ASX News LIVE | ASX to Rise; Optus and TPG Sign Sharing Deal, Another Star Head Steps Down

The Australian share market rebounded on today, with the ASX 200 climbing 0.81% to close at 7637.4. This recovery came after a 1.4% decline in the Friday session, which was triggered by concerns over the US Federal Reserve’s outlook for rate cuts after weaker-than-expected GDP growth figures.

Over the weekend, the core personal consumption expenditure (PCE) data from the US showed that sticky inflation persists in the economy.

Despite this, strong earnings out of the tech sector supported the belief that corporate earnings will be able to hold up in the late-cut environment.

This sentiment carried over to the ASX today, with 10 out of 11 sectors closing higher, led by the interest-rate-sensitive real estate sector, which gained 1.7%. ASX tech stocks also performed well, following strong earnings reports from Microsoft and Google’s parent company, Alphabet, which pushed the Nasdaq up more than 2% last week, marking its best week since November.

In local business news, wealth giant Perpetual rose 3.1% to $24.02 after confirming it was in talks to sell its wealth and trust business to buyout firm KKR.

Boss Energy was among the top performers on the benchmark, gaining 9.1% to $4.78 after unveiling its first quarterly report since beginning uranium production at its Honeymoon project in South Australia, in which it said operations were ‘exceeding feasibility study estimates‘.

The Star Entertainment Group added 6.4% to 41.5 cents as Chairman David Foster stepped down from the embattled casino operator amid an ongoing state inquiry into its Sydney operations. The board appointed Anne Ward as the new chair.

TPG Telecom [ASX:TPG] has forged a strategic network agreement with its rival, Optus. This collaboration aims to significantly extend TPG Telecom’s mobile network reach, utilizing both 4G and 5G technologies, to encompass 98.4%of the Australian population.

This ambitious goal will more than triple the company’s regional mobile site footprint.

Under the terms of the 11-year deal, TPG Telecom is expected to compensate Optus with a substantial sum of $1.17 billion. Several of TPG Telecom’s mobile sites may be transferred to Optus’ ownership as part of the arrangement.

In FY24, TPG anticipates recognizing non-cash charges ranging from $230 million to $250 million, attributable to the impact on 755 network sites. Despite this substantial charge, the company’s EBITDA guidance for FY24 remains unchanged.

Megaport [ASX:MP1] has revised its financial projections upward for the fiscal year 2024 (FY24), anticipating higher revenue and earnings than previously forecasted.

The company has upgraded its FY24 EBITDA guidance, now expecting it to fall within the range of $56 million to $58 million. This is up from the earlier guidance of $51 million to $57 million.

Additionally, Megaport has revised its FY24 revenue guidance upward. The company now confirms that it anticipates revenue to be in the range of $190 million to $195 million, marking a roughly 25% increase compared to the full-year revenue achieved in 2023.

These upward revisions in financial guidance weren’t enough to shift the share price today, with the share trading at $13.86, down -3.01% this afternoon.

The Japanese yen is making waves on Twitter (X) and financial papers as the currency continues to languish at a 34-year low against the dollar.

I thought I’d go into a little background into what’s happening and why it’s important for international markets.

Japan has been caught in an economic quagmire for over three decades due to expansionary monetary policies and excessive debt accumulation.

The root of the problem traces back to the early 1990s when the country experienced an asset bubble burst, leaving behind worthless assets but substantial loans that needed to be repaid.

To revive the economy, the Bank of Japan (BOJ) adopted a zero or negative interest rate policy and began printing money out of thin air through quantitative easing measures.

This allowed the government to borrow extensively without worrying about repayment costs. The government’s debt level ballooned to over 260% of GDP, an unsustainable burden.

The BOJ’s easy money policies facilitated a massive yen carry trade, where investors borrowed cheaply in yen and invested the proceeds in higher-yielding foreign assets like U.S. Treasuries.

This carry trade is estimated to have reached over $1 trillion in scale.

However, as the yen kept depreciating due to Japan’s debt-driven monetary policies, the brokers facilitating the carry trades demanded more collateral from investors to hedge their currency risk exposure.

This forced investors to borrow even more yen from the BOJ to obtain the collateral, exacerbating the yen’s devaluation in a vicious feedback loop.

Now, Japan finds itself stuck in this ‘doom loop’.

Raising interest rates will increase the government’s debt servicing costs, necessitating more debt issuance and money printing by the BOJ to repay creditors.

But this further devalues the yen, triggering more collateral calls on the carry trades and intensifying the loop.

The unwinding of the bloated carry trades also risks deflating asset bubbles in foreign markets that were inflated by the invested yen proceeds over decades.

One circuit breaker for this doom loop would be lower US yields/weaker US macro environment, but the large problem is that the BOJ’s main tools for tackling the Yen’s weakness will indirectly add upward pressure to global yields.

They’re stuck between a rock and a hard place, and speculators know it.

With economic prospects unclear, Japan faces tough choices and no easy way out of this prolonged monetary predicament.

The ASX 200 is up +0.78% at 7,635.2 today, as almost all sectors bounced from Friday’s sell-off.

At midday, only the Staples (-0.1%) sector is down, while Real Estate (+2.17%) is leading the charge in this morning’s trading, with all top 20 market cap real estate stocks up today.

At noon, Pexa Group was the top performer in that sector, gaining +6.13%, while the top players were all up around 2%+.

Boss Energy is one of the strong gainers this morning after releasing its latest quarterly report that shows its Honeymoon project is already exceeding feasibility study figures.

The top midday earner is Pacific Smiles Group, up 17% after announcing a buyout SID deal signed with National Dental Care (NDC), which has offered Pacific Smiles a cash consideration of $1.90 cash per share.

This is above the previous offer from private investment company Genesis Capital, who offered $1.75 per share.

Perpetual confirmed today that it’s in exclusive talks with buyout investment giant Kohlberg Kravis Roberts (KKR) to acquire the ASX wealth giant’s trust and wealth units.

‘There is no certainty of reaching a binding agreement, or that any transaction would proceed. Any transaction would be subject to conditions including regulatory approvals,’ the company said today.

So far the divestment of Perpetual’s wealth and corporate trust business has hit a few complications around Australian Tax Office bills and delisting the units but its widely expected to go ahead, although questions remain if KKR bid is the final word.

Perpetual has called on both Bank of America and Goldman Sachs to sell each unit after the group announced a strategic review late last year.

The troubled casino operator Star Entertainment Group [ASX:SGR] announced David Foster’s sudden departure as Chairman.

The board has appointed board member Anne Ward as interim chairman.

This is not the first leadership change we’ve seen from Star in recent months. The company has also been searching for a new CEO since March when both the CFO and CEO jumped ship.

Markets have reacted positively to the news, with the share price up by +3.2% in trading this morning.

Good morning. Charlie here,

The ASX 200 opened up +0.06% 7,580.1, as US stocks broke a four-week losing streak and saw their biggest weekly gain since November.

Strong earnings from the big tech players helped lift the Nasdaq and S&P500, with well-received earnings from Alphabet (+11.6%), which announced its first dividend.

Tesla (+14.4%), which managed to jump despite a 9% drop in first-quarter revenue was helped by the already rock-bottom expectations from investors who bought heavily in after-hours trading, expecting a local bottom to the share price.

Microsoft (+1.8%) topped analyst expectations with a strong US$27.6 billion in EBITDA, driven by healthy growth in its cloud offerings.

Meanwhile, concerns over the falling value of the yen have some market watchers sounding the alarm on Bond prices, more on this later.

Wall Street: S&P 500 +1.02%, Dow +0.40%, Nasdaq +2.03%.

Overseas: FTSE +0.75%, STOXX +1.37%, Nikkei +0.81 SSE +1.17%.

The Aussie dollar rose +0.09% to US 65.38 cents.

US 10-year bond yields -4bps to 4.66%.

Australian 10-year bond yields +6bps to 4.46%.

Gold flat at US$2,336.72, while Silver rose +0.1% to US$27.22.

Bitcoin fell -0.70% to US$63,047, while Ethereum is flat at US$3,258.

Oil Brent fell -0.57% to US$88.99, while WTI Crude fell -0.44% to US$83.48.

Iron ore fell -0.66% to US$116.70 a tonne.