China watch update/alert. On top of the usual daily iron ore watch, China will require added attention this week with the March quarter GDP data out on Wednesday, along with investment, retail sales and housing figures for the quarter and March itself. GDP will likely to be closer to the new government target of 7% than the old target of 7.5%. On top of that, the trade data for March and the quarter is also out later today and will reveal another solid month of exports and weakish imports thanks to low demand, sliding commodity prices (iron ore and oil), the strong currency and the intense price deflation.
With Friday came further confirmation Chinese industry remains in the grip of intense price deflation. Prices fell an annual 4.6% in March (from March 2014), against 4.8% in February. It was the 37th consecutive fall in the produce price index. Consumer prices rose a weak 1.4% (annual) in March, unchanged from February. But the thing to watch in China (and now Hong Kong), is the bubbling sharemarket — up 90% for the so-called China A (mainland) shares. The Hong Kong market has jumped 15.5% this year, but 9.5% of that has come so far in April, thanks to the 7.9% surge last week as billions of dollars of mainland investor funds poured out into the Hong Kong market. The mainland investors are using the China Connect investment facility (set up to encourage foreign investment in China, to play the Hong Kong market. — Glenn Dyer
A Walton family lesson for our billionaires. The Walton family (of Sam Walton, the founder of Walmart) intend to sell more than US$15 billion worth of their holding in the world’s biggest retailer after their stake reached roughly 50% of the shares on issue, thanks to the ongoing share buyback by the company. Walton Enterprises, the company that controls the family’s stake in Walmart, will move around 6% of Walmart’s shares into a new entity called the Walton Family Holdings Trust, which will sell the shares over time.
The Walton family’s stake has risen as the family has not sold shares into the buybacks. The family says there is “the prospect that Walmart may continue to buy back shares” in coming years, which would mean the shares held by the family would move over 50%. So to stop that happening, around 6% of the shares will be transferred to a charitable trust and the more than US$15 billion involved will be used “to help fund charitable contributions”. Thus the Walton family is joining the likes of billionaires Warren Buffett and Bill Gates in using some of their fabulous fortunes, built up by the development of their huge business empires over the years, to fund major charitable moves (such as fighting malaria). So come on James Packer, Kerry Stokes, the Pratt family, the Lowys, Harry Triguboff, the Murdochs, Gina Rinehart and others. Follow what the US super wealth are doing and be charitable. You can afford it. — Glenn Dyer
Fortescue’s cost-cutting. Yes, Thursday’s jobs report for March from the Australian Bureau of Statistics will be widely watched by business, investors and politicians of all stripes, especially in Perth (not to mention the Reserve Bank and all those business economists who are struggling to understand the RBA’s policies at the moment). But of equal (perhaps greater interest) to the markets will be the expected release of the March-quarter production report from embattled iron ore miner Fortescue Metals, especially after smaller rival Atlas Iron bit the bullet last week and decided to mothball its WA mining and export operations. Analysts will be looking for any progress in Fortescue’s cost-cutting efforts, not the usual focus on its production and export figures. In the December-quarter report, Fortescue said its “realised price” for iron ore was US$63 per dry metric tonne. Its “total delivered cost” for the fourth quarter was US$41 per wet metric tonne, “reducing to $US35 a wet metric tonne” based on second-half guidance.
Analysts will be looking for a significant improvement in those figures in Thursday’s report, but one figure that won’t improve will be the average realised price, which will drop thanks to the sharp slide in global iron or spot prices. Chairman Andrew Forrest was out trying to influence market perceptions in an appearance in this morning’s Australian Financial Review, telling the paper the company won’t expand iron or production past the 165 million tonnes a year to 180 million to 200 million tonnes. — Glenn Dyer
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