Add Category
Posted
2018 wasn't a champagne-popping festival on the Australian Stock Exchange.
After a turbulent 12 months, the ASX more resembles a half-drunk, room temperature spumante in a plastic cup with a cigarette butt floating in it, leaving investors with a gnawing feeling they should have left the party long ago.
The key benchmark ASX 200 fell almost 7 per cent, wiping $120 billion off the value of investors' portfolios.
Quiet, too quiet
January 1
The ASX started the year a tad over 6,000 points.
The mood was quietly optimistic after a solid 2017. The market gained 6 per cent over the year, largely on the back of a very strong momentum built up in the fourth quarter.
However, while the big investors and fund manages were off at their beach retreats, dark clouds were brewing
Storm breaks, markets smashed
February 5
When the storm broke, it was violent.
Wall Street crumbled after unexpectedly strong wage data stoked fears of rapidly rising interest rates and the "bondcano" erupted.
The ASX, along with every other major global equities markets, were swept away too. The ASX200 shed $90 billion in value in just two days.
Markets rebounded the next week, but the tone was set for the "Year of Living Nervously".
Hayne Royal Commission hearings start
March 13
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry's first round of hearings started in Melbourne with a look at the mortgage broking sector.
Cash bribes, credit extensions to problem gamblers and everyone from tailors to body builders pushing loans at home-buyers, often with limited capacities to repay — it wasn't a particularly edifying view of banking.
It got worse. Round two a few weeks later featured the unsavoury practices such as gouging the dead.
The banks started the year with bad reputations. They would finish the year with appalling ones.
Wesfarmers announces Coles spin-off
March 16
Perth-based conglomerate Wesfarmers announced it would spin-off its Coles supermarket chain.
Wesfarmers bought Coles in 2007, just before the GFC broke. Its future now lies in growth opportunities outside supermarkets.
Coles would list as separate entity on the ASX in late November.
TV sports upheaval
April 16
Cricket Australia secured a $1.2 billion, 6-year deal from the Seven West Media and Foxtel consortium, thus ending Nine's four-decade stint at the crease.
The deal was around double the previous rights package and while it offered fans more cricket, it controversially parked some games — including one-day internationals — behind Foxtel's pay-wall.
A bit miffed the long-term relationship ended so abruptly, Nine moved on, cosying up with Tennis Australia in a $300 million, 5-year rights package.
While the advertising revenue gains don't necessarily cover the cost of the rights, in the TV world that doesn't seem to be as important as the hard-to-quantify glow of being associated with top-level sports.
So far, with the exception of the women, none of Australia's cricketing XI's seem to have come close to repaying Seven and Foxtel's largesse.
Royal commission's first scalp as AMP boss goes
April 20
A little over one month after the royal commission started it had its first scalp, AMP chief executive Craig Meller.
A devastated Mr Meller walked after revelations the wealth business not only charged customers for advice never given, but also mislead the corporate regulators at ASIC.
Sadly for AMP, ASIC has its own section in corporations law, and when sufficiently riled, may even consider laying charges.
Mr Meller was soon followed out the door by AMP chair Catherine Brenner, the company's chief legal officer and half the board.
Banks bail on wealth management
May 2
After almost 20 years trying to grow its wealth management business, NAB announced it planned to sell MLC.
NAB joined ANZ in getting out of a sector that had failed to lived up to expectations and deliver the Holy Grail of banking — "cross-selling" of a variety retail, wealth management and insurance products.
The royal commission disgrace in wealth advice and superannuation no doubt made the decision to bail out easier and swifter.
CBA would follow suit a month later.
By the end of the year Westpac was the only big bank with much of a commitment to growing its wealth management operations.
AMP investors voice anger at AGM
May 10
AMP shareholders delivered a record protest vote against their company in the wake of the revelations flowing out of the royal commission.
While the 61 per cent vote was largely symbolic, it leaves the company open to a spill of all board positions if repeated next year.
Two directors withdrew their re-election nominations, while another indicated she would not leave at the end of the year — leaving the AMP board without any female representation.
CBA fined $700 million
June 4
The Commonwealth Bank agreed to pay a $700 million fine — the biggest in Australian corporate history by a vast margin — for breaches of anti-money laundering and counter-terrorism financing laws that resulted in millions of dollars flowing through to criminal gangs, drug dealers and quite probably terrorists.
The deal followed several months of negotiation with the financial intelligence agency AUSTRAC over allegations of serious and systemic failures to report suspicious deposits, transfers and accounts.
The CBA's new chief, Matt Comyn, again apologised to all and sundry and promised to do more to fix things.
"While not deliberate, we fully appreciate the seriousness of the mistakes we made," he said in a statement.
ANZ criminal cartel charges
June 5
ANZ, along with the global investment banks Deutsche Bank and Citigroup and several executives, were charged with allegedly running a criminal cartel during a $2.5 billion dollar share deal in 2015.
The charges related to the disposal of an overhang of almost $800 million worth of ANZ shares from a big capital raising run by the two investment banks, as well as JP Morgan.
The banks all said they would vigorously defend the charges. JP Morgan is understood to be helping investigators "with their inquiries".
In September, ASIC joined in adding to the rap sheet with new charges under corporations law.
Telstra slashes jobs and splits in two
June 19
Telstra became yet another company with a "shrinking-to-grow" strategy, unveiling another billion dollars in savings and plans to shed 8,000 full-time and contractor positions by 2022.
The strategy included $2b worth of asset sales and bringing the unwieldy 1,800 phone and data plans down to just 20 options.
Telstra said it would also split into seperate retail and infrastructure businesses.
Investors initial reaction was decidedly cool with the share price tumbling another 5 per cent to a fresh seven-year low.
Nine-Fairfax merger
July 25
Ten months after the Federal Government's media law changes made it through the Senate, the first big upheaval hit with Nine Entertainment and Fairfax media announcing plans for a $4b merger.
Under the deal, Nine would be the dominant partner, with its shareholders owning 51.1 per cent of the merged company, and the current Nine chief executive and chairman — Hugh Marks and former federal treasurer Peter Costello — leading the combined firm.
Nine would also own the naming rights, while the Fairfax name would be consigned to Australian corporate history.
Fairfax shareholders approved the deal in November.
BHP sells US oil and gas assets
July 27
BHP finally managed to unload its contentious US onshore oil and gas assets, but at a very heavy loss, and this was despite being at the higher end of market expectations.
BHP sold its interests in four large fields to energy giant BP and another US energy player for $US10.8 billion ($14.6 billion), somewhat less than the $50 billion ploughed into the venture since 2011.
The onshore energy assets returned $US14 billion in earnings while in BHP's hands.
BHP told investors the bulk of the proceeds of the sale would be returned to them after the deals were completed later in the year.
ASX peaks as reporting season fails to inspire
August 31
The ASX200 hit its peak for the year of 6,352 just as the bulk of corporate Australia had delivered their full year results in the August reporting season.
Generally speaking the results weren't particularly awful, maybe a bit softer than previous years. Around half the profits were in-line with expectations, with an even split of hits and misses either side.
But some worrying themes emerged.
Costs started to rise again after years of cost cutting, a slowing property market showed up in forecasts of banks and developers and a tougher stance from regulators cropped up in commentary in the results of banks and utilities.
Earnings forecasts were trimmed, not alarmingly, but it didn't bode well for the future.
Myer posts $500m loss
September 12
Right at the end of the reporting season the troubled department store chain, Myer, had yet another dose of bad news for its deeply underwater investors — 2017's relatively insubstantial $12m profit had become a very substantial $500m loss in 2018.
Perhaps surprisingly, it was the company's first loss since listing on the Australian share market in 2009.
Another batch of investors waved the white flag as shares tumbled 8 per cent over the day to a news record low.
"These results are obviously disappointing and shareholders deserve better," chairman John King said in a (under)statement to the ASX.
Trade war heats up
September 17
The long-threatened second-phase of the US tariff campaign was finally given the green light by the White House with taxes on a further $US200 billion ($270 billion) worth of Chinese imports to take effect within seven days.
The 10 per cent impost was one thing, but US President Donald Trump warned the Chinese it would become a 25pc on another $US267 billion of imports — basically every other import that hadn't been taxed so far — if there was any retaliation.
The market took it in its stride because (a) it had been expected and (b) there were some key carve outs, including smart watches from Apple and other consumer products such as bicycle helmets and baby car seats.
Despite the US increasing its protectionist measures against China, by the end of the year the trade deficit between the two economic superpowers would be wider than ever.
Damning royal commission report finds banks' motivation is greed
September 28
Royal commissioner Kenneth Hayne cut straight to the chase on what was behind the appalling conduct uncovered in consumer lending, financial planning, business lending, farm finance and Indigenous finance over past six months.
"Too often, the answer seems to be greed — the pursuit of short-term profit at the expense of basic standards of honesty," he wrote.
Commissioner Hayne observed that from the executive suite to the front line, staff performance was measured and rewarded based on profit and sales.
The failings of "soft-touch" regulators were also exposed.
So would the corporate law book need to be rewritten? Nope. Commissioner Hayne suggested just some basic honesty from the banks enforced by a more vigorous pursuit of existing laws could work a treat.
Wall St cracks again
October 9
It was another rough night on Wall Street with the S&P500 tumbling more than 3 per cent and the tech-centric Nasdaq down more than 4 per cent, its biggest one day fall since 2011.
Just two weeks earlier the S&P500 hit a record high of 2,931, and that was as good as it was going to get for the year.
The S&P500 would be into correction territory in November. The Nasdaq would be in the clutches of the bears, down by more than 20 per cent before Christmas.
As was the case back in February, the fear of rising interest rates did the trick, but the greatest pain was felt in the likes of Facebook (-4 per cent), Amazon (-6 per cent) and Netflix (-8 per cent).
The sell-off flowed through to Asian markets the next day with the ASX shedding almost 3 per cent or around $50 billion in value.
Telstra shareholders vent their anger
October 16
It had been another horrible year for Telstra investors, the value of the shares had dropped 40 per cent, the company's profit was down 8pc and their cherished dividend had been slashed by 30 per cent.
They arrived at the AGM with one thing on their mind — retribution.
A record (for the post-2010 "say-on-pay" era) 62 per cent of votes were directed against the executive and board structure, slightly higher than the protest vote meted-out to what was left of the AMP board and its interim management team.
The anger was a portent of things to come in the AGM season with Telstra only temporarily holding the protest vote record until the big banks' shareholders were given their say later in the year.
Unemployment hits 5pc
October 18
Australia's unemployment rate (seasonally adjusted) dropped to 5 per cent for the first time since early 2012.
For some economists it was a little too good to be true, with a decrease in the number of people looking for work helping to drive the jobless rate down.
Nonetheless, the September data represented the 24th consecutive month of employment growth.
Despite 20,000 new jobs being created a month over the previous two years, there was still no sign of wage growth picking up from its historic lows.
The unemployment rate would tick back up to 5.1 per cent by the end of the year.
AMP crashes 25pc
October 25
Just when investors thought it couldn't get much worse for AMP, it did.
AMP's announcement its funds-under management had shrunk by around $1.5 billion and it was selling its troubled life insurance business sparked another mass sell-off of shares.
As could be expected from AMP, the timing was unfortunate given the broader market was getting hammered as well.
The 25pc tumble was the steepest fall in AMP's two decades on the ASX, taking it to a record low share price and around 90 per cent below its peak.
AMP interim chief executive Mike Wilkins said bailing out of life insurance was "a major step towards shaping AMP as a simpler, more focused group" that was better positioned to compete in core markets.
Big bankers back in the dock
November
After a thoroughly awful year, November provided no respite for the banks.
Even before the Big Four bank bosses were hauled before the royal commission's seventh and final round of hearings, there were the full year results to deliver.
None contained much in the way of good news, all were weighed down by hefty compensation, legal and regulatory costs.
Back at the royal commission, the bosses were put through the grinder. It was grimly entertaining. None of the four came out with their reputation enhanced.
The humiliation was complete at the banks' AGMs with all four receiving first strikes on executive and director pay structures.
NAB investors were particularly furious with almost 90 per cent voting down the remuneration report and in the process smashing the previous record held by Telstra for just two months.
House price decline accelerates
December 2
Oh, for the good days when all the hand-wringing about house prices was the never-ending spiral upwards.
This year was a reality check for the property bulls.
By the end of 2018 house prices were down around 4pc nationally, with the previously hottest markets Sydney and Melbourne down 8 per cent and 6 per cent respectively.
Tighter credit and investors losing interest (and money) took their toll.
Looking forward, things could continue in the same vein for some time with auction clearance rates late in the year somewhat worse than insipid and lending data brittle.
Economy slows
December 5
The Australian economy burst out the blocks in 2018. In the first half of the year GDP growth was running at sprightly pace, around 4 per cent annualised.
By the third quarter it had run out of puff, year-on-year growth slipped below 3 per cent, the weakest result in two years.
Household spending was the big drag with household income per capita falling and the savings rate the lowest since 2007.
APRA moves against IOOF management
December 7
The fall out from the bank and financial services royal commission was far from over with APRA taking steps to disqualify IOOF managing director Chris Kelaher and four senior executives from looking after people's retirement savings.
IOOF — formerly known as the Independent Order of Odd Fellows and one of the nation's biggest wealth managers — came out of the royal commission rather poorly with counsel assisting Michael Hodge QC, accusing the company of using members' money to compensate themselves and breaching its duties as a superannuation trustee — duties to put members' interests above all else, even profit.
Clunk went the shares, losing around a third of their value in one day, down to where they were nine years ago when they were being tossed overboard in the middle of the GFC.
The IOOF was founded in the 1800s on the old fashioned ideals of "friendship, love and truth", not the sort of sentiments that could survive in the Australian financial services sector in 2018.
A very 'beary' Christmas
December 24
By Christmas the bears were well out of the cave and mauling the previously rampant bulls.
The bears had already devoured a number of big markets with China, Korea, Hong Kong, German and Emerging Market indices down 20 per cent or more from their 12-month highs.
The tech-centric Nasdaq, home to the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) has entered bear territory, as has Japan's Topix index.
In the commodities trade wasn't much better with essentials ranging from oil to coffee also down more than 20pc from their recent highs.
The ASX200, while mired in correction territory, still hadn't taken the next step down into the jaws of the bear market.
However, it is looking shaky with more than half its component stocks down more than 20 per cent from their 12-month highs.
ASX loses, but not as much as others
December 30
After a gruelling 12 months, perhaps the most surprising thing for ASX investors was their home market was one of the best (or least destructive) places to invest.
Drawing inspiration from Steven Bradbury's 2002 unlikely short-track speed skating Olympic gold medal, the ASX slid through ahead of the pack as powerhouse markets crashed on the final turn.
The ASX's 6.8 per cent loss edged most major equity markets, although it should be noted the likes of India, Russia and Brazil had better returns, despite also losing ground.
Globally, investors parking their money in US dollars were the best off. It was one of the few assets to make any headway over the year.
Commodities were flaky. Iron ore (-3 per cent) and gold (-4 per cent) outperformed the likes of the traditional global economic bellwethers, copper (-18 per cent) and oil (-16 per cent).
Agricultural commodities fared better with wheat up 20 per cent on the Chicago Board of Trade and wool gaining 13 per cent on already historically high prices.
However, if you had a stash of Molybdenum under your bed, well played. It was the big winner for the year up 59 per cent.
Volatility returns
December 31
However, the sentiment heading into 2019 is hardly euphoric. More like white-knuckled anxiety.
With eye-watering swings, including a 5 per cent rally on Wall Street immediately after Christmas, the fear seemed divided between holding a lot of overvalued assets and missing out on a rebound.
One of the last acts of the Trump administration for the year was convening a group of treasury officials and bosses of the six largest US banks known as the "Plunge Protection Team."
The team last met in 2009 in a bid to arrest the GFC meltdown on Wall Street. Gulp.
The thing that is back in spades is fear. Wall Street's "fear index", or VIX, spiked again around Christmas, meaning the New Year's trading is likely to be anything but smooth.
Topics: business-economics-and-finance, company-news, economic-trends, stockmarket, australia