NZX CEO apologises over systems problems after quadrupling of trade volumes, partly from Sharesies’ 140,000 traders buying a few shares at a time

Mea culpa: The NZX has apologised for shortcomings in its clearing systems that have frustrated brokers and market participants in recent days as Newsroom reported yesterday. In a statement CEO Mark Peterson said a significant increase in trading volumes – up almost four-fold since early 2020  – along with an associated increase in trade messaging within the market ecosystem’s IT infrastructure had been the cause of the problems. He said the incidents primarily involved NZX’s clearing and settlement system, which had come under significant pressure in recent days as it also acts as the gateway to report trade notifications and undertake shareholder balance enquiries for certain market participants.

Looking into the issue: NZX appointed EY to review the issues and current fixes, and said EY would report directly to the NZX board.

Business is booming: One particular market participant largely unaffected by the issues plaguing the NZX has been new kid on the block Sharesies. Launched in 2017, the low-cost platform has been a big hit with millennial investors who are currently signing up at the rate of more than 1000 a day. Co-founder Leighton Roberts said the company had invested in high quality technology systems when it built its trading platform and had not experienced any issues with the recent increase in trading volumes.

Learning the ropes: With time on their hands during the lockdown, which started just a few days after the recent market low, plenty of Sharesies customers had been spending their down time trading the market. With no lower trading limit and very inexpensive commission rates, Sharesies allows its customers to make trades for as little as a few cents. And now with more than 140,000 customers on its books, the company is eyeing expansion into Australia as well as allowing customers to purchase shares in U.S. companies in the near future.

Tough times ahead: Releasing its latest Quarterly Economic Report, the first since the onset of the coronavirus pandemic, ANZ Bank Chief Economist Sharon Zollner described the slump the country was currently experiencing as “truly enormous”.

The bottom line: ANZ sees GDP as 30-40 per cent lower under Level 4 lockdown conditions and 15-20 percent lower under Level 3. Despite the Government stimulus of more than $10b through the wage subsidy scheme, the bank said it expected unemployment to reach 11 percent. This translated to an extra 240,000 people out of work, along with a fall in labour-force participation.

Good news for house buyers: ANZ expects house prices to fall significantly. “At this stage we expect to see house prices drop 10 per cent to 15 per cent, with demand under considerable pressure. There is downside risk to this, particularly if credit becomes squeezed,” Zollner said.

On track: Spark investors responded positively to news it reaffirmed its full year profit guidance with an expected EBITDA of $1.1- $1.120b and a dividend per share of 25c. The company said that Covid-19 impacts had only materialised in the final quarter of FY20. It said travel restrictions and border closures had significantly reduced higher-margin mobile roaming revenues, which accounted for around five percent of Spark’s mobile revenues while the closure of most of its retail operations would also hurt revenues. Spark shares closed up 4.7 percent at $4.48.

Continuing to shine: Market darling A2 Milk delivered some much-needed good news to investors yesterday upgrading its earnings forecasts saying its profit margin is getting a temporary boost as consumers stock up, the Kiwi dollar slides and overhead costs are down. In a trading update, the company said its revenues for the three months to the end of March were “above expectations” as a result of strong revenue growth across all key regions, particularly infant nutrition products sold in China and Australia.

On the up: A2 Milk is now anticipating FY20 revenue will be in a range of $1.7 billion and $1.75 billion in the year ended June 30, up from $1.3 billion in the prior year. It’s shares closed up 1.5 percent at $19.75 and are up more than 20 percent since mid-February when the market sell-off began.

Markets weaker: The NZX50 lost ground for a second day falling 1.1 percent to close at 10,417. The market is now 4 percent off its high but up 23 percent from its low on 23 March. In Australia, the ASX200 closed unchanged at 5441 having recovered its losses earlier in the session.

Gone bust: This week’s oil price implosion triggered the collapse of one of Singapore’s biggest oil traders raising the prospect of a severe liquidity crunch in the city-state’s under-pressure commodities sector and potentially threatening a wave of defaults and bankruptcies. Heavily indebted oil trader Hin Leong Trading filed for bankruptcy protection and admitted to $800m in undisclosed losses, which police are investigating. This is the second Singapore commodities trader to run into financial difficulties in recent weeks.

Write off: Hin Leong Trading owes about US$3.85b to more than 20 lenders, including US$600m to HSBC. Of Singapore’s three largest banks — DBS, UOB and OCBC — 5 per cent of their loans were to the energy sector, which included commodities trading as well as support services such as oil rig maintenance. The trio are owed a total of more than US$600m.

Love Netflix: What happens when a pandemic forces most of the world to stay home? They watch Netflix of course. And if they don’t have Netflix, they sign up for it. That’s why the streaming giant added more subscribers during the coronavirus pandemic than any other quarter in its history. In its latest quarterly earnings report the streaming video company said it now has 183 million customers around the world, and that its leap in subscribers was driven entirely by the worldwide lockdown.

With more to come: Founder Reed Hastings said he thought the company could add another 7.5 million subscribers next quarter. Netflix shares have risen almost 45 percent to US$437 in the last month.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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