the rise continues - kpmg...mutuals industry review 2016. november 2016. join the conversation....
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Mutuals Industry Review 2016
November 2016
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The risecontinues
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Document Classification: KPMG Public
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1 Introduction
2 KPMG Interactive Dashboard
3 Financial results
4 Changes for growth
5 Financial market observations
Agenda
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Presenter: Peter Russell
Introduction
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Document Classification: KPMG Public
Residential lending
increased by 9.8%
(2015: 7.9%)
Gross loans and receivables
Increased by9.5%
(2015: 7.0%)
Impairment provisions decreased to 0.07%
(2015: 0.08%)
Operating profit before tax increased 2.7%
(2015: 2.9%)
Non-interest income declined by 0.1% (2015: grew 3.3%)
Net interest income
grew 6.0%
(2015: 3.9%)
Deposits up 7.8%(2015: 7.6%)
Branches decreased by 7 to
820
(2015: 827)
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185
Mutual banksof which
Converted in 2016(2015: 2)
7Mergers completed
(2015: 3)
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Document Classification: KPMG Public
Balance sheets strengthened, with asset growth of 7.8 percent.
Profitability metrics increased, with profit before tax up 2.7 percent to $626 million.
Capital levels decreased to 17.5% from 18.0%.
Looking forward, we see this momentum will continue.
Opportunities to propel growth: Regulatory reform Innovation and digital differences Operational cost leverage
IntroductionMutuals performed very well in an environment of low economic growth, interest rates and inflation.
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Growth in lending portfolio
Continued strengthening
of staff
Continued strong credit
risk management
Greater digital
expansion
Increased technology
spend
More interaction with fintech
startups
Positive results in 2016 emerged on the back of…
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Document Classification: KPMG Public
Introduction: Top 10 Join the conversation
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Greater$5.7bn
Heritage$8.4bn
Beyond$4.8bn
People’s Choice$7.5bn
NewcastlePermanent
$9.8bn
CUA$13.5bn
TeachersMutual$5.5bn
IMB$5.2bn
BankAus.$4.0bn
P&N$3.8bn
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Introduction: Top 10 Join the conversation
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- 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000
CUA NewcastlePermanent
Heritage People'sChoice
Greater IMB TeachersMutual
Beyond Bank Aus P&N
Top 10 Mutuals – Operating Profit before Tax
2012 2013 2014 2015 2016
$’000
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
CUA NewcastlePermanent
Heritage People'sChoice
Greater IMB TeachersMutual
Beyond Bank Aus P&N
$'000
Top 10 Mutuals – Total Assets
2012 2013 2014 2015 2016
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#mutuals2016Presenter: Zachary Kutlow
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1. Industry landscapeJoin the conversation
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1. Industry landscapeJoin the conversation
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Click on a fish –each fish is a mutual
Select a mutual
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2. Pick a mutual, measure, and ratioJoin the conversation
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Document Classification: KPMG Public
2. Pick a mutual, measure, and ratioJoin the conversation
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You can also define a peer group by selecting multiple individual mutuals
Select a category of mutuals
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3. Pick a mutual and group ofmeasures
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3. Pick a mutual and group ofmeasures
Join the conversation#mutuals2016
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4. YoY changes in growth metricsJoin the conversation
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4. YoY changes in growth metricsJoin the conversation
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Define a peer group by selecting multiple individual mutuals
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5. YoY performance in key ratiosJoin the conversation
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5. YoY performance in key ratiosJoin the conversation
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Define a peer group by selecting multiple individual mutuals
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6. Growth in assets and members Join the conversation
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6. Growth in assets and members Join the conversation
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2012
2013
20142015
2016
6. Growth in assets and members Join the conversation
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Document Classification: KPMG Public
KPMG PowerBI DashboardJoin the conversation
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Financial Results
Join the conversation
#mutuals2016Presenter: Peter Russell
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Document Classification: KPMG Public
Assets and asset quality Total assets increased by 7.8 percent (2015: 7.6 percent) whilst the major banks fell 2
percent (2015: 9.7 percent). Impairment provisions fell by 1.2 percent to $53 million (2015: $54 million).
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
40,000
45,000
50,000
55,000
60,000
2012 2013 2014 2015 2016
Impairment Provisions
Provision
Provision as a % of Gross Receivables
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-5%
5%
15%
25%
35%
45%
- 5,000 10,000 15,000
Growth in Total Assets (%)
Total Assets ($m)
Size vs Growth in Total Assets 2016
Top 10 Mutuals excluding top 10 Line of best fit
$’000
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Document Classification: KPMG Public
Deposits
Total deposits grew 7.8 percent (2015: 7.6 percent) Top 10 deposits increased 8.4 percent (2015: 8.1
percent). Composition of funding unchanged:
84 percent retail (2015: 84 percent)16 percent wholesale (2015: 16 percent)
0%
2%
4%
6%
8%
10%
12%
2012 2013 2014 2015 2016
Growth in deposits
Top 10 Mutuals excluding top 10
Capital
Average capital adequacy ratio for total mutualsdecreased to 17.5 percent (2015: 18.0 percent).
Top 10 decreased from 16.3 percent to 16.2 percent. Slight decrease by the mutuals indicates improved
efficiency.
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4%6%8%
10%12%14%16%18%20%
2012 2013 2014 2015 2016
Average Capital Adequacy Ratio
APRA minimum capital requirementMajor banksTop 10Mutuals excluding top 10
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Income
Net interest income increased 6% 65 percent of net interest income was
earned by the top 10. Net interest margin declined to 2.14 percent
(2015: 2.18 percent).
Non-interest income was down 0.1 percent increase from last year at $555 million
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2.00%
2.05%
2.09%
2.14%
2.18%
2.23%
2.27%
2.32%
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2012 2013 2014 2015 2016
Net interest income and net interest margin
Top 10Mutuals excluding top 10Net interest margin (%)
220,000230,000240,000250,000260,000270,000280,000290,000300,000
2012 2013 2014 2015 2016
Non-interest income
Top 10 Mutuals excluding top 10
$’000$’000
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Document Classification: KPMG Public
CostsTotal operating expenses increased by 3.4 percent to $1,946 million (FY15: $1,883 million).Average cost to income ratio for all mutuals decreased to 74.8 percent (2015: 75.7 percent).
Composition of costs - 2016
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0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016
Cost to Income Ratio
Major banksTop 10Mutuals excluding top 10
49%Personnel
31%Other
7%Occupancy
7%Technology
5%Dep’n
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ProfitsJoin the conversation
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Total profit before tax for the sector was $626 million, up 2.7 percent.
Top 10 grew 5 percent (2015: 3.5 percent).
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2012 2013 2014 2015 2016
%$'000
Profit before tax
Top 10 Mutuals excluding Top 10
Growth in profit before tax-150%
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
350%
400%
- 5,000 10,000 15,000
Growth in Operating Profit
After Tax (%)
Total Assets ($m)
Size vs Growth in Operating Profit Before Tax 2016
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Z-Score Performance AssessmentJoin the conversation
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METRICS
Member Growth (%)
Capital Adequacy ratio (%)
Cost to income ratio (%)
Provision for doubtful debts (%)
Deposit growth (%)
Gross Loans and Advances growth (%)
FINAL RANK
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Changes for growthJoin the conversation
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The sector continues to be a source for productivity
The 10% investment property lending growth cap has slowed loans to investors and held back growth opportunities.
All ADIs
$500bn
Mutuals$20bn
Other ADIs$480bn
Residential investmentlending in 2016
All ADIs
$50bn
Mutuals$2bn
Other ADIs$48bn
Growth at 10%
1% marketshare of totalinvestorlendinggrowth
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Changes for growthJoin the conversation
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Senate Inquiry into Co-operatives and Mutuals
Report issued in March 2016 17 recommendations, 6 of which relate to Capital and Regulation, and we consider these to
be key priorities
Capital
• Currently, mutuals hold additional capital over regulatory minimums
• Holding capital levels consistent with larger competitors at ~13.5% would increase loans by ~$25 billion
This would lead to… $375m additional profits assuming a
1.5% spread 60% in profitability 25% increase in size
Regulation
• Reducing regulatory burden aligned with government’s public commitment to reducing red tape by $1bn each year
• Improving competition so all players have a fair-go, regardless of size
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Changes for growthJoin the conversation
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We see a number of quick wins that could be achieved with potential regulatory changes.
Highlighting some of these ideas:
1. Simplifying regulatory rules, responsibilities and audit requirements
2. Allowing all ADIs to call themselves banks
3. Simplifying taxation arrangements
4. Allowing the strength of the sector to be analysed from a collective view
Presenter: Vic Jansen
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Volatility in markets – 2016 started with a slippery slide
Stock Markets— China’s Shanghai Index finished January 26% lower than December.
— In the US, the Dow and S&P500 were down 8.5% and 8.1% respectively.
— Meanwhile in Japan, the Nikkei slumped 12%
— Locally, the All Ords and ASX200 were down 6.8% and 7% respectively.
Commodity Markets— Oil has been a major driver for commodity markets, with a supply glut, Iran
production back on line and low global growth all contributing to the price drops to commence the year and the volatility since.
— Most bulk and base metals were again under price pressure, with lower forecast demand, particularly from China, representing the major contributor to the price falls.
— As global stocks tumbled, precious metals gained friends, with Gold the standout performer rising rapidly in a risk aversion environment.
Interest Rate Markets— Australian Interest Rate Swap yields fell, with the 3yr some 0.25% lower in
early 2016.
— Negative yields take hold globally, with approx. one third of global bonds in negative yields territory.
— Australian Corporate Credit markets widen in early 2016, due to equity market turbulence, however the flight to sovereign bond credit narrows spreads there.
Foreign Exchange Markets— The Australian Dollar has traded a five cent range against the US
Dollar so far in 2016, as global influences take hold.
— The Japanese Yen has been jolted in both directions, following the shock BOJ actions in late January.
— The Great British Pound has been weaker, with uncertainty surrounding EU membership weighing.
— The Chinese Yuan has been under heavy pressure, with significant defence by the PBOC.
Central Bank Actions— European Central Bank (ECB) seeks to review stimulus measures
in March, however in the meantime, ECB President Draghireiterates a firm stance.
— Peoples Bank of China (PBOC) continued to add to currency market volatility with its daily Yuan fixings, attempting to curtail the impact of market forces by injecting extra liquidity in an attempt to combat capital flight.
— Bank of Japan (BOJ) adopts a negative interest rate stance, in a bold attempt to fight off deflation and slowing external demand.
— The US Federal Reserve, after a small rise to the Fed Funds rate, maintains a firm stance to the balance of 2016 with its monetary policy settings, albeit with no further changes in light of continuing soft inflation.
Do you remember how the Financial markets started this calendar year?
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Approach taken to draw opinionsComment
During our analysis we have applied a number of generally available technical analysis tools, in conjunction with applying the overall experience of individuals within the KPMG Corporate Financial Risk Management team.
Both Thompson Reuters and ICE SuperDerivatives data and tools have been utilised for the analysis, as part of our KPMG (FAS) subscription services with these service providers.
There are numerous technical analysis approaches, methodologies and tools available with which to draw from, however we have maintained a consistent approach across all of the markets that are being discussed today.
A combination of wave analysis, made popular by RN Elliott, in conjunction with retracement/extension analysis, commonly used although identified by the mathematician Fibonacci, as well as time period analysis, derived by some of the theory in work by WD Gann.
Various other techniques including, but not limited to, noted patterns, such as double bottom, trend channels, resistance and support zones.
Below are some links to freely available information, should you seek further information on any of these analysis components.
Elliott Wave Principal
— http://www.elliottwave.com/info/elliott_bio.aspx
Leonardo (Pisano) Fibonacci
■ https://en.wikipedia.org/wiki/Fibonacci
■ https://www.mathsisfun.com/numbers/nature-golden-ratio-fibonacci.html
William Delbert Gann
— https://en.wikipedia.org/wiki/William_Delbert_Gann
Technical Chart Patterns
■ http://www.investopedia.com/university/technical/techanalysis8.asp
Technical analysis approach:
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Currency
Long term price indicators
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Australian Dollar v’s US DollarAustralia
— The RBA lowers and maintains the official cash rate at an all time low of 1.50%.
— AUD completes a major cyclical 5 Wave down trend from 1974 through until 2002, which incorporates the 1983 floating of the AUD.
— A 5 Wave retracement ensues, taking AUD, post the GFC, through to 1.1080, which was a major golden Fibonacci ratio (61.8%) retracement of the entire 1974-2002 down trend.
— The AUD then began a new 5 Wave fall, stopping so far at 0.6820, which has pierced the downward golden ratio by around 3 cents.
Source – Thompson Reuters
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Australian Dollar v’s US DollarAustralia
— The RBA lowers and maintains the official cash rate at an all time low of 1.50%.
— AUD completes a major cyclical 5 Wave down trend from 1974 through until 2002, which incorporates the 1983 floating of the AUD.
— A 5 Wave retracement ensues, taking AUD, post the GFC, through to 1.1080, which was a major golden Fibonacci ratio (61.8%) retracement of the entire 1974-2002 down trend.
— The AUD then began a new 5 Wave fall, stopping so far at 0.6820, which has pierced the downward golden ratio by around 3 cents.
1
2
3
4
5Source – Thompson Reuters
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Australian Dollar v’s US DollarAustralia
— The RBA lowers and maintains the official cash rate at an all time low of 1.50%.
— AUD completes a major cyclical 5 Wave down trend from 1974 through until 2002, which incorporates the 1983 floating of the AUD.
— A 5 Wave retracement ensues, taking AUD, post the GFC, through to 1.1080, which was a major golden Fibonacci ratio (61.8%) retracement of the entire 1974-2002 down trend.
— The AUD then began a new 5 Wave fall, stopping so far at 0.6820, which has pierced the downward golden ratio by around 3 cents.
1
2
3
4
561.8% Retracement of 1974-2002 down trend
Source – Thompson Reuters
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Australian Dollar v’s US DollarAustralia
— The RBA lowers and maintains the official cash rate at an all time low of 1.50%.
— AUD completes a major cyclical 5 Wave down trend from 1974 through until 2002, which incorporates the 1983 floating of the AUD.
— A 5 Wave retracement ensues, taking AUD, post the GFC, through to 1.1080, which was a major golden Fibonacci ratio (61.8%) retracement of the entire 1974-2002 down trend.
— The AUD then began a new 5 Wave fall, stopping so far at 0.6820, which has pierced the downward golden ratio by around 3 cents.
1
2
3
4
5
Source – Thompson Reuters
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Australian Dollar v’s US DollarAustralia
— The RBA lowers and maintains the official cash rate at an all time low of 1.50%.
— AUD completes a major cyclical 5 Wave down trend from 1974 through until 2002, which incorporates the 1983 floating of the AUD.
— A 5 Wave retracement ensues, taking AUD, post the GFC, through to 1.1080, which was a major golden Fibonacci ratio (61.8%) retracement of the entire 1974-2002 down trend.
— The AUD then began a new 5 Wave fall, stopping so far at 0.6820, which has pierced the downward golden ratio by around 3 cents.
Potential Technically Forecast outcomes Following the current completion of the 5 Wave sequence at 0.6820, the AUD begins a correction phase back towards 0.8000 or higher. Based on US Dollar Index read, the potential strength of the US Dollar may then turn the AUD lower, with the 0.6820 low becoming the
end of Wave 3 (and not Wave 5 as currently marked) thus encouraging a further down leg in AUD to complete the trend from 1.1080. In either scenario on the Wave count, the favoured position is for AUD higher in the first instance.
Source – Thompson Reuters
– Itraxx update– Have we seen a turn on global
benchmark bond yields in 2016?
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Volatility (Credit)
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Credit Spreads – Itraxx UpdateCredit
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016.
— Credit spreads spiked dramatically as the onset of the GFC loomed, following a long hibernation period prior. A 5 Wave sequence is easily observed from late 2007 through until 2009.
— An initial 5 Wave correction into 2010 before what appears to be a broader A, B, C correction from 2010 currently. The B Wave completes in a double bottom formation at 80bp before moving higher.
— A smaller rising trend within Wave C follows, so far reaching the Fibonacci golden ratio 61.8% of the earlier 2012-2015 down move.
Source – Thompson Reuters
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Credit Spreads – Itraxx UpdateCredit
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016.
— Credit spreads spiked dramatically as the onset of the GFC loomed, following a long hibernation period prior. A 5 Wave sequence is easily observed from late 2007 through until 2009.
— An initial 5 Wave correction into 2010 before what appears to be a broader A, B, C correction from 2010 currently. The B Wave completes in a double bottom formation at 80bp before moving higher.
— A smaller rising trend within Wave C follows, so far reaching the Fibonacci golden ratio 61.8% of the earlier 2012-2015 down move.
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Source – Thompson Reuters
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Document Classification: KPMG Public
Credit Spreads – Itraxx UpdateCredit
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016.
— Credit spreads spiked dramatically as the onset of the GFC loomed, following a long hibernation period prior. A 5 Wave sequence is easily observed from late 2007 through until 2009.
— An initial 5 Wave correction into 2010 before what appears to be a broader A, B, C correction from 2010 currently. The B Wave completes in a double bottom formation at 80bp before moving higher.
— A smaller rising trend within Wave C follows, so far reaching the Fibonacci golden ratio 61.8% of the earlier 2012-2015 down move.
C?
A
BDouble bottom noted at 80bpSource – Thompson Reuters
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Document Classification: KPMG Public
Credit Spreads – Itraxx UpdateCredit
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016.
— Credit spreads spiked dramatically as the onset of the GFC loomed, following a long hibernation period prior. A 5 Wave sequence is easily observed from late 2007 through until 2009.
— An initial 5 Wave correction into 2010 before what appears to be a broader A, B, C correction from 2010 currently. The B Wave completes in a double bottom formation at 80bp before moving higher.
— A smaller rising trend within Wave C follows, so far reaching the Fibonacci golden ratio 61.8% of the earlier 2012-2015 down move.
61.% Retracement
Source – Thompson Reuters
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Document Classification: KPMG Public
Credit Spreads – Itraxx UpdateCredit
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016.
— Credit spreads spiked dramatically as the onset of the GFC loomed, following a long hibernation period prior. A 5 Wave sequence is easily observed from late 2007 through until 2009.
— An initial 5 Wave correction into 2010 before what appears to be a broader A, B, C correction from 2010 currently. The B Wave completes in a double bottom formation at 80bp before moving higher.
— A smaller rising trend within Wave C follows, so far reaching the Fibonacci golden ratio 61.8% of the earlier 2012-2015 down move.
Potential Technically Forecast outcomes With the initial retracement target of 169bp met (from the 2012-2015 B Wave down), a short period of consolidation lower may ensue. Once this consolidation phase finishes, a break higher is favoured to complete the A, B, C formation. Potential target zone for the
Wave C completion lies in the 255-295bp window.
Source – Thompson Reuters
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Document Classification: KPMG Public
Benchmark Government Bond Yields: Have we seen the turn in 2016?
Consistent Technical Themes— Nearly all Benchmark Bonds corrected in an A, B, C Elliott wave correction in Mid 2015, before again turning lower.— A 5 Wave down in yields was the favoured view in early 2016, with all Benchmark yields having pushed to new lows in August 2016 on that
basis. — We appeared to be in the Wave 3’s (of the Wave 5’s sequences), so we did see an up move stage into May for the Wave 4’s, before a final
push lower.
Source – ICE Superderivatives
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Consistent Technical Themes
■ Following the recently viewed completion of the Wave 5 downtrend across nearly all Benchmark Bonds, a significant shift may be noted.
■ All Benchmark Bonds moved back into positive yields. Is this the early stages of bull run in yields?
Source – ICE Superderivatives
Benchmark Government Bond Yields: Have we seen the turn in 2016?
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Consistent Technical Themes
■ Following the recently viewed completion of the Wave 5 downtrend across nearly all Benchmark Bonds, a significant shift may be noted.
■ All Benchmark Bonds moved back into positive yields. Is this the early stages of a bull run in yields?
Source – ICE Superderivatives
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Benchmark Government Bond Yields: Have we seen the turn in 2016?
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– A long & winding road– Does history teach us anything?
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The US Dow
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The US Dow – a long & winding roadDow Jones
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016, before the Dow posts a new high.
— With one of the longest data sets available we have the opportunity to view major wave sequences over 116 years.
— Two major 5 Wave multi decade trends may be noted into 2008 prior to the GFC, which also included the 1929 crash and subsequent Great Depression.
— The GFC produced a sharp freefall, a little lower than 50% retracement of the entire 75 year 5 wave trend.
— A new Wave 5 is currently well advanced since commencing in 2008, with the early 2016 falls confirming the Wave 4. A new high has been achieved, although the Wave 5 is not yet confirmed as in place.
Source – Thompson Reuters
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Document Classification: KPMG Public
Dow Jones
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016, before the Dow posts a new high.
— With one of the longest data sets available we have the opportunity to view major wave sequences over 116 years.
— Two major 5 Wave multi decade trends may be noted into 2008 prior to the GFC, which also included the 1929 crash and subsequent Great Depression.
— The GFC produced a sharp freefall, a little lower than 50% retracement of the entire 75 year 5 wave trend.
— A new Wave 5 is currently well advanced since commencing in 2008, with the early 2016 falls confirming the Wave 4. A new high has been achieved, although the Wave 5 is not yet confirmed as in place.
Source – Thompson Reuters
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5
Join the conversation#mutuals2016The US Dow – a long & winding road
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Source – Thompson Reuters
50% Retracement
Join the conversation#mutuals2016The US Dow – a long & winding road
Dow Jones
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016, before the Dow posts a new high.
— With one of the longest data sets available we have the opportunity to view major wave sequences over 116 years.
— Two major 5 Wave multi decade trends may be noted into 2008 prior to the GFC, which also included the 1929 crash and subsequent Great Depression.
— The GFC produced a sharp freefall, a little lower than 50% retracement of the entire 75 year 5 wave trend.
— A new Wave 5 is currently well advanced since commencing in 2008, with the early 2016 falls confirming the Wave 4. A new high has been achieved, although the Wave 5 is not yet confirmed as in place.
56© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Document Classification: KPMG Public
Source – Thompson Reuters 3
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Join the conversation#mutuals2016The US Dow – a long & winding road
Dow Jones
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016, before the Dow posts a new high.
— With one of the longest data sets available we have the opportunity to view major wave sequences over 116 years.
— Two major 5 Wave multi decade trends may be noted into 2008 prior to the GFC, which also included the 1929 crash and subsequent Great Depression.
— The GFC produced a sharp freefall, a little lower than 50% retracement of the entire 75 year 5 wave trend.
— A new Wave 5 is currently well advanced since commencing in 2008, with the early 2016 falls confirming the Wave 4. A new high has been achieved, although the Wave 5 is not yet confirmed as in place.
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Document Classification: KPMG Public
Potential Technically Forecast outcomes The Dow Jones appears in the latter stages of its multi decade bull run. Given the long time frame to complete thus far, there may be quite
some time to fully develop the final stage. Standing back, a larger Wave 5 in totality may be observed, Wave 1 1800’s-1929, Wave 2 Great Depression, Wave 3 1933-2008, Wave 4
GFC, Wave 5 2009-Current (with 3 of 5 inside waves having already completed). A potential scenario, whereby the Dow corrects lower initially before attempting to make a new final high is starting to shape up. Volatility is
anticipated to heat up during this final phase of this long 120 year cycle.
Source – Thompson Reuters
Join the conversation#mutuals2016The US Dow – a long & winding road
Dow Jones
— Increasing risk sentiment, as global outlook weighs and stock indices tumble in early 2016, before the Dow posts a new high.
— With one of the longest data sets available we have the opportunity to view major wave sequences over 116 years.
— Two major 5 Wave multi decade trends may be noted into 2008 prior to the GFC, which also included the 1929 crash and subsequent Great Depression.
— The GFC produced a sharp freefall, a little lower than 50% retracement of the entire 75 year 5 wave trend.
— A new Wave 5 is currently well advanced since commencing in 2008, with the early 2016 falls confirming the Wave 4. A new high has been achieved, although the Wave 5 is not yet confirmed as in place.
58© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Document Classification: KPMG Public
Does history teach us anything?Dow Jones
— With the benefit of modern analysis tools we can dive deeper into the study of the times, and whilst on a long chart the 1920’s appear insignificant, this time period snapshot highlights some interesting observations.
— The roaring 20’s gave us an early glimpse of a major bull market in stocks, with the Dow rising some 500+% from 1922 – 1929, a mere 7 years.
— Following the crash of 1929, the Dow eventually settled back at the level from 1904, nearly 30 years early. The speed at which the fall occurred ie. 3 years tipped global economies.
— Following the Great Depression and World War 2, The Dow took until the mid-1950’s to retrace the market high put in place back in 1929. This timeframe also marked the start of the baby boom.
Join the conversation#mutuals2016
59© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Document Classification: KPMG Public
Does history teach us anything?Dow Jones
— With the benefit of modern analysis tools we can dive deeper into the study of the times, and whilst on a long chart the 1920’s appear insignificant, this time period snapshot highlights some interesting observations.
— The roaring 20’s gave us an early glimpse of a major bull market in stocks, with the Dow rising some 500+% from 1922 – 1929, a mere 7 years.
— Following the crash of 1929, the Dow eventually settled back at the level from 1904, nearly 30 years early. The speed at which the fall occurred ie. 3 years tipped global economies.
— Following the Great Depression and World War 2, The Dow took until the mid-1950’s to retrace the market high put in place back in 1929. This timeframe also marked the start of the baby boom.
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Join the conversation#mutuals2016
60© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Document Classification: KPMG Public
Does history teach us anything?Dow Jones
— With the benefit of modern analysis tools we can dive deeper into the study of the times, and whilst on a long chart the 1920’s appear insignificant, this time period snapshot highlights some interesting observations.
— The roaring 20’s gave us an early glimpse of a major bull market in stocks, with the Dow rising some 500+% from 1922 – 1929, a mere 7 years.
— Following the crash of 1929, the Dow eventually settled back at the level from 1904, nearly 30 years early. The speed at which the fall occurred ie. 3 years tipped global economies.
— Following the Great Depression and World War 2, The Dow took until the mid-1950’s to retrace the market high put in place back in 1929. This timeframe also marked the start of the baby boom.
Join the conversation#mutuals2016
61© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International. Liability limited by a scheme approved under Professional Standards Legislation.
Document Classification: KPMG Public
Does history teach us anything?Dow Jones
— With the benefit of modern analysis tools we can dive deeper into the study of the times, and whilst on a long chart the 1920’s appear insignificant, this time period snapshot highlights some interesting observations.
— The roaring 20’s gave us an early glimpse of a major bull market in stocks, with the Dow rising some 500+% from 1922 – 1929, a mere 7 years.
— Following the crash of 1929, the Dow eventually settled back at the level from 1904, nearly 30 years early. The speed at which the fall occurred ie. 3 years tipped global economies.
— Following the Great Depression and World War 2, The Dow took until the mid-1950’s to retrace the market high put in place back in 1929. This timeframe also marked the start of the baby boom.
Join the conversation#mutuals2016
Join the conversation
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Presenters:Peter Russell | 02 9335 7731 | [email protected] Kutlow | 02 9346 5406 | [email protected] Jansen | 08 9263 7284 | [email protected]
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The KPMG name and logo are registered trademarks or trademarks of KPMG International.
Liability limited by a scheme approved under Professional Standards Legislation.
The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of any particular individual or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial product. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence, negligent misstatement or otherwise).
Vic Jansen
Associate Director, Advisory
Corporate Financial Risk Management
KPMG
Peter Russell
Partner, Audit and Assurance
Financial Services
KPMG