Stock Takes: Pumping out the cash

The US Federal Reserve's decision to pump a further US$600 billion ($763.95 billion) into the economy through asset purchases has been good news for its sharemarkets.

The Dow Jones Industry Average yesterday rose 0.2 per cent to 11,215.13 - the highest level since the week Lehman Brothers filed for bankruptcy in September 2008. The Standard & Poor's 500 Index also rose 0.4 per cent to a six-month high of 1197.96.

Major sharemarkets around the world are expected to be boosted by the news although local commentators expect a "zero to negligible" impact on the New Zealand market.

But the quantitative easing, which was broadly in line with expectations, has boosted the New Zealand dollar.

Westpac market strategist Imre Speizer says it pushed the kiwi up about half a cent yesterday morning to US78c and has been a strong driver of the NZ currency over the past couple of months.

A surprise comment by the Fed that it could pump even more cash into the economy is expected to continue to weigh on the greenback.

Speizer reckons the kiwi could reach a new post-float high against the US dollar before Christmas by rising over US82.2c.

"Data from the [New Zealand] economy has also started to pick up in the last few weeks in a noticeable turnaround. As world currency traders pick that up they will start buying the kiwi in droves."

Of course the caveat on it all is that there are no major global shocks between now and then.

AUDITORS DEPART

Brent King's Investment Research Group has been dumped by its auditors and is under the eye of the Companies Office for its audited accounts.

The investment research firm, which counts Sir William Birch as its chairman, said its auditors, Deloitte, had resigned this week.

The resignation comes after IRG's directors questioned the qualified opinion made by Deloitte in their late annual report.

"We note that auditors are required to express their opinion and that is a good thing for the market.

"It does not mean that their opinion is correct nor does it mean that the company need agree with it," the directors stated in the report.

Deloitte gave a qualified opinion after struggling to get enough information out of IRG to confirm whether it had complied with acceptable accounting practice or International Financial Reporting Standards.

IRG also said this week it had been in communication with the Companies Office concerning the audit and the qualified opinion.

"The communication relates to whether the current audit qualifications comply with the Financial Reporting Act. The Companies Office current view is that they do not fully comply."

IRG has said it will take steps to ensure it does comply, including the possible removal of the audit qualification. IRG shares last traded at 0.1c.

ALL LOVED UP

Westpac Bank's New Zealand business is trying its hardest to make an emotional connection with its staff and customers and has launched a magazine called love RED.

It's been a tough ride for banks and financial institutions with much trust and confidence lost in the sector.

Westpac NZ chief George Frazis freely admits that "love" is not a word that readily comes to mind when talking about banking but says the mag is designed to showcase the values and attitude of the bank when it comes to helping its customers. The bank also has "earning the love of our customers" listed as one of its top 10 goals.

Stock Takes is not sure "love" is a word that can ever be connected with a business that takes a large chunk of money away on a regularly basis for mortgage, insurance and other parts of modern life.

Westpac is not the only corporate trying to win over the public through the friendly magazine approach. Telecom launched its Co. offering last year.

NZX-listed shares in Westpac NZ's parent company, Westpac Banking Corp, closed up 30c on Wednesday at $30.50 after reporting cash earnings of A$5.879 billion. Yesterday they closed down 20c on $30.30.

NO LOVE LOST

Meanwhile across the Ditch the Aussie banks, which own all of New Zealand's major banks, are facing increased political heat.

Commonwealth Bank of Australia, which owns the ASB locally and is headed up by Kiwi Sir Ralph Norris, came under fire this week after it increased mortgage rates by 45 basis points - nearly double the Australian' Reserve Bank's 25 basis point increase on Tuesday.

Collectively the Aussie banks have made A$22 billion in the last year and one opposition politician has suggested the Government should be stepping in to control rising mortgage rates.

A class action case against the ANZ Bank over penalty fees is also progressing. A court timetable for the action which is seeking to reclaim A$50 million in fees paid by 27,000 ANZ Bank customers over the past six years was due to be set down yesterday.

GROWTH SPURT

Milford Asset Management has nearly doubled its staff in the past year after hiring another investment manager to join the team.

The company, which was founded in 2003, has appointed Australian Marc Whittaker as head of Australasian equities research.

Milford executive director Anthony Quirk says the firm has hired seven staff in the past year, bringing its team to 13 of which six are investment managers.

He reckons Milford now has one of the biggest investment teams in town.

The boutique firm has had some big wins this year, gaining a mandate to manage money from the New Zealand Superannuation Fund and launching its own KiwiSaver scheme.

Milford already has a transtasman fund and an Australian-only fund could now be in the pipeline.

DOWN IN THE DUMPS

New Zealand Farming Systems Uruguay has unveiled a huge earnings downgrade just weeks after cutting its management contract ties with PGG Wrightson.

The dairy farming firm had expected an ebit (earnings before interest and tax) loss of US$5 million but downgraded it to US$16 million this week. The company has blamed the drop on higher than budgeted feed costs, difficult weather and fertiliser delays.

But Stock Takes finds it hard to fathom how the company got it so wrong.

Last month at the annual general meeting chairman John Parker told shareholders the last year had put the company "back on track".

He outlined revenue growth of 42 per cent on the back of a 52 per cent rise in milk production and a rise in average milk prices.

"There is clearly still a long way to go before the company can be said to be fulfilling its potential, but the latest year contained a significant measure of progress on that journey," Parker told shareholders.

The only thing Stock Takes can point to is the change in ownership. Singapore firm Olam International, which now owns 78 per cent after its completed takeover in September, was critical of Farming Systems' forecasts right from its first approach.

Olam's Vivek Verma told the Herald back in July that the company's forecasts were "extremely ambitious and probably not realistic". But perhaps the downgrade wasn't as bad as some had expected. Farming Systems rose 2c to 63c on the news. It closed flat on 63c yesterday.

STILL ON TRACK

Oyster Bay's shares spiked up more than 15 per cent this week as it passed the earliest date which takeover bidder Delegat's Group could make its offer formal.

Delegat's, which already owns 54.9 per cent of the NZAX-listed company, gave notice of its plans to make a $1.80 per share offer on October 18.

Under takeover rules the earliest it can make the bid formal is 14 days after the initial indication which would have been Tuesday.

Oyster Bay shares rose from $1.60 to $1.85 on the day although a formal offer has yet to come in.

Delegat's chairman Robert Wilton said the bid was still on track.

"We are just getting the ducks lined up. Watch this space," he said yesterday.

Delegat's shares closed down 1c on $1.84 yesterday.