Business Wrap: 100% business pessimism

In the latest business news, the NZIER says its confidence survey suggests 100 percent of businesses would now have a negative outlook, 596 kiwi pilots laid off by Air NZ and Virgin, and the RBNZ confirms will buy $3b of council bonds

Gloomy outlook: The March quarter survey of business opinion from the New Zealand Institute of Economic Research (NZIER) makes for sobering reading. The survey covered the period up to March 20, six days before the national covid-19 lockdown kicked in. NZIER said if the survey had been carried out today it was likely that 100 percent of businesses would have felt negative about general economic conditions over the coming months, and that around 70 percent would report seeing reduced demand.

Weak conditions: The survey showed a seasonally adjusted net 67 percent of respondents expected conditions to weaken, versus a net 28 percent in the previous survey. The headline number marked the lowest level since the height of the GFC in 2008. The services and manufacturing sectors were the most pessimistic.

Faded: The NZ sharemarket followed a strong lead from Wall Street to open up more than 3 percent, but couldn’t hold on to its gains, drifting lower throughout the day to close just 0.5 percent higher at 9810. The market is struggling to close above the key 10,000 level despite several attempts in recent days. It was a similar story across the Tasman, with the ASX200 closing down 0.6 percent at 5252, despite being up more than 1 percent at the open.

Roll up, roll up: Auckland International Airport will be pleased with the outcome of its NZ$1b institutional bookbuild. The placement was strongly supported with bids of well over $1b. The company said existing institutional shareholders who bid for their pro-rata allocation were allocated at least that number of new shares.

In demand: The placement was fully subscribed at the price determined in the bookbuild of NZ$4.66 per share. This represents a discount of 7.5 percent to the last closing price of NZ$5.04 last Friday.

It’s official: As foreshadowed by Newsroom last week, the Reserve Bank has finally confirmed - officially - that it will start buying Local Government bonds in the latest version of its QE program. More than $3 billion of Local Government Funding Agency (LGFA) debt has been added to its Large-Scale Asset Purchase programme representing approximately 30 percent of the total LGFA debt on issue. The move takes the total size of the QE programme to $33 billion over 12 months.

Downward pressure: The Reserve Bank’s monetary policy committee noted that purchases of New Zealand government bonds to date had successfully reduced longer-term interest rates. The yield on 10-year government bonds closed at 1.34 percent yesterday, down from a March 19 spike of 1.79 percent and 1.50 percent at the start of the year.

Capital raise number 3: Moa Group has become the latest company to announce a capital raising of up to $5.5 million at an issue price of 14 cents per share. The brewer-come-restaurateur said its offering included 17,857,143 new shares to an as-yet-unnamed cornerstone investor. It also planned a one-for-five rights issue to raise a further $3 million. The new funds are being pre-emptively raised to provide the Group with additional Balance Sheet strength given the ongoing uncertainty facing the group's hospitality business due to COVID-19.

Shares in the company rose 17 percent following the announcement to 16.5 cents, though Moa Group shares have fallen 60 percent since April last year.

No go: Livestock Improvement Corporation (LIC) shareholders have voted overwhelmingly against a proposal to make a strategic investment in Israeli based Afimilk. LIC announced in February it planned to buy a 50 percent stake in Afimilk, which develops and commercialises dairy farm technology and farm automation systems. The acquisition was valued at NZ$109 million at the time.

End of an era: 387 Air New Zealand pilots no longer have a job as a result of the COVID-19 outbreak. Air New Zealand slashed capacity to around 5 percent of its original schedule.

Turbulent times: The affected pilots join a further 208 from Virgin Australia who were told on the weekend that they’d been made redundant as a result of the Aussie carriers decision to close its New Zealand bases permanently. In total Virgin laid off around 550 New Zealand based flight and cabin crew.

Please explain: The NZX market surveillance panel issued Sky Television with a price inquiry in respect of the yield to maturity of its March 2021 6.25 percent bonds which has seen the closing yield of 4.1 percent on 17 March spike dramatically to 80 percent on 6 April. The company responded briefly saying that it was fully complying with its continuous disclosure obligations, implying that it had no material disclosures to make at this point.

Lucky no more: The Reserve Bank of Australia has warned the country will experience a significant economic contraction in the June quarter with unemployment expected to increase to its highest level for many years. Australia was one of the few countries to avoid a recession following the 2008/09 GFC.

Downgraded: Ratings agency Fitch has downgraded all four Australian banks and their New Zealand units, ANZ NZ, Westpac NZ, ASB and BNZ, one notch from AA- to A+ because of Covid-19.

Faded star: Airbnb announced a US$1 billion infusion yesterday from private equity firms Silver Lake and Sixth Street Partners. The last time Airbnb raised money in 2017, it was valued at US$31b, but had recently revised that down to $26 billion because of, well, you know.

In some U.S. urban markets, coronavirus knocked reservations by 50 percent or more in mid-March, according to data from AirDNA. In response, Airbnb loosened its cancellation policy, set aside $250 million to pay hosts 25 percent of lost revenues, and reportedly cancelled 2020 marketing to save $800 million.

It’s going to be bad: JPMorgan Chase CEO Jamie Dimon used his annual shareholder letter to detail just how bad he thinks the U.S. economy will get as a result of the coronavirus pandemic. Dimon expected a "bad recession," he wrote. His most adverse scenario was for U.S. GDP to fall at an annualised rate of 35 percent in the second quarter, and that a downturn would last through the rest of the year. He expected the unemployment rate to spike as high as 14 percent in this scenario.

Business as usual: But Dimon added that "this scenario is quite severe and, we hope, unlikely." And even if the worst-case situation bears out, JPMorgan Chase -- the largest US bank by assets -- still planned to lend an additional US$150 billion to its customers.

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