THE DISTILLERY: Riding the QR rails

Only one real issue this morning, trains and wagons, big shiny things, sold for too much, too little or just right by the Queensland government? So will QR National become the Myer of the 2010 floats, finding it hard to regain or surpass its issue price of $2.55 ($2.45 for retail investors)? Well, according to Fairfax's Stuart Washington, the answer is no. It will have all the support it can get until December 21. Merry Christmas and welcome to the 'green shoe': "Be certain of this: if the share price falls below the offer price, there is price support available in the form of five investment banks with about 9 per cent of the total traded shares available to buy. If the share price is hovering above and below the offer price, read the Queensland government's victorious media releases with a degree of scepticism. The share price is more than likely being gamed."

The Australian's Tim Boreham, writes today: "Market watchers fear rail operator QR National could "do a Myer" and tank on market debut today, with a poor performance likely to tarnish the prospects for a further $14 billion of big-ticket listings. Today's listing follows Saturday's announcement of an institutional subscription price of $2.55, close to the bottom of the bookbuild range of $2.50 to $3 a share. Retail holders will pay $2.45 a share in the $4.1 billion raising, the biggest since Telstra's T3 in 2006. Investors are wary about a repeat of Myer Holdings' dismal performance following its high-profile listing a year ago. Having been priced at $4.10, Myer shares have traded as low as $2.86 but recently recovered."

Fellow Fairfaxian, Adele Ferguson says: "After a fraught few weeks, the Bligh government has done a Houdini act thanks to strong foreign investor support and pulled off the country's second biggest float, QR National, without having to lower its pricing. And to ensure its credibility remains intact when it lists at $2.55 at noon, and doesn't tank like the Myer float did a year ago, the government has included a greenshoe option in the structure of the float, which allows the float's promoters to go into the market and trade up to 6 per cent of the stock for 30 days if it looks like it might fall below its issue price. But it isn't just the government that wants this float to succeed. The 30 or so private equity operators in Australia will be watching the QR float after delaying at least $4 billion of IPOs this year after the Myer and Kathmandu floats muddied the IPO market for most of the year."

The Australian Financial Review says this morning "The Queensland government has ruled out further asset sales beyond the next state election after raising $4.6 billion from the public float of rail and freight company QR National, which will list on the ASX today." And "Bankers have defended poor interest from local institutions in QR National's $6.2 billion initial public offering as reflecting gun-shy investors burned by floats, but fund managers maintain the offering was overpriced."

Stuart Washington in the Fairfax broadsheets says: "A secret alliance was forged between Macquarie Bank and the doomed financial planner Storm Financial, explosive documents have revealed. Revelations about the existence of Macquarie's formal ''alliance document'' with Storm raise fresh questions about the level of the bank's responsibility in the disaster that engulfed the financial planner. The issue of bank responsibility in Storm's collapse will be aired on Wednesday, when the Australian Securities and Investments Commission makes a statement after almost two years of investigations into the collapse."

Little noticed by most Australian media, China continues to tighten monetary policy. Late Friday it lifted the reserve asset ratio for its banks for a fifth time. Yesterday it revealed a raft of measures to try and control food and energy costs and price manipulation. The AFR says this morning: "China's central bank has stepped up its fight against inflation raising the reserve requirement for major banks for the second time in two weeks in a bid to cool bank lending and rein in liquidity." In fact the policy moves by the Chinese government deserve far deeper treatment and explanation from the mainstream media in this country than they so far have been given.

On the issue of the NBN, Fairfax economic editor, Ross Gittins writes this morning: "I am starting to get a really bad feeling about Labor's plan for a national broadband network. The more it resists subjecting the plan to scrutiny, the more you suspect it has something to hide. I fear Julia Gillard is digging herself in deeper on a characteristically grandiose scheme her swaggering predecessor announced without thought to its daunting implications, when she should be looking for ways to scale the project down without too much loss of face. The obvious way to start that process would have been to accede to calls for the Productivity Commission to conduct a cost-benefit analysis. The determination of governments to keep their schemes away from the commission is always prima facie evidence they know the scheme's dodgy." Solid points.

Telstra hit the headlines on Friday with the spat with the Future Fund. Stephen Bartholomeusz wonders about the sense of the Future Fund and its chairman, David Murray, attacking Telstra: "There are suggestions that Murray's aggression towards Telstra – which hasn't exactly helped the value of the fund's shareholdings – played a role in the decision of the fund's inaugural general manager, Paul Costello, to announce his resignation. Costello, the fund's first employee, will leave the organisation at the end of this year. It may not have been the only factor – Murray can be assertive and abrasive – but the continual attacks on the fund's biggest single investment wouldn't have been well received by those most immediately responsible for the fund's performance. Now, it appears, the fund has informally declared war on Telstra, even to the point of voting against relatively uncontroversial changes to its constitution and the appointment of a new director, Dr Nora Scheinkestel, who bears no responsibility for Telstra's past. On the evidence so far the fund's "constructive engagement" hasn't helped Telstra or the value of the fund."

The Australian's John Durie wrote on Saturday: "Future Fund Fund chairman David Murray's five-year term expires in April and he was not going to let yesterday's chance slip to show his strength as Telstra's 10 per cent shareholder at yesterday's annual meeting. Just whether Murray will be re-appointed is a moot point, and depends in part on whether the government values his view enough to maintain his public soap box. Three other directors, John Mulcahy, Trevor Rowe and Geoffrey Browne, are also up for renewal and of course founding chief Paul Costello will be off at month's end. If Murray is true to his word by the next AGM he will not be as powerful with half his holding gone. Murray would also realise this stock overhang is a key reason why Telstra's stock price is underperforming and certainly a bigger reason than any board incompetence."

The AFR's Chanticleer is comfortable with the David Murray approach and wrote on Saturday; "The extraordinary confrontation between Telstra and the Future Fund at Telstra's annual meeting in Melbourne on Friday is a watershed for the company because it signals loud and clear that the country's biggest phone and internet company is being run in the interests of retail investors." And what about our biggest government-owned investor? Is trashing the Telstra share price in the interests of taxpayers?

Michael Pascoe wrote at SMH.com.au: "Such is the hypocrisy of moment. One man's fee is another's income. Trying to legislate that away, turning business operations into altruistic excises in just covering costs, is the stuff of nonsense, an ideology that might still hold sway in the hopeless regimes of North Korea, Cuba and Sydney University's Arts Department, but is otherwise discredited. (OK, that might be a little harsh – the Castro brothers are showing signs of seeing the light.) Tackling the less-than-legal standing of penalty fees is one matter; arbitrarily legislating against other fees to suit overtly political purposes is another; and perverting the claimed policy purpose while doing it is Canberra.

Fairfax's Ian Verrender wrote on the weekend: "recent review of corporate salaries by the Australian Council of Superannuation Investors found that company directors provided salary cushions for their executives, protecting them from pay cuts while shareholders were forced to endure the full brunt of the financial storm. This was done by boosting the base salaries of executives to compensate for lower bonuses. But even then, bonuses were still raised last year, and while below the record of 2007 are 20 per cent higher than in 2006. Chief executives earned 23 per cent more last year than three years earlier. The value of our top 100 companies fell 21.4 per cent in the same period. You do the maths."

And finally, The Australian reported a Wall Street Journal story from the weekend: "The US is preparing insider-trading charges that could ensnare consultants, investment bankers, hedge- and mutual-fund traders and analysts. The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totalling tens of millions of dollars, according to people familiar with the matter. Some charges could be brought before year-end, they say. The three-year investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in US financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say." Big story if true.