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ASX set for flat start as US-China tensions simmer

The a2 Milk Company has named Australian businessman David Bortolussi as its new chief executive after a six-month global search.

Mr Bortolussi, who will assume the role early next year, is currently the group president for international innerwear at Hanes Brands and is a former chief strategy officer at Foster’s Group.

Incoming A2 Milk chief executive David Bortolussi.

Incoming A2 Milk chief executive David Bortolussi.Credit:Josh Robenstone

Before his time at Foster’s Group, where he was responsible for corporate strategy and performance improvement, Mr Bortolussi held senior consulting roles at PwC and McKinsey and Company.

Mr Bortolussi will succeed interim CEO Geoff Babidge, who returned to the role late last year after the sudden departure of CEO Jayne Hrdlicka after about 18 months in the role.

Mr Bortolussi will be paid total remuneration of $1.75 million per year, including superannuation. He will also be paid an allowance to assist with relocating from Melbourne to Sydney.

A2 shares have been performing strongly in the market throughout 2020 despite the emergence of the coronavirus pandemic. The stock closed on Monday up 0.5 per cent at $19.09.

Annuities specialist provider Challenger will not pay shareholders a final dividend as it reports net profit after tax is down 13 per cent for the year, driven by investment losses during the coronavirus pandemic market sell-off.

Despite the weaker profit, the group reported its assets under management had grown by 4 per cent to $85.2 billion despite being impacted by the federal government’s early release of super scheme.

“The result in very challenging conditions demonstrates the benefits of our strategy to diversify our products and distribution channels,” Challenger chief executive Richard Howes told the market.

Challenger chief executive Richard Howes.

Challenger chief executive Richard Howes.Credit:James Brickwood

Challenger is comprised of four companies, one that sells annuities – a product that provides customers with an income stream during retirement – and three others in the space of institutional investment, boutique funds management and consulting for self-managed superannuation funds.

Domestic annuity sales were down $900 million, driven by “major structural change in the bank aligned advice networks”, according to the group.

Annuities are often sold by financial adviser networks, and social distancing rules combined with new rules around the age pension means test, had challenged this income stream, according to the group.

However, Mr Howes remained positive that new products, combined with a greater focus on digital customer engagement would drive sales growth into the future.

“We are quickly evolving our business in response to the changes, and we are seeing positive signs that we are well positioned to rebuild momentum in the new market environment,” he said.

Challenger’s capital arm maintained a strong balance sheet after the June capital raise brought in $270 million from institutional investors and $35 million from retail shareholders.

Challenger shares last closed at $4.34 and have decreased in value by 46 per cent in 2020.

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Sydney Airport has announced it will raise $2 billion in fresh capital to firm up its pandemic-stressed balance sheet through a pro-rata renounceable entitlement offer.

The airport also revealed on Tuesday morning that it ran at a loss after tax of $53.6 million for the six months to June 30, compared to a $17.3 million profit in the same half last year, as COVID-19 travel restrictions caused passenger numbers to fall 56 per cent.

Most of Sydney Airport's passengers have disappeared during the COVID-19 pandemic.

Most of Sydney Airport’s passengers have disappeared during the COVID-19 pandemic.Credit:Edwina Pickles

Sydney Airport said it will use the $2 billion raising to “substantially” reduce its net debt, enhance its financial resilience, support its investment grade credit rating and increase liquidity.

“Six months into the pandemic, there remains uncertainty as to how long it will take for aviation markets to return to pre-COVID-19 levels,” chief executive Geoff Culbert said.

“Accordingly, Sydney Airport is taking further decisive action to strengthen its balance sheet and to help ensure it remains well capitalised to meet the challenges presented by an uncertain COVID-19 operating environment, and to ensure it is positioned for growth in the future.”

Mr Culbert said a renounceable entitlement offer was the fairest structure for all investors, particularly retail investors.

Shareholders who participate in the raising will not be diluted, he said.

Shares in the company last closed at $5.39 and have shed nearly 38 per cent this year against an 8.6 per cent fall for the wider ASX 200.

IG MARKETS SPONSORED POST

ASX futures down 3 points to 6067 at 9am AEST

  • AUD at 71.50 US cents at 9am AEST
  • On Wall St: Dow +1.3% S&P 500 +0.3% Nasdaq -0.4%
  • Spot gold -0.5% to $US2025.74 an ounce
  • Brent crude +1.4% to $US45.00 a barrel
  • US oil +2% to $US42.04 a barrel
  • 10-year yield: US 0.57% Australia 0.86% Germany -0.53%

IG MARKETS SPONSORED POST

The Australian sharemarket is poised for a flat start despite a largely positive night on Wall Street saw investors flock to value stocks, sending the Dow and S&P 500 higher while the tech-heavy Nasdaq fell. Shortly before 7am AEST, futures are pointing to a drop of 3 points at the open.

Wall Street was mixed in overnight trade.

Wall Street was mixed in overnight trade.Credit:New York Stock Exchange/ AP

The fine balance of risks between the ratcheting up of US-China trade tensions, and the weekend’s executive decree from US President Donald Trump of further fiscal support saw a small rotation unfold in US equities overnight.

Tech stocks slumped from their record highs once again, as market participants discounted the risk of a tech cold-war between the US and China. While value stocks broadly topped the intraday market map, with the S&P 500’s 0.27 per cent gain underpinned by strength in industrials, energy and materials stocks.

The rest of the trading week for global markets will likely be driven by political machinations within Washington, and between Washington and Beijing. Despite US President Trump’s weekend executive orders, congressional Republicans and Democrats remain wide-apart on a more comprehensive fiscal package.

And the tit-for-tat nature of US-China trade tensions look likely to persist, after China announced retaliatory sanctions against US officials yesterday, ahead of Friday’s diplomatic meeting between the two countries on compliance with the phase one trade-deal.

Good morning, bonjour, bună dimineața, and welcome to this Tuesday edition of the Markets Live blog.

Your editors today are Lucy Battersby and Alex Druce. The latter incidentally appears on this week’s edition of The Short Squeeze which, if you’ve got 10 minutes, you can listen to below.

This blog is not intended as financial advice.

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