RBA & Trade Tension | Crown’s VIP Losses

20 March 2019

Global markets were mixed overnight, with shares on Wall Street mostly lower following a Bloomberg report that US officials are concerned China is pushing back against American demands in trade talks. While there is no set date for a trade deal, what seems to have encouraged markets this year is that neither side appears to have the appetite to escalate tensions further – through tit-for-tat tariff increases. 

Closer to home, yesterday saw the release of minutes from the last Reserve Bank of Australia (RBA) meeting. The path for the RBA is not clear cut, and economists have noted the strong tension between employment and economic growth in the minutes from the March meeting. The RBA noted that "domestically, there continued to be tension between the ongoing improvement in labour market data and the apparent slowing in the momentum of output growth in the second half of 2018". While there are growing calls for interest rate cuts, it is still possible the RBA could move up or down (although we think it is more likely rates move lower rather than higher in Australia).


Stock in Focus: Crown Resorts (CWN:ASX)

Shares in CWN fell on its 2019 interim result, with weak revenue and earnings weighed down by soft VIP gaming. VIP numbers were down across all three casinos for Crown, due to a slow-down in China’s economy, cracking down on conspicuous consumption, and further regulations around money transfers for high spending visitors. This wasn’t specific to Crown as casinos in Macau and Singapore who are reliant on Chinese VIP gamers are also feeling the pinch.

As a result, group revenue for the half was down -7.3% from last year and normalised operating earnings fell -6.5% from last year down to $418.8m. The weak VIP turnover was partially offset by better performance from Crown’s Melbourne property as well as its hotel division which reported modest revenue growth across as they continue to benefit from booming tourism into Australia which is seeing strong demand for their luxury accommodation.

We currently have a BUY rating on Crown.



Australia & New Zealand Market Movers

The Australian share market was a touch lower on Tuesday (ASX 200 index -0.09%) as the ASX continued its volatile run, rising and falling throughout the session before closing lower. In stock news, Westpac said it would be exiting the personal financial advice sector and that group executives George Frazis and Brad Cooper would be exiting the bank. Part of the financial advice business is being sold to Viridian with the consideration reported to be less than $50 million. Caltex shares fell after announcing a challenging first quarter, marred by weak refining margins, a shutdown at its oil refinery and a dip in convenience retailing returns.

The New Zealand market lost ground yesterday (NZX 50 index -0.19%) as the NZX retraced from a record in relatively quiet trade. Gentrack led the declines as investors fretted over the Brexit implications for the UK exposed utilities software developer. News that private civil construction firm Fulton Hogan's first-half earnings fell on challenging Australian projects and softness in New Zealand added to the growing nervousness among investors about the building sector. The Warehouse Group rose after reporting a 5.7 percent increase in underlying first-half earnings as its Noel Leeming brand performed well.


3 Things Markets Will be Watching this Week

  1. The US Federal Reserve makes an interest rate decision Thursday morning AU/NZ time.
  2. Thursday also sees the release of official NZ economic growth (GDP) figures.
  3. Tuesday sees the release of minutes from the Reserve Bank of Australia’s last meeting, as well as Aussie house price data which is expected to confirm a suspected slowdown.


Have a Great Day,



The path for the RBA is not clear cut, and economists have noted the strong tension between employment and economic growth in the minutes from the March meeting.

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