FX Strategist

Greg Gibbs

Fundamental analysis of topical themes in FX

Amplifying Global FX Capital

Amplifying Global FX Capital was founded in 2015 and is fully owned by Greg Gibbs. It is a registered company both in Australia and Colorado, USA and is a licensed in Australia to provide financial services.

We are producing a regular trading view orientated macroeconomic analysis of topical themes in global financial markets, with a particular focus on foreign exchange. We invite you to view an “executive summary” of these reports in “AmpGFX Reports” under our “Research” menu.

These reports are drawn from the analysis of Greg Gibbs and inform the capital management he undertakes on behalf of the company. The trading performance is posted periodically on our website. We aim to build our company into both a research and capital management business. We are currently in the planning phase for managing capital for wholesale customers.

Greg Gibbs has spent his working life of more than 26 years in financial markets, beginning in 1989 at the Reserve Bank of Australia, after completing a Bachelor of Economics Degree (Honours) at the Australian National University. He has been a CFA Charterholder since 2005. He has worked in Sydney, Singapore, New York and London for major global banks and presented on foreign exchange markets to major financial institutions and companies around the world, and maintained a high profile in the financial media.

Before Amplifying Global FX Capital, Greg was the Head of Asia Pacific Market Strategy at the Royal Bank of Scotland based Singapore. He now resides in Breckenridge Colorado.

Macroeconomics

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome.  The much lower core inflation reading, evidence of tightening bank credit conditions, some softening recently in credit growth, cooler job vacancies, a stronger AUD, some renewed doubts on China and timing of the 2 July election suggest the RBA needs to be decisive and get ahead of expectations.  Consequently we see further weakness in the AUD and continue to favour gold as we discussed last week outlining risks in China that may spill over to global asset markets and the rebounding JPY that may push the BoJ toward more easing.

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome.  The much lower core inflation reading, evidence of tightening bank credit conditions, some softening recently in credit growth, cooler job vacancies, a stronger AUD, some renewed doubts on China and timing of the 2 July election suggest the RBA needs to be decisive and get ahead of expectations.  Consequently we see further weakness in the AUD and continue to favour gold as we discussed last week outlining risks in China that may spill over to global asset markets and the rebounding JPY that may push the BoJ toward more easing.

Domestic Australian factors are being overshadowed by global developments.  These global drivers account for both its rapid rebound over the last month and its significant correction in recent days.  Throughout this move we have been skeptical that the AUD can sustain its rally with significant local political and economic uncertainty.  These risks remain and continue to make it difficult to hold long AUD positions.  On the other hand, political and economic uncertainty in many alternative currencies are equally troubling. In Australia, economic momentum picked up in 2015, but has been more mixed in 2016.  The housing market is starting to ebb from strong levels, political risks remain elevated, bank equity performance has been weak, potentially a drag on confidence.  However, Global drivers remain in control, and while uncertainty is elevated in Australia, it is not clear that it will be sufficient to throw the Australian economy off course.  The RBA Statement continued to express a steady policy outlook albeit with an easing bias.

Domestic Australian factors are being overshadowed by global developments.  These global drivers account for both its rapid rebound over the last month and its significant correction in recent days.  Throughout this move we have been skeptical that the AUD can sustain its rally with significant local political and economic uncertainty.  These risks remain and continue to make it difficult to hold long AUD positions.  On the other hand, political and economic uncertainty in many alternative currencies are equally troubling. In Australia, economic momentum picked up in 2015, but has been more mixed in 2016.  The housing market is starting to ebb from strong levels, political risks remain elevated, bank equity performance has been weak, potentially a drag on confidence.  However, Global drivers remain in control, and while uncertainty is elevated in Australia, it is not clear that it will be sufficient to throw the Australian economy off course.  The RBA Statement continued to express a steady policy outlook albeit with an easing bias.

AmpGFX - AUD in No Man's Land, Political and Economic Risks Remain Elevated

Founder Evidente. Top rated quantitative analyst, Evidente

Sam Ferraro

Founder Evidente. Top rated quantitative analyst

Evidente

Evidente is an independent financial education firm that delivers innovative financial advice to wholesale investors, including active long only funds, hedge funds, pension funds, and sovereign wealth funds, in Australia and globally.  Drawing on academic research in asset pricing, behavioural finance and portfolio construction, Evidente provides wholesale investors with commercial solutions to stock selection and asset allocation decisions across equities and other asset classes.

Thematic (Sector/Industry)

<ul><li>In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO succession at Woolworths and renewed concerns that Australian banks represent a 'big short' thanks to rumours of the imminent collapse of residential house prices. </li><li>The losses announced by Woolworths in its home improvement division this week and decision to exit the business altogether serves as a timely and powerful signal to other companies about the dangers associated with investing for growth in the current environment of deficient demand.  Corporate Australia has already taken heed, with the economy on the precipice of a capex cliff.  The recently released ABS survey of capex intentions points to a 20% slide in business investment in the current financial year, which would represent the largest annual decline in over 25 years.</li><li>Any bubble talk around housing discounts the important role that dwelling investment and household consumption still has to play to support the outlook while the economy is on the precipice of a capex cliff.  Against the backdrop that interest rates will remain low for an extended period (and likely move lower from here), if there is a bubble in Australian housing it might well persist.  To take a cue from John Maynard Keynes, hedge funds seeking to capitalise on Australia's 'big short' will probably need an abundance of patience (and capital).</li></ul>

In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO succession at Woolworths and renewed concerns that Australian banks represent a 'big short' thanks to rumours of the imminent collapse of residential house prices. The losses announced by Woolworths in its home improvement division this week and decision to exit the business altogether serves as a timely and powerful signal to other companies about the dangers associated with investing for growth in the current environment of deficient demand.  Corporate Australia has already taken heed, with the economy on the precipice of a capex cliff.  The recently released ABS survey of capex intentions points to a 20% slide in business investment in the current financial year, which would represent the largest annual decline in over 25 years.Any bubble talk around housing discounts the important role that dwelling investment and household consumption still has to play to support the outlook while the economy is on the precipice of a capex cliff.  Against the backdrop that interest rates will remain low for an extended period (and likely move lower from here), if there is a bubble in Australian housing it might well persist.  To take a cue from John Maynard Keynes, hedge funds seeking to capitalise on Australia's 'big short' will probably need an abundance of patience (and capital).

What the Capex Cliff Means for Australia's 'Big Short'

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Equity Bottom-Up

After months of exclusive due diligence, Western Union has not made a binding offer for OzForex and discussions have been terminated. More disappointing is fiscal 2016 earnings guidance being reduced. While a binding offer at a premium to our fair value estimate was a desirable outcome, we continue to believe stand-alone OzForex is an attractive business with attractive growth prospects. Providing customers a low-cost, simple, secure and fast way to make international payments we see scope for continued client acquisition.Analyst: Nathan Zaia

After months of exclusive due diligence, Western Union has not made a binding offer for OzForex and discussions have been terminated. More disappointing is fiscal 2016 earnings guidance being reduced. While a binding offer at a premium to our fair value estimate was a desirable outcome, we continue to believe stand-alone OzForex is an attractive business with attractive growth prospects. Providing customers a low-cost, simple, secure and fast way to make international payments we see scope for continued client acquisition.Analyst: Nathan Zaia

Earnings Guidance Disappoints and No Binding Offer Eventuates

Event-Driven

<ul><li class="p1">Ozforex received a preliminary, non-binding, indicative&nbsp;conditional takeover offer from Nasdaq-listed, global&nbsp;payment business, Western Union.</li><li class="p1">The board will&nbsp;evaluate the indicative AUD 3.50 to AUD 3.70 per share&nbsp;all-cash offer, which is subject to access to due diligence,&nbsp;retention of management, and relevant regulatory&nbsp;approvals.</li><li class="p1">The offer represents a 35%-42% premium to&nbsp;the last close price of AUD 2.60.</li><li class="p1">At the top end of the range, the AUD 888 million price tag&nbsp;implies an EV/EBITDA multiple of 23 times based on our&nbsp;fiscal 2016 forecasts.</li><li class="p1">While not a low-ball offer, the board&nbsp;may seek an additional premium for the strong earnings&nbsp;growth outlook, and potential for significant transaction&nbsp;volume which can pass through the Ozforex platform&nbsp;under the ownership of Western Union.</li><li class="p1">Western Union has acknowledged a need to adapt to&nbsp;changing industry trends if it is to maintain its dominant&nbsp;position and strong profitability, but despite strong growth&nbsp;in recent years, revenue via electronic channels still represents only 7% of revenue. The acquisition of Ozforex&nbsp;would lift electronic revenue by about 40% and represent&nbsp;near 10% of group.</li></ul>Analyst: Nathan Zaia

Ozforex received a preliminary, non-binding, indicative&nbsp;conditional takeover offer from Nasdaq-listed, global&nbsp;payment business, Western Union.The board will&nbsp;evaluate the indicative AUD 3.50 to AUD 3.70 per share&nbsp;all-cash offer, which is subject to access to due diligence,&nbsp;retention of management, and relevant regulatory&nbsp;approvals.The offer represents a 35%-42% premium to&nbsp;the last close price of AUD 2.60.At the top end of the range, the AUD 888 million price tag&nbsp;implies an EV/EBITDA multiple of 23 times based on our&nbsp;fiscal 2016 forecasts.While not a low-ball offer, the board&nbsp;may seek an additional premium for the strong earnings&nbsp;growth outlook, and potential for significant transaction&nbsp;volume which can pass through the Ozforex platform&nbsp;under the ownership of Western Union.Western Union has acknowledged a need to adapt to&nbsp;changing industry trends if it is to maintain its dominant&nbsp;position and strong profitability, but despite strong growth&nbsp;in recent years, revenue via electronic channels still represents only 7% of revenue. The acquisition of Ozforex&nbsp;would lift electronic revenue by about 40% and represent&nbsp;near 10% of group.Analyst: Nathan Zaia

OzForex Receives Knock on the Door from Payment Behemoth WesternUnion

Australia

OFX Group Limited provides online international payment services. The Company offers single and recurring transfer, foreign exchange, and other related services. OFX Group serves clients worldwide.

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OFX Group (OFX AU)

AmpGFX - RBA Cut the Obvious Decision

We think the case is clear for the RBA to cut rates tomorrow and are predicting this outcome. The much lower core inflation reading, evidence of...

Greg Gibbs

AmpGFX - AUD in No Man's Land, Political and Economic Risks Remain Elevated

Domestic Australian factors are being overshadowed by global developments. These global drivers account for both its rapid rebound over the last...

Greg Gibbs

What the Capex Cliff Means for Australia's 'Big Short'

In the past week, two bottom up developments have dominated the financial market news flow in Australia: the belated announcement of CEO...

Sam Ferraro

Earnings Guidance Disappoints and No Binding Offer Eventuates

After months of exclusive due diligence, Western Union has not made a binding offer for OzForex and discussions have been terminated. More...

Morningstar, Inc.

OzForex Receives Knock on the Door from Payment Behemoth WesternUnion

Ozforex received a preliminary, non-binding, indicative conditional takeover offer from Nasdaq-listed, global payment business, Western Union. The...

Morningstar, Inc.

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