Cancer diagnostics firm Pacific Edge backed by ANZ, Dairy exports keep trade positive and Warren Buffett’s increasing stake in Bank of America

Pacific Edge gains a new major shareholder

Fledgling cancer diagnostics company Pacific Edge has a new shareholder. ANZ New Zealand Investments confirmed on Friday it had purchased $22 million new shares in the company at a 14 percent premium to its recent trading price. Pacific Edge will issue 33.8 million shares to ANZ at 65 cents per share. Investors welcomed the news pushing the share price up another 19 percent to close at 69c on Friday, adding to the stock’s recent gains. Pacific Edge shares have surged 467 percent year-to-date.

The company recently announced a major breakthrough in the United States after its Cxbladder tests were approved for patients covered by the US’s national health insurance programmes, Medicare and Medicaid. Each test is charged at US$760 with the additional income stream estimated to be worth an additional NZ$10 million in annual revenues. Pacific Edge chair, Chris Gallaher, said the move reflected growing investor interest following major commercial milestones in the US and the new funds would allow the company to continue to scale-up its operations.

Markets take a breather

Markets last week tempered their recent optimism as coronavirus cases spiked globally, unnerving investors about a growing second wave of lockdowns. The NZX50 closed out the week up 0.5 percent at 11,636, while in Australia, the ASX200 was barely changed, falling 0.1 percent to end the week at 6024. In the US, the benchmark S&P500 index fell 0.28 percent to close at 3215 ahead of a high anticipated week of tech earnings (see below). The NZ dollar will start the week at 66.42 US cents after gaining 1.3 percent last week, though well off its highs of 66.9 US cents.

Exports up, imports down in June

Another positive month for dairy exports in June, despite the impacts of the global coronavirus pandemic, helped to achieve another monthly trade surplus of $426 million. Exports lifted 2.2 percent to $5.1 billion and imports inched up 0.2 percent to $4.6 billion. Milk powder, butter, and cheese exports were up 8 percent from last month at $1.2 billion. Log exports, which had been severely impacted during the lockdown also improved, lifting 3.2 percent to $454 million.

Imports continued to decline, falling more than 8 percent to $4.2 billion, though this figure was artificially elevated due to the purchase of the Navy’s new vessel being included in this months imports total. If this figure is excluded the trade surplus would have been $821 million in June.

Vehicle imports and parts were down sharply in April and May due to the Covid lockdown and were still $256 million lower last month than in June 2019. However, imports from China continued to hold up, lifting 10 percent in June versus the same month a year ago. Electrical machinery and equipment, such as mobile phones, articles of plastic, such as disposable aprons, and textiles, such as face masks were all higher last month.

The annual trade deficit meanwhile was $1.2 billion in June, the smallest since December 2014. Exports during the past year lifted 1.4 percent to $60.2 billion while imports fell 4.6 percent to $61.4 billion.

New housing providers named

The first two housing providers able to access a government scheme aimed at helping people into property ownership have been named. Auckland Housing Foundation and Queenstown Lakes Community Housing Trust were named by Housing Minister Megan Woods on Friday as the initial partners in the programme. The $400 million fund which will help low to median income households onto the property ladder. Woods said more providers in other centres would be named soon.

The fund will focus on areas where housing affordability is most severe, with a strong preference for new houses to build supply. It aims to help up to 4,000 families who could not otherwise afford home ownership. The first group of families are expected to be in their own homes by November. The fund was part of the Green Party’s supply and confidence agreement with the Labour Party in forming the government in 2017.

To be eligible, applicants must be older than 18, be a first-home buyer or ‘second chancer’, must be citizens, permanent residents or resident visa holders, have a household income below $130,000 and be able to secure a commercial mortgage and have some money for a deposit.

OECD beckons for NZ business leader

Well known NZ business leader Chris Liddell looks set to have the backing of the United States to head the Organisation for Economic Co-operation and Development (OECD). Liddell, who has been serving as deputy White House chief of staff focusing on economic policy since Donald Trump took office is being tipped to become the next secretary general of the OECD, according to Reuters.

Liddell, who has dual US/NZ citizenship, began his career as an investment banker in New Zealand before moving on to head majority US-owned forestry and paper manufacturer Carter Holt Harvey between 1999-2002, having earlier served as the company’s chief financial officer. Liddell relocated to the United States in 2002 where he held senior roles with Microsoft and General Motors before joining the Trump administration in 2018. In 2010 he was awarded New Zealand Business Leader of the Year.

Angel Gurría is currently serving as the secretary general of the OECD, now in his third five-year mandate, having been appointed in June 2006. Founded in 1961, the OECD works to promote policies that will improve the economic and social well-being of people around the world.

Big week for US investors

Investors have plenty to digest this week as tech bellwether Apple, with several other tech heavyweights get set to report earnings. In addition, Republicans will unveil their much-anticipated stimulus package proposal, which will then be debated as enhanced unemployment benefits get set to expire. The US Federal Reserve also meets this week and is likely to discuss other steps it can take. It’s not expected to make any major moves other than to reassure markets it will continue to use extraordinary programmes to help the economy recover from the impacts of the coronavirus pandemic.

Investors will also be watching as the ‘titans of tech’ are expected to testify before the House Judiciary Antitrust Subcommittee this Thursday (NZ time). Amazon CEO Jeff Bezos; Apple CEO Tim Cook; Alphabet CEO Sundar Pichai and Facebook CEO Mark Zuckerberg have all been called to appear for a likely grilling about their companies’ market dominance.

But the real showstopper this week will be the release on Friday (NZ time) of the first official reading of second quarter GDP, which economists are expecting will show a contraction of 35 percent. The result is likely to eclipse the contraction that occurred at the peak of the Global Financial Crisis in 2008/09.

Costly settlement for Goldman Sachs

US investment bank Goldman Sachs has agreed to a US$3.9 billion settlement deal with the Malaysian government relating to the bank’s role in the high-profile corruption scandal at 1Malaysia Development Berhad (1MDB), the country’s sovereign wealth fund, in 2015. In return, the government of Malaysia has agreed to drop all criminal and regulatory proceedings in Malaysia involving the firm, including pending proceedings against subsidiaries of Goldman Sachs and certain current and former directors, Goldman Sachs said in a statement.

The Wall Street bank will pay the Malaysian government US$2.5 billion and provide a guarantee that it also receives “at least US$1.4 billion in proceeds from assets related to 1MDB seized by governmental authorities around the world,” it added. The case relates to bond sales that Goldman Sachs arranged and underwrote for 1MDB, from which the US Justice Department alleges US$4.5 billion was stolen. Malaysian financier Jho Low, who remains at large, and had ties to the film “The Wolf of Wall Street,” is accused of masterminding a plot to channel the money from the fund to former Malaysian Prime Minister Najib Razak’s bank accounts.

Buffett doubles down on US bank stake

Legendary US investor Warren Buffett has pulled out his cheque book again acquiring more than US$800 million worth of Bank of America stock last week. The latest purchase boosts his stake in the iconic US banking conglomerate to more than 11 percent. The shares were acquired at an average price of around US$24.

Bank of America was Berkshire’s second-largest holding by dollar value at the end of March, after Apple. Berkshire’s increased stake is worth about US$24 billion, based on Bank of America’s stock price of $24.31. The bank’s shares have plunged 32 percent this year, meaning Berkshire’s stake would have been worth around $35 billion at the start of January.

However, Buffett is effectively only spending a bit over half the profit, at least on paper, he has made on his increased holding in Apple which he acquired when the market bottomed in March. Berkshire Hathaway’s Apple stake — which now makes up 40 percent of its equity portfolio — is up a whopping $40 billion in the four months since March. The investment in the tech giant played a crucial role in helping Berkshire weather the coronavirus crisis as other pillars of its business, including insurance and energy, took a huge hit.

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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