Miners give back gains

Investors are taking profits in the mining sector, as early optimism on the ASX sours amid heavy selling in Aussie bonds, while Boral slumps following a capital raising.

  • Boral shares plunge 10% after resuming trade, says placement was ‘greatly oversubscribed’
  • Japanese stocks continue to rally, hitting their highest since early January on a weaker yen
  • Rio sells aluminium assets in Scotland, in a deal that Citi says is ‘value accretive’
  • Spot gold slides below $US1200, losing $US100 in three weeks and hitting gold miners
  • Bonds resume their sell-off, with the yield on the 10-year note climbing to 2.76 per cent

The election of Donald Trump has sparked worries of increasing trade protectionism, but the following chart shows that global trade has already been slowing since 2012.

Several factors are contributing to the sluggishness of world trade, BNP Paribas notes: there’s cyclical reasons such as sluggish eurozone growth, the slowdown in the emerging economies and the changed composition of demand in favour of household consumption and public spending.

But other factors are structural, the bank’s economists say.

“Indeed globalisation is losing steam, and, in recent years, we have seenhigher wage costs in China. All of these factors hamper the international segmentation of the supply chain and trade.”

BusinessDay columnist Elizabeth Knight explains why James Packer’s casino wounds have been re-opened:

This week’s formal arrests by Chinese authorities of 18 Crown Resorts staff more than a month after they were detained highlight the particular problem for the James Packer-controlled casino operator. Each new incremental bit of news reignites investor concerns about the ramifications of losing a large part – if not all – of the Chinese VIP market.

There is so much unpredictability about what will happen to this lucrative source of gambling customers – to say nothing of the fate of those now arrested – that it’s difficult for the company to provide any meaningful guidance on what it means for earnings this year or next.

The information vacuum from the Chinese authorities only compounds the issue.

However, Crown does know how many Chinese VIP players have signed on since the Chinese raid last month. But it’s not telling.

The Crown share price, which fell 20 per cent in response to the initial arrests, has already factored in an almost total drying up of the Chinese VIP market. That has cost the market value of the company half a billion dollars.

It has a legal team in China dealing with the situation and it will also have a better handle on the staff’s situation and prospects. However, it is understandable that Crown is heralding its legal tactics at the risk of inflaming the Chinese authorities.

It also knows the activities that its China-based staff were engaged in on the mainland and if they were actively or aggressively marketing to locals.

Since the raids, there has been numerous – and often contradictory – theories about why Crown in particular was targeted.

This week, one of the junker operators – the groups that market and arrange gaming clients to travel to casinos – broke ranks and said Crown was in effect operating outside the bounds.