Cash Rate remain at 75 basis points

80 Collins Street. Photo credit: Multiplex.

This week on the front cover:

“RBA upbeat despite fire, virus crises”, the Australian.

“RBA boss Philip Lowe warns of ‘excessive’ pricing for housing, shares, corporate bonds; markets push out rate cut timing; cheap money can get too risky”, the AFR.

“Cruise ship quarantined, 200 Aussies trapped”, the AFR.

“Treasurer doesn’t rule out economic contraction; ASX set to tumble; $A close to 11 year low”, the AFR.

“Virus crisis could cost nation $13 billion”, the Australian.

News Summary:

After its first meeting of 2020, RBA announced that the cash rate will remain unchanged at 0.75%. Despite the bushfire and coronavirus outbreak, RBA did not downgrade its growth forecasts for the year and maintained a positive outlook on the economy. “The central scenario is for the Australian economy to grow by around 2¾ % this year and 3% next year, which would be a step up from the growth rates over the past two years”. The RBA further stated that “The overall outlook is also being supported by the low level of interest rates, recent tax refunds, ongoing spending on infrastructure, a brighter outlook for the resources sector and, later this year, an expected recovery in residential construction.” An extended period of low rates is expected with the market pricing in another rate cut later this year. 

Domain reported a strong auction clearance rate this week in Sydney (80%) and Melbourne (74%). This is an increase from Sydney (77%) and Melbourne (65%) last week despite an increase in listing numbers demonstrating strong demand from first-home buyers and owner-occupiers.

Prices for premium medium-density homes (townhouses and low-rise apartments) are expected to increase by up to 10% in 2020 due to limited supply. According to Knight Frank, the share of medium-density homes due to complete by 2022 has declined by 47% nationally compared to the last three years. Limited development sites in blue-chip suburbs and challenges in obtaining building approvals are key challenges faced by developers delivering more stock. (Nila Sweeney, 4/2/2020, Medium-density home prices to climb 10pc)

The AFR reported a mega build-to-rent project by Greystar (US property giant) in South Yarra. The $400 million mixed-use development includes office space (5,000 square metres), retail (1,000 square metres) and more than 500 build-to-rent apartments. (Ingrid Fuary-Wagner, 6/2/2020, Mega build-to-rent project headed for South Yarra)

Law firm Ashurst has signed a 10-year lease commencing in June 2021 at new office development, 80 Collins Street. Joining other law firms, including Herbert Smith Freehills and DLA Piper, Ashurst will take up a total area of 4,427 square metres across 4 floors. Dexus acquired the site in May 2019, for a total consideration of $1.5 billion. The site includes an existing A-Grade office tower with major tenants including the Minister of Finance and Cenitex (North Tower), a brand-new office tower (South Tower), retail podium (21 retail and dining tenancies) and a 255-room boutique hotel. Since the acquisition, Dexus has increased pre-committed leased space at the South Tower from 63% to 97%. Only one floor is left for lease, and the development of the South Tower is expected to complete by mid-2020.

Australian Borders to Shut

Photo credit: Nick Lenaghan

This week on the front cover:

“Borders shut, flights cut as crisis grows”, The AFR

“Schools isolate students in danger of China virus”, The Australian.

“A year ago mortgage brokers faced losing their business. Today, as housing heats up, they’re ‘in the land of opportunity’ again. Financial advisers, not so much”, The AFR.

“Mallacoota firefighters lead city’s Australia Day parade”, The Age.

News Summary:

  • Foreign visitors from China will no longer be permitted to enter Australia due to the outbreak of coronavirus in China (Michael Smith and Tom McIlroy, 1/2/2020, Australia bars foreign arrivals from China). The United States, Singapore and Mongolia have also imposed temporary restrictions on visitors who visited the country. Russia shuts its land border with China while Japan imposed restriction on visitors from Hubei. (Jake Rudnitsky and Evgenia Pismennaya, 31/1/2020, Russia Closes Border With China to People, Not Goods).
  • Ouson (Chinese backed developers) has listed the World Trade Centre on the market through Savills and AsheMorgan is reported to be one of the interest parties. Acquired in 2017 from Abacus Group, KKR and Riverlee for $267.5 million, the current deal is estimated to pass $380 million. The World Trade Centre is located in Melbourne’s riverside precinct with significant redevelopments in the pipeline. This includes Mirvac’s planned build-to-rent apartment project at the former Melbourne Convention Centre and Riverlee’s Seafarers Place development at Northbank (the Seafarers Place development consists of a 5-star hotel, function centre and 150 residential apartments) (Nick Lenaghan, 30/1/2020, AsheMorgan eyes up World Trade Centre).
  • Despite controversies about loopholes in LIT fees and commission structure as well as the riskiness of its underlying assets, fund managers continue to tap into the LIT market for primary and secondary capital raisings. Listed Investment Trusts (LIT) are closed-ended vehicles incorporated as trusts. LIT distributes surplus income to investors and can provide investors with a steady income stream.
  • Metrics is reported to be seeking an additional $638 million, taking its MCP Master Income Trust (ASX:MXT) FUM to almost $2 billion. MXT invests in corporate loans in Australia and makes a small allocation to commercial real estate loans through its unlisted real estate debt fund. The fund has written more than 150 corporate loans to date. The fund targets a return of cash rate plus 3.25% p.a. (Jonathan Shapiro, 28/1/2020, Metrics debt fund nears $2b as it taps LIT market). The fund is currently trading above its net asset value.
  • Neuberger Berman is seeking an additional $750 million for its NBI Global Corporate Income Trust (ASX:NBI) (Jonathan Shapiro, 21/1/2020, Neuberger Berman kick-starts debt fundraisings). The fund has a target return of 5.25% and invests in high yield corporate bonds globally (with significant positions in US and France). The average credit rating of the portfolio is BB- and its top 5 sector exposures are Media (9.8%), Services (9.4%), Telecommunications (8.5%), Healthcare (6.8%) and Leisure (6.2%).
  • Pimco has confirmed plans to launch its first closed-ended corporate debt listed investment trust by March 2020. The fund’s investment strategy includes targeting less liquid corporate debt opportunities and will be managed by Dan Ivascyn, Rob Mead and Alfred Murata.
  • MaxCap and Metrics have provided a $210 million a senior debt loan to fund the acquisition and construction of Eynesbury Estate by Resimax Group. The transaction represents one of the larger non-bank senior debt deals in Australia. Eynesbury Estate is 35km west of Melbourne CBD, located between Wyndham and Melton in Melbourne’s growth corridor. The project is planned to deliver over 10,000 residential lots and with an estimated gross realisable value of over $2 billion. 

Neobanks in Australia

Image credit: Australian FinTech

This week on the Front Cover:

“ASX7000: low rates drive shares ahead of profits”, AFR.

“Costello warns investors of risky assets boom”, AFR.

“RBA urged to hold fire on rate cuts”, The Australian.

“BlackRock to dump shares in thermal coal”, AFR.

“Big four banks’ $13.8b global funding blitz”, AFR.

“Taxpayer cash used as election slush fund”, The Age.

News Summary:

Following a successful capital raising, neobank Volt announced its plans to float on the Australian Securities Exchange this year. Volt’s recent Series C funding ($70 million) was oversubscribed, with 176 investors participating in the raising. Volt is currently in discussions with investors to raise a further $50 million in Series D funding before the planned IPO in late 2020. Despite receiving APRA full banking license last year, the three-year-old bank is still currently in beta mode and will expand beyond its deposit product by launching personal loan products in June and home loans in August/ September. (Aleks Vickovich, 18/1/2020, Neobank Volt raises $70m, plans to float)

Judo Bank, Australia’s new SME challenger bank is confident about increasing its market share this year. In an interview with the Australian, Judo Bank’s Co-CEO Joseph Healy and the former head of business banking at NAB explains his plan to boost lending to over $3 billion in the next 12 months driven by an estimated $90 billion unmet demand for credit in the SME sector. Judo bank has already attracted over 100 business bankers from major banks since June and is looking at expanding its offices to Perth and Adelaide this year (Judo Bank is currently based in Melbourne and has offices in Sydney and Brisbane). Since its establishment in 2016, Judo Bank has successfully raised over $540 million from investors including Abu Dhabi Capital Group, OPTrust, Myer Family and Ironbridge Capital. The bank holds APRA full banking license and has written over $1 billion in loans. Judo’s average loan size is around $2m and has the ability to write loans up to $15 million.

The Open Banking Regime commencing in July this year will allow customers of accredited fintech companies and banks to share and transfer personal data with third parties. The regime will mark Australia’s first step towards an open data economy and hopes to encourage competition and innovation in the industry. Despite this, the Open Banking rules are said to be too costly for new fintech companies. It is estimated to cost up to $100,000 for companies to get accredited by ACCC. Further education regarding the regime and a structured data consent management system needs to be implemented to ensure a successful rollout of the regime. (James Eyers, 15/1/2020, Open Banking Rules too tough, says start-ups)

Building permit applications accepted by building surveyors on or after 1/1/2020 will be hit by additional building permit levy. The new building permit levy will fund cladding rectification works in Victoria and is estimated to raise over $300 million over the next five years. The new cladding rectification levy will apply to building work in metropolitan areas with a cost of works greater than $800,000. The rates are outlined below.

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Domestic and residential buildings will be exempted from the levy. (Victoria Building Authority)

How to pass your CA/ CFA® Program?

Photo credit: Good-E-Learn

Organise a study plan

  • The program materials can be overwhelming and a study plan can assist in tackling them in an organise manner. A study plan can also assist in tracking your study progress and track if you are falling behind on any topic areas.
  • Be realistic when creating your plan and stick to the plan! There are no short cuts in covering the materials!

Complete practice questions and the work examples provided by the Institute

  • Practice practice practice. Many candidates have expressed a common reason to failing the exams is due to the lack of practice. Only reading the materials is not enough as you need to know how to apply the theories and concepts.

Maintain mental wellness

  • Studying while working fulltime can be extremely stressful. As such, it is critical to maintain a balanced approach despite a hectic schedule! Make time for friends and family and spare some time doing something that makes you happy.
  • I found exercising a great way to reduce stress and improve concentration.
  • Both the CA and CFA® Program are a marathon not a sprint.  Keeping mentally and physically fit is key to completing the program.

Find a support network

  • Studying can be a lonely process. Having a support network helps motivate and encourage you through the journey.

Gain support from your employer

  • Most employers are supportive of further studies. As an example, the big 4 accounting firms typically provide study and exam leave for you to prepare for the exam.

Find your best time of studying

  • Everyone works best in different parts of the day. Find when YOUR time is – where you are the freshest and work most efficiently. For some, it may be early in the morning or late at night for others.
  • Block out that time as your study time. Being able to devote 100% of yourself does wonder to study efficiency!

Latest in CES 2020

Photo credit: CES®

This week on the Front Cover:

“$2bn pumped into crisis relief; PM taps budget surplus to rebuild fire-hit communities, business; tax office to allow victims to defer payments”, AFR.

“Crisis a $5bn blow to economy; Insurance claims to top $1bn”, The Australian.

“Harry and Megan wave a royal goodbye”, The Australian.

“Ore exports drive trade surplus”, The Australian.

“Australia takes crown as top LNG exporter”, AFR.

“All Ords soars through 7000, surprise retail sales boost as markets hit records”, AFR.

News Summary:

This week marks the close of CES 2020, the world’s largest gathering for consumer technology. Held in Las Vegas, the annual conference attracts over 4,400 exhibiting companies and over 175,000 attendees across the globe. The conference provides a platform for entrepreneurs and companies to showcase ground-breaking technologies and innovations.

This week’s News Summary covers a brief overview of the key themes of the conference.

Steve Koenig, CTA opened the conference by redefining “IOT” – from “Internet of Things” to “Intelligence of Things”. This new definition describes how technology will influence business and culture through the consumerisation of Artificial Intelligence and the adding of intelligence across the economy, thus creating a web of “connected intelligence”. Following this theme, both Samsung and Mercedes highlighted their vision of the future.

Samsung

Samsung kicked off CES by introducing the “new Age of Experience” and Samsung’s vision of robots as “life companions”. HS Kim, President and CEO of Samsung Consumer Electronics Division further describes robots as “Intelligent robots that live by your side and react to your needs every day,” “Robots that know you, support you, and take care of you, so you can focus on what really matters.”

Samsung introduced Ballie at the conference, a mini-robot that understands people and follows users around their daily life. Ballie can assist users in managing their smart devices, track exercises, assist with housekeeping and even act as a companion to pets when the owner is away from home.

HS Kim introducing Ballie. Photo credit: CES®

HS Kim introducing Ballie. Photo credit: CES®

Samsung also introduced its concept of a smart home with its Family Hub Refrigerator (refrigerator that orders ingredients online and prepares meal recipes) and chef bots that provide an extra pair of hands in the kitchen.

Samsung is currently partnering with global real estate developers to develop smart buildings. A project in Seoul allows residents to call an elevator, turn out lights, manage deliveries and find parking spots through voice command. (Samsung Newsroom).

Mercedes

Introduced by Ola Källenius (Head of Mercedes-Benz Cars), Vision AVTR (Advance Vehicle Transformation) is Mercedes concept vehicle that embodies the future of luxury driving.

A collaboration with James Cameron (from the Avatar), Vision AVTR introduces a new way of connecting both humans and machines without the traditional driving stick or dashboard.

The concept car recognises the driver’s heartbeat and breathing and establishes a biometric connection with the driver through a centre console in the vehicle. Natural hand gestures brings the car menu onto the palm of the hand.

Digital neurons flow from the interior into the exterior of the vehicle to provide more intuitive control of the vehicle. A fully carbon-neutral vehicle, the concept car uses utilises composable fast-charging battery technology.

Melbourne is forecasted to be Australia’s biggest city by 2026

Photo credit: BBC.com

This week on the Front Cover:

  • “A state ablaze: PM sends in 3,000 reservists, fires to burn for two months, 1,000 rescued from blazes, locals airlifted from Omeo, navy on way, insurance claims may top $600m”, The Age.
  • “Share gain the best in 10 years spurred by surging global markets, three interest rate cuts with the potential of more rate cuts to come”, The Australian.
  • Treasurer warned on risky funds as listed funds are rife with poor performance and conflicted commissions, AFR.
  •  “The Reserve Bank is expected to slash interest rates to new lows this year to buttress a recovery in growth”, AFR.
  •  “Drop hurdle rates or risk missing out: investment expectations need to be cut”, AFR.
  • “North Korea ends nuclear pact”, The Australian.

News Summary:

  1. Melbourne is forecasted to be Australia’s biggest city by 2026, driven by strong interstate net migration, immigration and natural growth.
  2. The Australian reported the fastest national trough to peak recovery in Q4 2019 – Sydney and Melbourne rising by 6.2% and 6.1% respectively. The surge in capital value however forced yields to a record low – 3% in Sydney and 3.3% in Melbourne. (Andrew Wilson, 3/1/2020, House price surge biggest in a decade)
  3. AFR reported the rise of built-to-rent projects (BTR) in Australia. An established asset class in the US and UK, BTR are multi-unit buildings whereby developers rent out the building to households instead of selling the individual units. Current BTR projects in Australia include:
  • Smith Collective (Gold Coast) by UBS Asset Management, Grocon and JLL.
  • Element 27 (Perth) by Sentinel Real Estate.
  • Sydney Olympic Park (Sydney) by Mirvac.
  • Apartment block in Docklands (Melbourne) by Salta Properties.
  • Apartment block in Victoria Market (Melbourne) by Mirvac.

(James Dunn, 11/11/2019, Building to rent is now an asset class)

4. AFR reported that companies are urged to reduce return hurdles to reflect lower interest rates. According to Reserve Bank governor Philip Lowe, some companies have hardwired hurdle rates at 13% – 14% and does not want Australia to miss out on assets due to unrealistic hurdle rates. Chief executives pushed back stating that long term view of rates should to be taken and higher asset prices are reflective of increasing risks despite falling rates. (James Thomson, 3/1/2020, Drop hurdle rates or risk missing out:Sims)

5. AFR reported the following top private equity deals in 2019:

  • KKR acquisition of Arnott’s Biscuits from Campbell’s Soup ($3.2 billion).
  • Silver Lake acquisition of TEG from Affinity Equity Partners ($1.2 billion).
  • Quadrant acquisition of QMS Media ($572 million).
  • PAG acquisition of Craveable Brands from Archer Capital ($457 million).
  • Pacific Equity Partners acquisition of Horizon Global ($340 million).

The pathways to commencing your CA Program

Photo credit: NYU

To commence the CA Program, you will need to meet the minimum academic requirements as outlined by the Institute.

The Institute outlined several academic entry pathways to the program:

  • Accredited degree entry
  • Degree not accredited
  • Overseas qualifications entry
  • Accredited tertiary courses

The most straightforward pathway to starting your CA Program is through completing a CA accredited degree. The CA website lists the accredited degrees available and you should complete the subjects listed by CA to demonstrate competencies in each identified competency area.

Speaking to a course advisor during your first year of study can also help in ensuring that you include all mandatory subjects in your study plan.

If you do not meet the pre-requisite study requirements, you can complete further studies to close the gap. This can be done through the CA Foundation Course or an accredited conversion course.

Please note that before enrolling in any CA modules, you will need to be admitted as a provisional member. Processing times can take up to 20 business days (or more during peak periods). It would be a good idea to submit your application in advance of term commencement to ensure successful subject enrolment.

How to get a job in the big 4 accounting firms?

  • Network

Start networking in the first year of university (the earlier you start, the more practice you get!). By connecting with others, you can exchange ideas and gain career advice from experienced peers. Take the opportunity to learn about the working culture of a firm and what a specific job position encompasses.

An excellent place to start is by participating in career fairs, seminars and workshops organised by your university.

As an example, while working with the big 4 accounting firms, I often attend career fairs and university presentations alongside the recruitment team to share ideas and experiences. The team is friendly and are always happy to help!

  • Internships/ work experience

The best way to secure a graduate role is through an internship! Some students secure multiple internships across different organisations and functions. If you are in this fortunate position, you will be able to make a more informed decision when accepting a graduate role that best suits your interest.

All big 4 accounting firms have different pathways into the firm, including work experience programs for high school students, cadetships for university students etc. Try applying for one of these to get as much experience as possible.

  • Be open, genuine and interesting

Apart from good grades, employers are often looking for candidates with excellent soft skills and participation in extra-curriculum activities.

Think about how you can stand out amongst the other applications by demonstrating the skills and expertise that you can offer to the employer.

Not all accounting firms are the same, demonstrate a genuine passion not only in the role you are applying for but also in the firm that you are applying to.

Ask yourself, why do I want to work as an [auditor] in [PwC]. What attracts you to [PwC]. Why [audit]?

  • Keep a pulse on the economy

It is highly beneficial to keep a pulse on the economy. The Australian Financial Review is an excellent source of information.

It is quite often during an interview that the employer would test your knowledge of the latest news or seek your view on the latest topical issues.

  • Practice makes perfect!

Participate in practice/ mock interviews, especially if it is your first time attending an interview. A mock interview can boost your confidence and reduce anxiety by familiarising yourself in an interview setting.

You can also improve your communication skills, identify any weaknesses and gain feedback on your performance. Most university careers and employment department offers mock interview services.

What is the CA/ CFA® Program?

Photo credit: Investopedia.com

Chartered Accountant Program

The Chartered Accountant curriculum focuses on developing competencies in auditing, tax, management accounting and applied finance, as well as financial reporting.

Obtaining your Chartered Accountant designation is a requirement to progress in most of the professional accounting firms as well as a minimum requirement to secure a job in the industry as a qualified accountant.

Many CA work as a tax consultant, management accountant, business analyst and progress to C-suite positions.

The CA program an open book exam. The program has three semesters throughout the year and candidates are required to attend workshops organised by the Institute.

CFA® Program

The CFA® Program curriculum encourages candidates to be an ethical and effective investment management professionals. It focuses on investment tools, application of asset valuation techniques, and evaluation of portfolio management strategies.

The CFA® Program is a global examination. As such, all candidates around the world take the same rigorous exam and the qualification is recognised internationally.

Most graduates pursue a career in investment analysis and portfolio management, progressing into C-suite positions as CIOs or CEOs.

The average study hour is 300 hours per exam. From my experience, it is possible to pass the exams by devoting less hours than that, whilst some candidates study more than the 300 hours.T

The CFA® Program is a closed book exam, with 100% of the marks allocated to the final exam typically held once a year in June.

Both hold the highest credentials in the accounting and finance profession. I found them to be complementary.

Finovate Asia

Finovate Asia 2018 kicked off with a welcome address from Mr. Bernard Chan Pak Li, acting Secretary for Commerce and Economic Development, Hong Kong Special Administrative Region Government. Mr. Chan welcomed an exciting new era of financial innovation and highlights Hong Kong’s unique position in playing a role due to its fair and transparent regulatory regime, mutual access arrangements between the Hong Kong and Chinese financial markets as well as the Greater Bay Area Initiative.

Following that, Forrester Research set the scene with the importance of being ready for change and outlines a framework for digital transformation. Forrester Research predicted a rise of digital workers (RPA and AI) as companies including banks seek productivity improvements through increased operational efficiencies driven by automation and Artificial Intelligence.

A shift in mindset amongst banks on open banking technologies is further illustrated through Ovum’s research. It is stated that 88% of banks in Asia now recognises open API as part of its strategic plans with the majority believing that open API will lead to better products and services for customers.

PwC later shared the latest global crypto trend and provided an overview of the crypto-asset ecosystem, including traditional crypto-currencies, utility tokens, non-fungible tokens and stable tokens as well as security tokens which are a big focus in the ecosystem. PwC’s main concern is not a black swan event but the existence of ‘bad apples’ in which companies try to exploit the industry to make quick cash.

Other key themes consistent throughout the event include financial inclusion, blockchain, payments and digital banking.

Charles d’Haussy, Head of Fintech, Invest HK gave audience an overview of the latest developments in the Hong Kong fintech ecosystem. The key highlights include:

  • Latest fintech deployments in Hong Kong: common QR code standard, virtual banking license and trade finance on blockchain.
  • Hong Kong fintech priorities: cyber security, blockchain, wealth tech, insurtech, regtech and creditech.
  • Government initiatives: HKD 200k for HK SME to buy new technology, internship schemes, up to HKD 10m from the HK government to support R&D projects and the establishment of a co-investment fund to co-invest in start-ups.

The right balance of live demonstration from innovative cutting-edge fintech and curated discussions from global fintech leaders makes Finovate Asia an insightful event for fintech enthusiast, venture capitalist, industry leaders and entrepreneurs alike.

Over 20 fintech firms delighted the audience with a 7-minute demonstration of their latest solutions, which ranges from smartphone based credit scoring, AI enabled credit assessment, marketplace for wholesale deposits, digitised KYC, finance marketplace, banking bots, electronic payment system, virtual call centre and blockchain based platform for renewable energy.

The event concluded with the announcement of Finovate Best of Show winners (as voted by the audience based on demo quality and potential impact of innovation presented). A huge congratulations to Arival Bank, Avaloq and Voca.ai for receiving the honour. The two day event held at the Hong Kong Convention and Exhibition centre attracted over 600 fintech attendees with representatives from over 200 financial institutions.