go ex-dividend this week were BHP Group (BHP), CSL (CSL), Rio Tinto (RIO) and Woolworths (WOW) which together account for 17.6% of the ASX200 benchmark – hardly an immaterial amount.

Investors can expect receipt of these dividends in the next 3 – 6 weeks.

RBA

If you ever needed more confirmation that central banks are here to help just look at the RBAs commitment to its bond purchasing program.

As global bond yields continue to spike the RBA stepped in as a natural buyer whilst offering to buy up to $4bn of government securities ranging from 2024 through to 2028.

Given all the talk about rising bond yields and near-term inflationary shock this is hardly the reaction of a central bank that is about to cut back on its accommodative monetary policy and hike rates.

The RBA kept rates at 0.1% when it met on Tuesday and whilst it maintained the overall size of its $200b QE bond purchasing program it did state, “the bank is prepared to make further adjustments to its purchases in response to market conditions.”

The RBA also reiterated its expectation that the cash rate was unlikely to rise until 2024 “at the earliest”.

We remain firm believers that core inflation data and employment data are still significantly below the level required for the RBA to commence winding back its accommodative monetary policy stance.

Post Reporting Season Review

On Thursday PRIME hosted its first webinar for 2021 diving through some of the major themes that emerged post reporting season.

All members of the PRIME Investment Committee were in attendance and the discussion was driven by Marcus Bogdan – our Australian Equities specialist.

It is a very concise summary of where we are at in the cycle, what performed, what was disappointing and what the current outlook is.

Highlights from the webinar include:

• ASX 200 now trades only 5% lower than its pre-covid peak as the V-shaped recovery has been driven by material increases to earnings per share (EPS) expectations of around +16%.
• The unprecedented response from accommodative monetary policy and fiscal support has and continues to insulate economies from the impacts of COVID-19.  
• Economic data at global and domestic level has been better than expected. GDP data and unemployment rates both locally and abroad continue to trend in the right direction.
• The rollout of a vaccine has so far been a success, particularly in the northern hemisphere where immunisations are rising and infections falling.
• The ASX200 is currently trading on a 12-month forward price-to-earnings multiple of 20x – well above its long-term average. The primary driver of this has been a low interest rate environment.
• The banks delivered results well above expectations leading the wider market in upgrades to earnings forecasts. Strong capital positions, greater credit growth and stabilisation of net interest margins were the major drivers.
• The rally in iron ore has underpinned strength and earnings upgrades across the commodities sector.
• The PRIME Australian Equity Growth SMA has actively reduced its exposure to growth stocks as the economic recovery continues to play out rotating more towards value stocks.
• We believe cyclical stocks are best suited to a prolonged recovery and will outperform growth with Commonwealth Bank (CBA) and Westpac Bank (WBC) our preferred exposures.
• Health care stocks on a longer-term view will continue to benefit from an aging demographic with CSL (CSL) and Ramsay Healthcare (RHC) well placed to deliver future growth

Looking ahead

Monday 8th March 2021 – Friday 12th March 2021

• Monday: CN House Price Index (FEB), Retail Sales (FEB)
• Tuesday: AU RBA Meeting Minutes, US Retail Sales (FEB)
• Wednesday: AU House Price Index Q4, Westpac Leading Index (FEB)
• Thursday: AU Unemployment Rate (FEB), US Fed Interest Rate Decision, UK BoE Interest Rate Decision
• Friday: US Weekly Jobless Claims

Thursday 4th March, 5pm values

Thursday 4th March, closing values

Key dividends

Monday 8th March 2021 – Friday 12th March 2021

• Monday: Div Ex-Date – Kogan.com (KGN), NABPF (NABPF), NABPH (NABPH), Nick Scali (NCK), Northern Star Resources (NST), REA Group (REA), Ramsay Healthcare (RHC)
  Div Pay-Date – Metrics Master Income Trust (MST), Metrics Income Opportunities trust (MOT
• Tuesday: Div Ex-Date – Qube Holdings (QUB), Sonic Healthcare (SHL), WBCPI (WBCPI)
  Div Pay-Date – Mineral Resources (MIN)
• Wednesday: Div Ex-Date – Brambles Limited (BXB), Costa Group (CGC), Regis Healthcare (REG), Reliance Worldwide (RWC)
  Div Pay-Date – Ansell Limited (ANN)
• Thursday: Div Ex-Date – ANZPG (ANZPG), ANZPH (ANZPH), NABPE (NABPE), South32 (S32), WBCPF (WBCPF), WBCPH (WBCPH), WBCPJ (WBCPJ)
  Div Pay-Date – Domino’s Pizza Limited (DMP), VGI Partners Limited (VGI)
• Friday: Div Ex-Date – Tassal Group (TGR), WBCPE (WBCPE), WiseTech Global (WTC)
  Div Ex-Date – Tassal Group (TGR), WBCPE (WBCPE), WiseTech Global (WTC)

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.

We’ve noticed many SMSF trustees are making the decision to invest in Precious Metals. We’re going to explain how to do it in a compliant manner.

The first item to ensure is that the asset is acquired in the name of the super fund, not in your personal name. A copy of the tax invoice for the acquisition must be supplied to us as supporting evidence.

Next we need to consider the annual fund audit. Gathering sufficient audit evidence to support existence, where bullion is not a collectable or personal use asset by definition, is clearly simpler when it is stored in an independent specialist storage facility than when stored at the members home.  

The Audit guidance provides that the auditor may physically inspect assets or examine documentation to support their existence at year end.  However, it’s not always practical to conduct a physical inspection for bullion in the first instance. 

It is more common to consider other sources of evidencing first, and then move to the conduct of a physical inspection of bullion, when these are not able to be provided. 

Where bullion represents less than 5% of the fund and the above existence evidence is not able to be provided, we suggest the Trustee/s provide a written declaration detailing the bullion held by the fund, and confirming bullion was on hand during the period and at year end i.e. attest to the existence of the bullion at year end.In the instance, where we rely on this declaration by the trustee to support existence, this should be communicated to the trustees in the audit completion letter.

Auditors may then request that the Trustee/s provide some evidence to support the existence of the bullion for the audit of the fund for the following financial year.

Where the above evidence is not able to be provided to support existence, and the bullion is greater than 5% of the fund, Part A of the audit report will include a limitation of scope in respect of the evidencing of the existence of this asset.

An example of this is noted as follows:

As many of you are aware, we work with external Auditors and it’s important to ensure you are aware of your obligation with regard to satisfying audits for Bullion.

If you’d like to discuss further, please don’t hesitate to contact Karen Dezdjek or Olivia Long.

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 Modern Manufacturing Initiative (MMI) is now open providing co-funding for manufacturing projects across 2 of the 3 targeted manufacturing streams:

• Manufacturing Integration Stream (MIS): helps Australian manufacturers to access domestic and global supply chains and produce and distribute quality products and high value services into them
• Manufacturing Translation Stream (MTS): helps Australian manufacturers translate high quality research and ideas into commercial outcomes

There will be 6 grant opportunities that align with the National Manufacturing Priorities, which are:

• Space – Currently open for applications. Applications close 22 March 2021 5PM AEDT
• Medical Products – Currently open for applications. Applications close 29 March 2021 5PM AEDT
• Resources Technology and Critical Minerals Processing – Currently open for applications. Applications close 1 April 2021 5PM AEDT
• Food and Beverage – Applications will open for this sector in the coming weeks.
• Recycling and Clean Energy – Applications will open for this sector in the coming weeks.
• Defence – Applications will open for this sector in the coming weeks.

The Manufacturing Integration Stream (MIS): Funding for businesses to integrate their products and services into domestic and global value chains

The MIS supports projects that integrate Australian businesses into domestic and international value chains, propelling their goods and services into new markets. It provides co-funding to encourage linkages between local businesses and domestic and international firms, increasing scale, supply capacity, and the ability to innovate. It will also facilitate the adoption of product standards and greater sharing and transfer of knowledge.

Eligible activities include (but are not limited to):

• Collaborating and networking with business and researchers to build capacity and deliver products, processes or services with domestic and international market potential into domestic or global value chains
• Identifying domestic and international market opportunities for your existing or new products, processes or services, and developing and implementing export strategies
• Developing a product, process or service for market that is competitive, meets export standards and is ready for distribution into domestic and global value chains
• Undertaking high value-add activities such as design, branding, distribution and after sales services that are part of domestic and global value chains and markets
• Engineering activities associated with improving or qualifying a product to reach the standard of a supplier for a domestic and/or international company or value chain
• Acquiring, constructing, installing and commissioning of new machinery and specialist equipment to facilitate the manufacturing project to access new markets, customers and value chains
• Workforce training and accreditation required to undertake the manufacturing project.

To read further on the eligibility criteria, please click here

The Manufacturing Translation Stream (MTS): Funding for businesses to translate research and ideas into commercial outcomes

The MTS provides businesses with funding to support projects that translate high quality research into commercial outcomes and support businesses to scale-up and be more competitive and resilient. It provides co-funding to support businesses to adopt new technologies and improve their manufacturing processes to boost productivity and competitiveness.

Eligible activities include (but are not limited to):

• Collaborating and networking with other businesses to develop your product, process or service for commercialisation and establish market potential
• Research collaboration as it relates to the validation/viability of later stage commercialisation
• Early stage commercialisation activities, including undertaking market research and developing market strategies, seeking investment opportunities, creating distribution strategies and undertaking other high value add activities such as design, branding, distribution and after sales services
• Developing a product, process or service for commercialisation using high value manufacturing techniques or processes such as rapid prototyping, specialist engineering, or using state-of-the-art manufacturing plant
• Acquiring, constructing, installing and commissioning of new machinery and equipment to facilitate the project
• Fitting out of new premises and altering or extending existing premises to facilitate the manufacturing project
• Workforce training and accreditation required to undertake the manufacturing project

To read further about the application process and eligibility criteria please click here.

If you have any questions regarding these grants and require any assistance on processing your applications, please do not hesitate to contact the Prime Accounting and Business Advisory team via the following contact details:

Brisbane / Sydney
Matthew Smith – matts@primefinancial.com.au
John Driscoll – johnd@primefinancial.com.au
Sean Fincham – seanf@primefinancial.com.au

Melbourne
Matt Murphy – mattm@primefinancial.com.au
Brendan Brown – brendanb@primefinancial.com.au
Simone Quin – simoneq@primefinancial.com.au
Paul Minieri – paulm@primefinancial.com.au
Jade Nicholls – jaden@primefinancial.com.au
Stuart Thomson – 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.

Below are updates of R&D Tax Incentive Program and the Export Market Development Grant (EMDG)

R&D Tax Incentive Program

R&D tax incentive applications for the tax year ended 30 June 2020 are due for lodgement with AusIndustry by 30 April 2021.

This is a use it or lose it deadline !

For companies that still haven’t lodged their annual claim this should be viewed as a priority in order to unlock valuable non-dilutive funding into their business that could assist with the disruption caused by the COVID-19 virus and transitioning out of Jobkeeper.

Prime are happy to talk to any clients that may not have claimed in the past and require an eligibility assessment.

Export Market Development Grant

Applications for expenditure incurred during the current financial year ended 30 June 2021 under the existing EMDG programme can be lodged with Austrade from 1 July 2021.

This long running grant provides exporters with an annual reimbursement of up to $150k – based on 50% of their eligible promotional expenses. We are still waiting for confirmation if the export earnings test will apply to applicants submitting their 3^rd – 8^th applications.

There are several expense categories including online advertising, appointment of overeas reps and securing overseas patents and trademarks. 

Prime can assist clients navigate the existing EMDG programme and start planning and collating documentation to submit their final annual claim from 1 July 2021 to gain access to the available funding as soon as possible.

We are also waiting for final announcements regarding the operation of the new EMDG scheme that will apply for expenditure incurred after 1 July 2021 and will hopefully be able to advise details shortly.

For any enquiries or support:

Melbourne team

Brisbane team

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.