Australia

US hot money’s new crush: Canadian, Japanese banks

25 Jun 2012

It’s hard to blame US money market funds for seeking safer harbors than the turbulent euro zone. Yet Canadian and Japanese lenders - as well as the National Australia Bank - must remember not to become too enamored with the attention from their fair-weather friends.

Qatar’s cash cow can ride out a global gas glut

3 May 2012

The emirate’s grip on gas markets will weaken by the second half of the decade due to oversupply. That might knock some of the swagger out of the energy-dependent state. But Qatar’s low production cost, long-term contracts and significant market share should limit the fallout.

Australia’s rate policy dragged in two directions

2 May 2012

The central bank’s rate cut looks like a response to a slowing China, which will weigh on Australia’s commodity exports. Yet that exposes it to new risks. Australia has built up a reliance on foreign investors to fund its current account deficit. Lower rates could scare them away.

Australian GDP shows vulnerability to cooler China

7 Mar 2012

Mining investment plateaued in the fourth quarter. That left the economy at the mercy of weak housing. Investment may pick up again for a while. But Chinese policy suggests slower increases in demand for stuff from the ground. A linchpin of Australian growth looks wobbly.

Rio Tinto is brave to open dividend gusher

9 Feb 2012

The miner’s 34 pct dividend hike is the latest sop to investors after the disastrous Alcan deal of 2007. Rio can afford it for now. But with capex and cost pressures increasing, Rio needs the super-cycle to continue. Sticking with share buybacks would have maintained flexibility.

Build cost inflation threatens new gas economics

13 Jan 2012

Australia’s latest liquid natural gas mega-project will cost 70 pct more than initially envisaged. The French and Japanese backers should still be able to justify the $34 billion price. But cost inflation makes life more difficult for U.S. groups planning big LNG export facilities.

Australia still vulnerable despite triple-A crown

29 Nov 2011

Investors love the low official debt, high yields and strong exports to China. A Fitch upgrade makes Australia one of 14 nations with top marks from all three rating agencies. But there’s kryptonite: indebted households and reliance on foreign investors and high commodity prices.

M&A gives no reprieve for China’s global lawyers

25 Nov 2011

Mallesons of Australia plans to merge with King & Wood, a Chinese rival. It sounds harmonious, but won’t do much to change the fact that foreign counsels get short shrift in the People’s Republic. When the WTO let China in, it largely forgot lawyers. Their prospects look bleak.

Qantas vindicated in workforce battle

4 Nov 2011

The Australian airline’s decision to ground its fleet a week ago looked like commercial madness, and followed tactical errors by the CEO. But a resolution with recalcitrant unions is in sight. The gamble will pay off as long as Qantas wins back passenger confidence.

Rio Tinto takes bold step into aluminium rehab

17 Oct 2011

The miner’s $38 billion purchase of Alcan in 2007 was a financial disaster, and aluminium’s prospects still look poor. Rio is making some amends with a plan to sell off a third of the business. The strategy is sensible and now looks as good a time as ever to sell.

Foster’s gets full measure from SABMiller

21 Sep 2011

Boozy rows between the Australian and UK brewers are history. Like most hostile M&A, this has turned friendly with a sweetener from SAB. Torrid markets and the absence of rival bidders mean Foster’s has done especially well to extract a punchy $10 bln-plus cash offer.

Foster’s comeback to SAB bid just a sharpener

23 Aug 2011

The Aussie brewer promised shareholders an A$500 million payout. That was enough to nudge its shares past SAB’s hostile offer, but is less than it can afford. With SAB yet to make a formal bid, Foster’s has left itself plenty of room for something stronger later.

SAB may yet brew up friendly Foster’s takeover

17 Aug 2011

The UK-listed brewer is canny to go hostile with an unchanged $10 billion bid days ahead of its Aussie target’s results. Peace may yet break out. Hostile takeovers are hard Down Under, and Foster’s has no white knight. With a small sweetener, both sides may get what they want.