iPredict Newsletter: Bridgecorp, Fonterra, Superministry & Collins

IPREDICT LTD

ECONOMIC & POLITICAL NEWSLETTER

16 April 2012

FOR IMMEDIATE RELEASE

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Key Points:

• Bridgecorp directors awaiting sentencing all expected to be jailed for at least 3 ¼ years

• John Wilson and Colin Armer lead in race to succeed Sir Henry van der Heyden as Chairman of Fonterra

• Tertiary Education Commission and New Zealand Trade & Enterprise both expected to be swallowed into Steven Joyce’s new superministry, and David Smol overwhelmingly picked to be first CEO

• Judith Collins may be getting cold feet on suing Trevor Mallard and Andrew Little

• NZ Government to increase price of smokes and booze

• Kim Dotcom not expected to be extradited to US until 2014 at the earliest but Julian Assange off to Sweden in July

Hot Topics

Former Bridgecorp director Gary Urwin is expected to be jailed for just under three years and three months when he comes up for sentencing before the High Court in Auckland tomorrow, trading by iPredict’s 6000 registered traders suggests.

The online predictions market also suggests this will be less jail time that that expected for the other Bridgecorp convicts awaiting sentence: Rod Petricevic (more than five years and nine months); Rob Roest (five years and six months); and Peter Steigrad (more than three years and seven months).

Meanwhile, at Fonterra headquarters, the two favourites to replace Sir Henry van der Heyden as Chairman of New Zealand’s biggest and most important company are John Wilson (45% probability) and Colin Armer (31%).

Fonterra payouts over the next four years are now expected to be NZ$6.80 per kilogram of milk solids in 2011/12 (down 3c compared with last week), NZ$6.49 in 2012/13 (up 9c), NZ$7.46 in 2013/14 (up 8c), and NZ$7.50 in 2014/15 (up 8c). New stock has been launched for the Fonterra payout in 2015/16, and iPredict will report on it once trading volumes have increased.

In Wellington, the Government is expected to achieve its goal of having the new Ministry of Business and Innovation in place on 1 July 2012. As well as including, as announced by the Prime Minister on 15 March, the Ministry for Economic Development, the Department of Labour, the Ministry of Science and Innovation and Department of Building and Housing, the new Ministry is now also expected to integrate the functions of New Zealand Trade & Enterprise (81% probability) and the Tertiary Education Commission (67% probability). Current Economic Development boss David Smol is overwhelmingly favoured to be its first Chief Executive.

ACC Minister Judith Collins is now not expected to file defamation proceedings against Labour MPs Trevor Mallard and Andrew Little before 28 April (24% probability she will) and the market continues to give her only a 13% probability of winning damages within five years.

Despite hints to the contrary from McDonald’s New Zealand, the owner of the brand, Georgie Pie appears unlikely to be back in New Zealand in the foreseeable future, and there is only a 17% probability Pengxin Group's offer for the Crafar Farms will become unconditional before 28 April 2012.

The Government is expected to increase taxes on tobacco and alcohol above the rate of inflation in 2012/13 (74% and 60% probability respectively), but petrol taxes will increase by no more than inflation (60% probability).

Efforts by the US Government to extradite Kim Dotcom from New Zealand are not expected to succeed until 2014 at the earliest, but the Swedish Government is expected to be more successful but Julian Assange heading for Sweden by July.

International Economy

World growth expectations for 2012 are up this week to 3.26%, from 3.09% for most of the year.

Chinese growth expectations are 1.90% for Q2 2012, 1.96% in Q3 2012, and 2.05% in Q4 2012.

Early trading suggests the Australian economy will grow by 0.33% in the March 2012 quarter, 0.42% in June quarter, 0.42% in the September quarter, and 0.42% in the December quarter Inflation is expected to be 2.44% for the March quarter, 2.24% in the June 2012 quarter, 2.24% in the September 2012 quarter and 2.24% in the December 2012 quarter, while unemployment forecasts are 6.70% for April 2012, 6.69% for May 2012 and 6.66% for June 2012. The country’s Cash Rate is expected to be reduced by 0.25 points on 1 May 2012, with no further increases for the remainder of the year.

There is a 22% probability that at least one Euro member will depart the single currency in 2012, a 40% probability the US Senate will formally approve a resolution of ratification of the Trans Pacific Partnership by July 2015 and a 52% probability that New Zealand and South Korea will sign a Free Trade Agreement before 1 December 2014.

New Zealand Economy

Short-term New Zealand growth prospects have remained unchanged this week with growth expected to be 0.4% for the March 2012 quarter, 0.6% for the June 2012 quarter, 0.5% for the September 2012 quarter and 0.5% for the December 2012 quarter.

Forecast unemployment is also unchanged from last week, with the market still predicting unemployment of 6.4% for the March 2012 quarter, 6.3% for the June 2012 quarter, 6.3% for the September 2012 quarter and 6.2% for the December 2012 quarter.

Inflationary expectations have reduced slightly over the past week. Inflation is forecast to be 1.5% for the March 2012 quarter, 1.4% for the June 2012 quarter (down from 1.5%), 1.7% for the September 2012 quarter and 2.0% for the December 2012 quarter.

91 unleaded petrol is expected to cost $2.18 per litre at the end of April rising to $2.20 per litre at the end of May, reducing to $2.18 to the end of June.

The Reserve Bank of New Zealand is expected to hold off increasing the Official Cash Rate (OCR) until December 2012, when it will rise to 2.75% and again in January when it will rise to 3.00%.

Current account deficit expectations are 4.27% to March 2012, 5.16% in June 2012, 5.45% in September 2012, 5.85% to December 2012 and 5.96 to March 2013.

Contracts have been extended out to December 2013 for GDP growth, unemployment, Inflation, and the current account deficit. Commentary on these stocks will be included as trading increases on the NZ Economics page.

US Presidential Election

In the United States, Mitt Romney is now expected to win all remaining Republican Caucuses and Primaries, after Rick Santorum withdrew from the race, and has 97% probability of being his party’s candidate for President. Barack Obama has a 99% probability of being the Democrat’s nominee.

On election day, the Democrats are expected to win California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Iowa, Maine (state), Maine’s Congressional District 1, Maine’s Congressional District 2, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, and Wisconsin.

The Republicans are expected to win Alabama, Alaska, Arizona, Arkansas, Georgia, Idaho, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska (state), Nebraska’s Congressional District 1, Nebraska’s Congressional District 2, Nebraska’s Congressional District 3, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, and Wyoming.

Across the country, the Democrats are expected to win 55% of the share of the Electoral College vote, and 52% of the popular vote, with the Republicans winning 45% of the Electoral College vote and 45% of the popular vote. President Obama has a 67% probability of being re-elected depite early trading suggesting that the US Supreme Court will rule his signature health reform policy, the individual mandate, unconstitutional.

Other International Politics

In China, after weeks of trading predicting his departure, Wen Jiabao is now expected to remain Premier of the People’s Republic of China through to 1 January 2013. Yang Jiechi is expected to remain Minister of Foreign Affairs and Chen Deming to remain Commerce and Trade Minister. However, Zhou Xiaochuan is expected to be replaced as Governor of the People's Bank of China by year’s end, as is Xie Xuren as Minister of Finance.

In the United Kingdom, London Mayor Boris Johnson has an 85% chance of winning the 2012 Mayoral Election, with 50% of the first choice vote and 52% of the final vote, compared with challenger Ken Livingstone who is expected to win 42% of the first choice vote and 47% of the final vote. In national politics, the Conservative/Liberal Democrat coalition is expected to survive 2012 (82% probability).

Elsewhere in Europe, there is a 78% probability Francois Hollande will win the French presidential election over incumbent Nicolas Sarkozy.

In the Middle East, Syrian dictator Bashar al-Assad is expected to remain in power until at least 1 December 2012 while the probability Israel will launch an airstrike against Iran in 2012 is now 28%, down from 31% last week

Despite last week’s rocket launch failure North Korean dictator Kim Jong-un looks safe until at least 2015, with a 35% probability his regime will detonate an atomic device (up from 28% last week).

In Australia, iPredict traders continue to forecast that the two candidates for Prime Minister at the next Federal Election will be incumbent Labor Prime Minister Julia Gillard (56% probability) and Liberal Party challenger Tony Abbott (63% probability).

For the Australian Federal Election, first preference expectations have remained steady this week and are forecast to be: Labor 35.4% (up from 33.9%); Liberal 31.0% (steady); Greens 11.9% (up from 11.2%); Queensland Liberal National 10% (up from 9.4%); Australian National 6.8% (steady) and Family First 4.5% (stead) On a two-party preferred basis, the Coalition is forecast to win 51.7% of the vote and Labor 48.3%.

The Coalition has a 78% probability of forming the next Federal Government. New stock has been launched predicting the next Australian Federal Election date, which must be held by November 2013, early trading suggests the election will be in Q4 of 2013.

In the Northern Territory, the Country Liberal Party is expected to win 52% of the First Preference vote, while in the Australian Capital Territory election the Labor and Green parties are expected to win a combined 53% of First Preference Votes. Stocks have also been launched forecasting Chief Ministers for Northern Territory and Australian Capital Territory after their elections this year.

New Zealand Politics

Back in New Zealand, the next General Election is almost certain to be held in 2014, and traders believe Mr Peter’s NZ First will be the kingmaker. The forecast party votes see the Greens on the rise a second week in a row, and are: National 41.6% (steady); Labour 33.6% (steady); Greens 11.7% (up from 11.1%); NZ First 5.2% (steady); Conservative 2.7% (steady), Act 1.7% (steady); Maori Party 1.4% (steady); Mana Party 1.3% (steady) and UnitedFuture 0.8% (steady). Of small parties not forecast to pass the 5% threshold, the Maori Party is expected to win 2 electorate seats and the Act and Mana parties one each.

Based on these results, Parliament would consist of: National 52 MPs; Labour 42 MPs; the Greens 14 MPs; New Zealand First 6 MPs; the Maori, Act and the Mana Party 2 MPs each. There would be 120 MPs, requiring 61 to govern.

The National/Act partnership would have 54 MPs while the Labour/Green/Mana group would have 58 MPs, meaning Labour could form the next government with the support of NZ First. National/Act would require the support of both NZ First and the Maori Party. Overall, there is a 53% probability Labour will form a Government after the next General Election, with a 40% probability David Shearer will be Prime Minister by 1 January 2015.

Other NZ Issues

Early trading suggests that there is only a 29% probability that Georgie Pie will be re-launched in New Zealand by Christmas 2012, there is a 34% probability that it will be re-launched by Christmas 2013 and a 42% probability it will be re-launched by Christmas 2014.

Excise duties are expected to be increased on tobacco and alcohol in 2012/13, although the market suggests petrol excise won’t be increased.

At MFAT, John Allen looks secure in his role with a 73% chance that he will stay on as CEO. However early trading on MFAT appropriations for 2012/13, suggests there could be cuts of up to 7.32%. Traders believe that the New Zealand Police will experience cuts in their appropriations for the 2012/13 budget. No Commission of Inquiry is expected into the 2007 police raids on suspected terror activities in the Urewera district, nor are the ‘Urewera Four’ expected to be re-tried.

Elsewhere, Pengxin Group’s bid for Crafar farms is predicted to become unconditional between 28 April and 2 June 2012. The Defence Force isn’t expected to announce an outsourcing of their payroll administration before 2013. The Auckland Council is no longer expected to add a new bin for glass collection, and the market doesn’t believe there will be an increase in the waste levy rate.

Miscellaneous

iPredict is owned by Victoria University of Wellington. Details on the company and its stocks can be found at www.ipredict.co.nz. The weekly snapshot is taken at a random time each week. This week’s was taken on the afternoon of Monday 16 April.

ENDS

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