Business Wrap: Is China vs US Cold War II?

Markets are nervous as China vs US ‘Cold War II’ rhetoric grows over Beijing’s tighter controls on Hong Kong. Meanwhile in New Zealand, H&J Smith pulls back to its Invercargill flagship store

Steady: Hong Kong’s Hang Seng Index managed to steady itself overnight after Friday’s steep sell-off, finishing flat at 22,954. The index suffered its biggest one day fall in almost five years after China announced a new national security law, which would give Beijing more control over Hong Kong and may incite further pro-democracy protests in the city.

Tit for tat: China’s announcement has drawn criticism from U.S. officials. White House national security advisor Robert O’Brien warned on Sunday that if Beijing goes ahead with implementing the controversial law, the U.S. government would likely impose additional sanctions on China.

Luck running out: Australia’s AAA sovereign credit rating may yet be downgraded by global rating agency Fitch despite the federal government reducing the cost of its JobKeeper program by $60 billion.

Significant hit likely: Last Friday, prior to Treasury’s $60 billion reduction in the estimate of JobKeeper, Fitch revised Australia’s credit outlook from stable to negative because of the Covid-19 hit to public finances and the economy. Yesterday, Fitch said it stuck by the negative outlook, saying a significant deterioration in the Australian economy was still likely.

Capital boost: Sky Network Television has raised $119.2 million from investors to pay down debt and boost its balance sheet. The capital raising, at a deeply discounted price of 12c a share, secured $110.1 million from a pro-rata entitlement offer and $9.1 million from a placement with institutional investors. An offer to retail investors will be made later this week and is expected to boost the total amount of new capital raised to $157 million.

Shares fall below 20c: Chief executive, Martin Stewart (pictured above) said the placement attracted bids well in excess of what was offered. Eleven members of Sky’s senior management participated in the placement, buying $450,000 of shares. No directors took part. Sky Television shares fell 40 percent to 17.1 cents yesterday to reflect the discounted capital raise

Mediaworks, which owns TV3 and a network of radio stations including MORE FM and Magic Talk, is planning to cut up to 130 jobs and extend pay cuts of 15 percent for all staff for a further four months to help offset a revenue shortfall caused by the Covid-19 lockdown.

Staying alive? CEO Michael Anderson told staff in an email the media company was in a “fight for our survival” and would begin reducing the size of the business with job losses in its sales, out-of-home and radio divisions. The television division would have only minimal changes due to the current extended sales process.

Remaining grounded: Air New Zealand disclosed yesterday most of its international fleet would remain grounded for a further two months until the end of August, with just five percent of its pre-Covid-19 schedule operating. 

Will it stay up? Kiwi Property Group has reported a slight lift in its full year profit to March of $129.7 million, up 4.2 percent on the previous year. Net rental income increased 3.4 percent to $186.8 million. The result included just one week of the Level 4 lockdown. The company said foot traffic at its shopping centres was down eight percent on the first day of Level 2 compared to the same day last year. CEO Clive Mackenzie told analysts traffic had risen since then, but uncertainty remained.

$20m hit: Rent relief measures including rent abatements and deferments had been offered, with a focus on supporting small and medium sized businesses unable to operate during the recent lockdown. Abatements applied to the first quarter of the current financial year were expected to cut pre-tax profits by $20 million. Kiwi Property shares closed up 2c at 96c.

Shutting up shops: Southland retailer H&J Smith is considering closing its branch stores in Dunedin, Mosgiel, Balclutha and Te Anau, and reducing the size of its store in Gore as a result of the fallout from the Covid-19 pandemic. However, it plans to retain its flagship store in Invercargill. It’s estimated 175 staff will be affected by the decision. The 120-year old business said the closures could begin from August this year and would take up to six months to implement. 

Lucky find: Two 10-year-old children in France have the coronavirus lockdown to thank for becoming probably the luckiest kids on the planet after discovering two one kilo gold bars in an elderly relative’s house where they were staying near the town of Vendome. The children made the discovery while searching for items in the house to build a fort locating their lucky find wedged below a pile of old sheets.

Finders keepers? Purchased in 1967 the two bars had been ‘lost’ by the elderly owner since then. Auctioneers have estimated their find at being worth around NZ$200,000 based on the current gold price.