CBA reports earnings and capital raising, China's currency wars, falls in US & European equities drag ASX futures back to six-month lows - down 28 points

The Australian equity market will be--somewhat--put out of its Financial System Inquiry misery today as Commonwealth Bank of Australia (CBA) announces an A$5 billion pro rata renounceable entitlement offer. Shareholders will be given the option to buy 1 new share for every 23 shares held, at a price of $71.50 - CBA closed yesterday at $82.12. This will result in an anticipated 71 million new shares coming on line versus a current outstanding 1.628 billion shares - so the dilution equates to around 4.35% and obviously we must take into account the recent CBA share price falls when considering what CBA might open up at today. With the announcement of as-expected 5% growth in net profit after tax (NPAT) in the 2015 result, as well as the commensurate 5% year-on-year up-tick in the 12-month fully-franked dividend ($4.20), we don't expect the market to react badly to this news today - the $5 billion figure was very well anticipated by analysts. Let's see what the market has to say when this stock opens up.

Australia's ASX 200 equity index will trade at slightly precarious levels today. Why? Well, as you can see from today's second chart, the ASX 200 cash index CFD is trading near its daily closing lows with regard to the current trading range. Buying support at these levels only really exists down to about 5,380, so we would not want to see a close below that point. If this did happen, one might expect a higher likelihood of a resumption of the down-trend that existed between April and early July. 

In today's last chart we show Apple Inc. (AAPL) trading lower as it responds to the devaluation of China's renminbi. Tradeable on the Rivkin Trader platform, the US dollar versus the offshore Chinese renminbi (USDCNH, shows how many renminbi can be bought by one US dollar) jumped markedly as the Chinese government took action to reduce the value of its currency to try and boost exports, which were--among other things--suffering from renminbi strength. So why did AAPL respond so negatively to this? Two reasons I guess - firstly it will make Apple's iPhone more expensive in renminbi terms and thus they'll be faced with having to decrease their earnings margins for the phone in this high-growth market, or they'll need to pass on the increased cost caused by the currency move - either way it'll negatively impact Chinese iPhone sales and/or earnings. Secondly, Apple may or may not have been fully hedged for this move with regard to repatriating Chinese sales proceeds back to the US, given it was largely unexpected.


Source: Rivkin, Saxo Bank

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How to apply for the FGG IPO

As was the case with Future Generation Investment Company (FGX), Rivkin will be working with its broking partner CMC Markets in donating the broker stamping fees to charities associated with the investment company’s cause – in this case, youth mental health and homelessness.

With this in mind, we strongly urge you to follow the following steps accurately so Rivkin can add to the philanthropic nature of this IPO.

  1. Visit http://www.futuregeninvest.com.au/Global/prospectus.pdf to download and read the prospectus
  2. IMPORTANT: complete the Broker Firm Application Form on page 87 of the prospectus, this way we can donate the stamping fees
  3. Ensure you have sufficient funds in your Rivkin Securities stockbroking account to pay for the stock
  4. Enter the Broker Code 02662
  5. Enter the Adviser Code 0001
  6. Email your application to customerservice@rivkin.com.au or post it to:

Rivkin Securities FGG Offer
Po Box 1524
Double Bay 1360

Don’t have a Rivkin Securities stockbroking account? Open one now by emailing customerservice@rivkin.com.au (your Relationship Manager will call you back and pre-fill forms etc.) or phoning 1300 748 546. Our online brokerage is $11.00 or 0.11%, $9.90 or 0.11% for SMSFs that use Rivkin Super. PLUS we go the extra mile and donate non-core earnings like broking fees from this IPO to charity. You’re doing yourselves a favour and doing those in need a favour by getting involved.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
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