Wall Street Retraces | Crown Tumbles

21 October 2020

There was little in terms of fresh news, as US stocks turned lower as investors assessed the latest progress toward a government spending bill. Speaker of the House Nancy Pelosi set a Tuesday deadline for a stimulus vote after lengthy discussions over the weekend with Treasury Secretary Steven Mnuchin, though the Republican-controlled Senate has signalled opposition to a large bill. We think a fiscal deal this side of the New Year is unlikely, especially pre-election.

In Europe, Italy’s cases swelled to a daily record as the government prepares new containment measures, while globally COVID cases topped 40m.

Crown Resorts (CWN:ASX)
Crown Resorts fell -8% yesterday after announcing AUSTRAC had identified "concerns in relation to ongoing customer due diligence, and adopting, maintaining and complying with an anti-money laundering/counter-terrorism financing program”.
According to sources, AUSTRAC started a "compliance assessment" at Crown in September 2019, which was focused on the management of customers identified as "high-risk and politically exposed persons" at the group's Melbourne casino. Evidence given to the NSW inquiry last week by an independent director of Crown and the chairman of Crown Melbourne, said there were ~600 suspicious transactions over four years, accounting for just 0.3% of all transactions. However, according to Nathan Lynch, the Asia-Pacific manager of regulatory intelligence at Thomson Reuters, the number of breaches would matter less than the potential harm, particularly given it involved high-profile customers.

CWN shares have rebounded since the initial covid-19 sell off and were higher after delivering a better than expected result for the 2020 financial year. While we have generally maintained a positive view on CWN’s business with quality assets and growth potential from its Sydney resort, this is another disappointing stumbling point for the company. In terms of valuation CWN is no longer “cheap” and we remain on the side-lines with a HOLD rating.


Australia & New Zealand Market Movers

The Australian market started the week on a positive note (ASX 200 Index +0.9%) as Victoria eased lockdown restrictions and on news reports of progress in the development of a COVID-19 vaccine.
Stocks leveraged to the reopening trade were among the market's best performers, after Victoria eased travel and business restrictions – such as Transurban, Flight Centre, Webjet, and Qantas.

In stock news, Ampol (formerly Caltex) was higher despite its third-quarter profit slumping almost three quarters as a significant improvement in returns from convenience retailing failed to offset the heavy loss in refining.

The CEO of Australia’s largest bank, CBA, in a speech was highlighting rising levels of confidence which are placing a much higher floor under house price falls, with CBA now forecasting a 6% fall from peaks vs a previous 10-12% decline. He said: “We don't think they are going to fall by anything like we were expecting just a few months ago" and the “the housing market overall has been an area that has surprised us on the upside”.

The New Zealand market was lower on Monday (NZX 50 Index -0.4%) as the electricity sector led a modest market decline with Contact and Meridian once again weighing on the market return. The electricity sector has been posting strong gains since late September, when the Labour Party said it will offer NZ Aluminium Smelters a lower transmission price to keep it running for several more years, but investors have been taking some profits over the last week.
Metlifecare is set to officially de-list from the stock exchange as the Takeovers Panel said it would issue a "no objection" statement at yesterday's High Court sitting on the proposed scheme of arrangement.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​The week ahead is dominated by corporate earnings in the US with key names reporting including Netflix, Tesla, Procter & Gamble, and Coca-Cola.
  2. In the US we will also see the release of 3rd quarter GDP figures and the last US presidential debate.
  3. Locally, CSL will host an investor briefing while Mirvac and AMP will provide quarterly updates and a number of companies are hosting AGM’s including Origin Energy, Crown, Magellan Financial, Webjet, and Qantas.


There was little in terms of fresh news, as US stocks turned lower as investors assessed the latest progress toward a government spending bill.

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