Monthly Archives: August 2016

Crown shares after raids

Australia is forecast to enjoy at least another two years of solid economic growth, extending a quarter of a century without recession and dodging the deflation that dogs so many of its rich world peers.

The latest Reuters poll found analysts expect the $1.6 trillion economy to expand by 2.9 per cent this year, unchanged from the July poll.

Growth was seen at 2.8 per cent next year and 2.9 per cent in 2018, a result that would see Australia capture the Netherlands’ crown for the longest run without a recession.

Surging export volumes, record low interest rates and an historic boom in home building have already underpinned growth of 3.3 per cent in the year to June.

A recent revival in the value of commodity exports also promises to boost company profits, national income and tax receipts in coming months. Surging prices for coal alone could eradicate the country’s trade deficit and add 2 percentage points to nominal GDP.

The worst also seems to be over for a long slump in mining investment, which subtracted a huge 1.6 percentage points from GDP growth in the year to June.

“The Australian economy’s output performance, in aggregate, has been resilient in what remains a challenging environment,” said Westpac senior economist Andrew Hanlan. He is tipping economic growth of 3 per cent for both 2016 and 2017.

“That said, downside risks persist. World growth is sluggish, and global financial sector vulnerabilities remain.”

At home, jobs growth has turned sluggish and heavily weighted to part time work, restraining wage growth and adding to downward pressure on inflation.

Indeed, underlying inflation slowed to a record low of 1.5 per cent in the year to June and looks likely to have remained very subdued in the third quarter

Accelerating global growth means we are nearing the end of the Australian “profits recession”, write Credit Suisse strategists.

Aggregate earnings per share for the ASX 200 has dropped 13 per cent since the third quarter of 2014, but an expected pick-up in global economic growth in 2017 should help inspire single-digit EPS expansion in the year ahead. This backdrop of climbing earnings should help the benchmark top 200 index grind higher to 6000 by December 2017, the broker reckons.

“The coming end of the profits recession suggests a new phase of the market cycle,” they write. “The premium associated with growth stocks should diminish as profits growth becomes less scarce.”

Lowly valued companies are set to benefit, the strategists write, including the likes of Bluescope Steel, Caltex, Computershare, Macquarie Group and Myer. They add department store owner to their model portfolio.

The analysts also bring a global perspective to the ASX sectors, and they note:

  • Australian heath care and  infrastructure stocks trade at a biggest premium to their global peers.
  • Aussie gold stocks are closing the valuation discount to their peers.
  • Banks’ price-to-book premium is justified by the superior return on equity.
  • Meanwhile, the Australian fund managers are some of the most expensive in the world. But they are also some of the most profitable.

The broker notes that the commodities “mini-cycle” continues, with more spending by China and an increase in infrastructure projects there should boost steel demand and support iron ore prices. Credit Suisse’s forecasts are:

  •  Iron ore could trend lower in the next calendar year to $US45/t because of a developing oversupply.
  • The coal price rally is likely to peak out in 4Q16 then drift lower in 2017.
  • Despite the recent plunge in the gold price, investment demand could be supported by the uncertainty of the US presidential election and earlier (and harder) than-expected Brexit timeline. We forecast $US1325/ounce by Dec 2016 and $US1450 by end 2017.
  • Oil had a flat Q3 but started the fourth quarter with a price rally. Lower inventories in the US and flat production had set the stage for a rally before the OPEC output freeze agreement. The OPEC agreement would pose as a significant upside risk for prices, but currently it lacks crucial details and our analysts maintain crude forecast at $US44 a barrel in December 2016 and $US55 a barrel at the end of 2017.

Interesting credit card for your business

Stop wasting money on interest fees! If you’re carrying a balance on one (or several) credit cards, you’re probably paying interest fees each month. Or if you need to make a large purchase that you can’t pay off for a while, you’ll likely start racking up substantial interest on your card. The fees might not seem like that big of a deal, but over time they can add up to a lot of dough and make it much more difficult and expensive to pay down your balance. Did you know there’s a way to avoid paying interest on your credit card balances? By taking advantage of a card with a long 0% intro APR, you can essentially get a free loan and pay down your balance without spending a dime in interest.

The question is, which cards offer the most competitive features and longest 0% intro APRs? We’ve done the research and found the best. In fact, with some of these cards the 0% intro APR is so outrageously long you’ll pay absolutely no interest until 2018!!! Our list of the top 0% intro APR cards is below.

Citi Simplicity Card

With an amazing 21-month 0% intro APR on balance transfers and purchases, the Citi Simplicity Card (a NextAdvisor advertiser) will take you all the way into 2018 without paying a dime in interest. It sounds crazy, but it’s true. There is a 3% balance transfer fee, but given the lengthy 0% intro APR period, it still might be worth transferring a balance to this card (to find out, use our free Balance Transfer Calculator). Additionally, there are no late fees, no annual fee and no penalty rates imposed. This means if you happen to be late with a payment, you won’t be penalized with a higher ongoing interest rate after the 0% intro APR period is over. It does require excellent credit, so if you’re in more of the good credit range consider Chase Slate, which is discussed below. We really like Citi Simplicity because of its super-long 21-month 0% intro APR, lack of late fees and $0 annual fee.

Citi Diamond Preferred Card

Similar to Citi Simplicity, the Citi Diamond Preferred Card (a NextAdvisor advertiser) features a spectacular 21-month 0% intro APR on balance transfers and purchases. It also has a very reasonable ongoing interest rate after the 0% intro period is up. If you’re transferring a balance, you will need to pay a 3% balance transfer fee, but paying no interest until 2018 could make it worthwhile. Take a look at our free Balance Transfer Calculator to see whether this card will work best for your needs. Additionally, the Citi Diamond Preferred Card has absolutely no annual fee and provides a free monthly Equifax FICO Score. You do need excellent credit to qualify for the card, so if you’re not necessarily in that range check out one of the cards listed below that only require good credit.

Chase Slate

If you’re worried about paying a fee to move your balance from your current card(s) to a new card, worry no more. Chase Slate has absolutely no balance transfer fees for transfers completed within the first 60 days your account is open, which means you can transfer your balances from cards with high ongoing APRs to Slate without paying a cent in fees. Plus, you’ll enjoy a 15-month 0% intro APR on both balance transfers and purchases. And if you happen to have a ding or two on your credit reports, Chase Slate is available to those with good credit (rather than “excellent” credit), which is typically a credit score above 670. All this, and there is no annual fee.

Citi Double Cash Card – 18 month BT offer

With a nice balance of cash back rewards and an 18-month 0% intro APR on balance transfers, the Citi Double Cash Card – 18 month BT offer (a NextAdvisor advertiser) hits the spot. There is no annual fee, and the card is available to those with good credit (670+ credit score), but there is a 3% balance transfer fee. Citi Double Cash’s cash back potential is substantial, with an effective 2% back on every single purchase. You’ll get 1% back when you make the purchase and the other 1% when you pay for it, making this an ideal card for making a big purchase you may not be able to pay off for a while. You’ll also receive a free monthly Equifax FICO score, helping you to track your credit over time. Altogether this is a winner of a card, mixing generous cash back with a lengthy 0% intro APR and no annual fee.

Discover it — 18 month Balance Transfer Offer

Combining cash back rewards with a 18-month 0% intro APR on balance transfers and a low ongoing APR, Discover it packs a big punch. Transfers incur a 3% balance transfer fee, but this is pretty standard. Discover it also offers a 6-month 0% intro APR on purchases. Plus, you’ll earn 5% cash back in categories that rotate each quarter (on up to $1,500 in purchases) and 1% back on everything else. Some of the past 5% categories include Amazon.com, gas and restaurants. There is no annual fee and you’ll get a free TransUnion FICO Score each month. As an added bonus, Discover it is available to those with average credit which is usually considered to be a credit score of 670 and up.

Rate gap is interesting for investor mortgage

Banks are being forced to cut the interest rate premium they are charging new property investors, as lenders compete more fiercely in the investor mortgage market once again.

The mortgage market was split in two last year, after banks resumed charging property investors interest rates that were about 0.25 percentage points higher than owner-occupiers, something that had not occurred since the 1990s.

Now, however, the interest rate gap is narrowing, with several banks recently lowering what they are charging new landlord borrowers.

The change, which will only affect new customers, and not those with existing loans, comes after recent figures have also pointed to new lending rising for property investment – a market where the banking regulator has capped annual loan growth at 10 per cent in response to fears of a housing bubble forming.

Even so, financial regulators say they are more comfortable with lending standards in the housing market, including to investors. That is because banks have cut back on interest-only lending and are assessing borrowers’ living costs more realistically, key regulators said last week.

Dutch lender ING Direct on Friday was the latest to announce a cut-price mortgage deal for investors, offering new investors with a deposit of more than 20 per cent an interest rate of 3.99 per cent.

AMP, which was forced to briefly stop writing new loans last year after growing too quickly, is also charging property investors 3.99 per cent if they borrow more than $750,000. That is about 0.1 percentage points higher than its owner-occupier rate promoted to mortgage brokers.

Macquarie Group cut its fixed rates for investors earlier this month, with a three-year rate of 4.09 per cent.

Mortgage brokers say the trend is gathering pace, and the Reserve Bank observed the bout of competition in its Financial Stability Review on Friday. It played down the risks from banks targeting property investor lending, which it has previously seen as a “speculative” influence on the housing market.

“Competition for investor loans in particular has increased, and banks have recently narrowed the pricing differential between investor and owner-occupier loans,” the RBA said.

“But the tightening of lending standards in recent years has meant that the profile of this new lending is lower risk than it was a year or so ago.”

Australian Prudential Regulation Authority chairman Wayne Byres on Friday said the banking industry had “appreciably improved” lending standards, saying all lenders now stress-tested to make sure new customers could cope with interest rates rising to 7 per cent.

“There is no shortage of competition for the business of home loan borrowers, but we are keen to see the industry’s competitive instincts directed towards pricing, product features and customer service, rather than pursuing market share by reducing the quality of loans written,” Mr Byres said.

Earlier in the year, some banks also relaxed their deposit requirements for property investors in an attempt to fire up sagging rates of credit growth.