Pension funds for companies on Germany’s DAX index return 5%

first_imgThe companies on the German stock exchange DAX returned 5% on average on their pension plans over 2013, according to figures from Mercer.Looking at the 22 already available annual reports of companies that represent around 90% of pension liabilities in the DAX, the consultancy found that, despite the fact the average return halved year on year, funding levels improved from 62% to 66%. This is down to liabilities going down for the first time since the beginning of the financial crisis, according to Thomas Hagemann, chief actuary at Mercer Germany.“It seems a few of the DAX companies could even increase the discount rate for 2013, which led to a reduction of the liabilities,” he added. Others were able to hold the 2012 level or make only slight adjustments.Hagemann said it was a “great advantage” of the German system that companies did not have to fund their pension plans fully every year or achieve a minimum funding level, but were able to “sit out” drops in interest rates.“Last year, no company was forced to offset the lower funding level with additional payments,” he pointed out.Further, Carl-Heinrich Kehr, a principle at Mercer’s investment department, said contributions made by companies currently exceed the level of new liabilities, which he said might mean companies were shooting for a higher funding level in the near future.In total, pension liabilities in the DAX are now at €300bn, while assets have grown to €197bn.Over the last year, equities have boosted performance, returning around 20%, while bonds only contributed 1.4% and emerging market fixed income performed negatively.Overall, the equities allocation of around 25% on average increased by approximately 300 basis points over the period, but Kehr put this down “more to strong returns rather than active asset reallocation”.More than 60% of the DAX’s pension assets remain invested in bonds, while another 15% is invested in ‘other’ asset classes.last_img read more

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FTK to hit Dutch pension funds’ coverage ratios, consultancies warn

first_img“If the Ministry of Social Affairs is to adopt the recommendations of the ultimate forward rate committee, the new discount rate would be slightly lower than the current one and result in a lower coverage ratio,” he said.However, he said he could not confirm whether a lower discount rate would lead to new rights cuts.“So far, we haven’t conducted exact calculations about the effects on the funding of a new curve,” he said.“In the new situation, for example, the current three-month average of the discount rate would be abolished.”Krijgsman pointed out that Jetta Klijnsma, state secretary for Social Affairs, had said no rights discounts needed to be applied at the end of 2014, and that, under the new FTK – still scheduled to come into force on 1 January 2015 – cuts could be spread out over a 10-year period.Driessens’s response came on the back of calculations of the average coverage ratio, which were, according to Aon Hewitt, stable at 109% in April but so far have not improved in 2014.The company said liabilities increased by 1.9% in April in the wake of falling interest rates, which caused the three-month average of the discount rate to fall.On the other hand, the assets of Dutch pension funds grew by 1.4% on average, largely thanks to a 1.7% increase in fixed income holdings, but also due to a value increase of equity investments of 0.3%, according to Aon Hewitt.Mercer, which linked its calculations to the most recent figures of supervisor De Nederlandsche Bank (DNB) also concluded that average funding had hardly changed, estimating a 0.1 percentage point drop to 110.4% in April.According to Krijgsman, the 30-year swap rate dropped from 2.55% to 2.45% in April, while the three-month average of the discount rate fell from 2.66% to 2.6%.Dennis van Ek, principal and actuary at Mercer, added that, based on the actual market rate at April-end, the average coverage ratio of Dutch pension funds would have been 104.8%. Aon Hewitt has warned that a number of Dutch pension funds will find themselves with insufficient financial buffers when the new financial assessment framework (FTK) is enacted if their coverage ratios fail to improve significantly in the coming months.Frank Driessen, chief commercial officer for retirement and financial management at the pensions adviser, said: “This would threaten to erode their indexation potential and might even lead to new rights discounts.”Driessen also argued that the lower discount rate for liabilities under the new FTK would generally hurt schemes’ funding. Edward Krijgsman, team leader for monitoring at Mercer in the Netherlands, agreed.last_img read more

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Swiss second pillar guarantee rate to stay at 1.75%

first_imgSome members had proposed a lowering to 1.5% based on the calculations on the minimum expected return the commission uses as the basis for its suggestions to the government.Six members instead voted in favour of raising the rate to 2%, a demand supported by Swiss unions which have demanded a higher minimum rate for years.Over the last few years, the Swiss government has followed these non-binding recommendations almost without exception.Part of the current reform package, “Altersvorsorge 2020”, negotiated by the authorities would include a change to the approach of setting the minimum interest rate.In future, the government wishes to set it at year end based on actual returns rather than basing the rate on estimates and agreeing it in advance. Almost two thirds of the members of the BVG commission have voted in favour of keeping the Swiss second pillar’s minimum interest rate at 1.75% for 2015.The decision comes after the commission last year voted to raise the rate – which is the level Swiss Pensionskassen have to guarantee under the BVG law governing the mandatory occupational pensions sector – from 1.5% to 1.75%. However, a year ago the yield of a Swiss 10-year government bond stood at the much higer rate of 1%, compared to 0.5% at the beginning of September 2014.Nevertheless, the commission said the “on the whole satisfactory situation on the financial markets” as reason for the decision to keep the rate at the current level.last_img read more

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UK roundup: BT Pension Scheme, Accenture, HM Treasury

first_imgThe £40bn (€56.5bn) BT Pension Scheme (BTPS) has re-appointed Accenture to provide its administration system for its 300,000 members, extending the current arrangement for another eight years.Accenture has been the scheme’s provider since 2000, when the BT Group and Accenture launched a joint venture, with the outsourcing firm providing pensions administration alongside HR services such a payroll, training and recruitment.The scheme began reviewing the arrangement in 2013 and has appointed Accenture for an additional eight years.Accenture does not market itself as a third-party administrator to other UK pension schemes. It provided the service to BTPS as part of the wider deal with BT.However, it said it would continue building its capability to provide additional features to BTPS’s members, and grow its business in the UK.Chairman of the scheme, Paul Spencer, said the company was appointed on new terms after a full review of the market.“This new contract provides for further investment in the administration function to continue to enhance the service provided to members,” he said.In other news, the UK government has begun consulting with the pensions industry on whether to cap or ban charges placed on defined contribution (DC) pension scheme members when they transfer out a scheme.Since April, when HM Treasury brought in new freedoms to DC savers to access their savings as cash or income drawdown, the government grew concerned providers might restrict access by adding charges.HM Treasury is also assessing whether to cap fees by assessing what may be “excessive”, and whether charges deter members from accessing savings.The consultation runs for 12 weeks.Malcolm McLean, senior consultant at Barnett Waddingham, criticised the government consultation for being non-specific on what charges and controls it wanted to identify or implement.“[It is] more a case of kicking the ball down the road, pending further evidence, than anything else,” he said.last_img read more

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Longevity-linked securities also of use as short-term holdings, researchers argue

first_imgHe added the research team was “surprised” by the 0.5 Sharpe ratio from longevity-linked investments, but stressed it was “risky in risk-return tradeoffs with a lot of leverage”.For a longevity securitisation market to work, however, “a more transparent and efficient pricing of life annuities” was required to create “an integrated market for insurance and financial contracts with a publically traded longevity index”.The prediction of returns of such products was “surprisingly accurate” as “aggregate longevity is mean reverting and can be used for the predictions”, Tebaldi noted.This was confirmed by Marcel Fischer from the Copenhagen University who discussed the paper at the conference.However, Fischer pointed out there was “no well-working secondary market for products underwritten by insurers” and therefore it was “difficult” for investors to assess such risks.He also questioned whether investors could “make money on this or if the market is too narrow”.Last year, the OECD had also called for more standardisation and transparency in the pricing of longevity risk to allow the market to grow. Researchers have identified the re-packaging of longevity risks into products tradable on the secondary market as a “crucial step” to increasing interest longevity-linked securities, conference participants heard in Vienna.At a retirement symposium organised by Bank Gutmann and the Vienna Economic University (WU), Claudio Tebaldi from the Italian L. Bocconi University presented research he published last year together with other researchers entitled “A Multivariate Model of Strategic Asset Allocation with Longevity Risk”. They found a potentially large number of short-term investors would be willing to increase their exposure to longevity risk, but without increasing the duration in their portfolio.According to Tebaldi the potential investors wanted to use the proceeds from these assets ”to fund bond and equity investments as this gives them a non-cyclically correlated source of financing”.last_img read more

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PKA sees early fruits of new business push with 1,800-member deal

first_img“The more members PKA has, the more robust it is, and the greater chances it has to be able to give its current and future members concrete benefits in the form of a high return, low costs, and a competitive yield on pensions.”Damgaard Jensen said PKA was a pension fund for different professional groups and had a clear aim to provide pension products that matched their demands, regardless of whether they were public sector employees, private sector staff or self-employed.Tina Christensen, chairman of the Danish Chiropodists’ Association, said there were many reasons why PKA had been chosen.“It was very important for us that PKA can offer our self-employed and private-sector employed members a voluntary and flexible pensions package tailored to their needs,” she said.“At the same time, PKA understands employees in the healthcare sector, so our 1,800 members will get a pensions package that suits them for their whole lives,” Christensen said.Back in October, PKA launched a new drive to take on thousands of new members and win private-sector pension schemes from the hands of Denmark’s big commercial providers such as Danica and PFA. It said it had developed a pension product called PKA Private, which can be tailored to appeal to a wider range of customers.The following month PKA announced it had poached Søren Bang Palfelt from PFA to lead the new business push.Tomas Frydenberg, executive director in charge of membership matters, said the Danish Chiropodists’ Association deal was an early result of PKA’s new strategy to provide pension schemes to the entire healthcare sector.He said PKA would continue this strategy in years to come and bid for other groups within the healthcare sector. PKA, the DKK250bn (€33.6bn) labour-market pension provider, has won a contract from the Danish Chiropodists’ Association (Danske Fodterapeuter) to provide pensions for its 1,800 members.PKA, which currently has around 300,000 scheme members via the three social and healthcare pension funds it runs, said it won the tender process arranged by Deloitte to provide pensions for the association’s members, beating several other pension companies.It said this was the first step on the path towards its goal of attracting more members.Peter Damgaard Jensen, chief executive of PKA, said: “We have implemented a growth strategy at PKA, which we believe is necessary in an ever more competitive sector.last_img read more

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Interview: Alecta CEO ‘proud’ of EU sustainable finance body output

first_imgHe told IPE that he was proud of the work the HLEG had done.“It is exciting to see what will happen with it and what the European Commission decides to push forward,” he added.The advisory body presented eight “priority” recommendations in its final report, one of which was that investor duties be clarified “to extend time horizons and bring greater focus on environmental, social and governance (ESG) factors”.“We concluded that the marketplace would benefit from a codification of what investor duty actually entails”Magnus Billing, Alecta CEO Billing said: “I think that investor duty has a critical role to play in order to make a difference in allocating what I would call the mainstream capital to sustainability investments and achieving the policy objectives that are quite clear to all of us in the market: the Paris Agreement, the [UN] Agenda 2030 [for sustainable development] and so forth.”A persistent argument made by those pushing for more ESG investing has been that pension funds have been misinterpreting investor duty and failing to appreciate it required consideration of ESG factors.The HLEG’s recommendation on investor duty has made some in the European occupational pension industry uneasy. Billing, however, said pension funds should not fear over-regulation.The expert group’s recommendations were based on the view that there were still only a few pension funds that had really integrated ESG factors into their investment process, and for many there was a misalignment between the time horizons of their liabilities and assets.“I am not sure that is to the benefit of the beneficiaries, i.e., the owner of the money that we manage, and I think that is a very important point the report is making,” said Billing.The HLEG also considered that laws regulating investor duty in Europe were not harmonised, he added.“We concluded that the marketplace would benefit from a codification of what investor duty actually entails, also underlying the importance of understanding and fulfilling beneficiaries’ demands and requirements,” said Billing. Magnus Billing, CEO of AlectaThe HLEG’s recommendations about investor duty should be seen in connection with the rest of the group’s report, he added.He highlighted the fact that the group focused on identifying and suggesting measures to remove hurdles standing in the way of more capital being allocated to “sustainable and inclusive growth”.“That is the right way to go about it if we’re going to have a meaningful impact,” he said, “because large pension funds will normally look for investment opportunities that are scaleable and have a low transaction cost.”HLEG recommendations in this vein included establishing ‘Sustainable Infrastructure Europe’, a new organisation designed to support the development of sustainable infrastructure projects across EU countries.Billing also highlighted the group’s recommendation that the EU endorse and implement the guidelines and recommendations of the Task Force for Climate-related Financial Disclosures.“This is a first step to get to the point where we actually get standardised, qualitative forward-looking data to process,” said Billing.Similarly, requiring the European supervisory authorities to consider climate risk as part of their work would also be beneficial, as it could lead to regulators asking investors to provide assessments of such risks in their own risk reports.Billing said: “From there the step is actually quite short to actual risk management and then also assigning risk and capital charges, and maybe we will then see that if you are clever and prudent when you assess your ESG factors in the investment process you get a lower capital charge.”The HLEG also proposed an EU classification system to establish market clarity on what is green or sustainable, but Billing warned against this being used as a basis for determining capital charges as “we’re far away from that”.Beneficiary consultation ‘no big ask’One of the recommendations of the HLEG was that pension funds consult their beneficiaries about their sustainability preferences, and incorporate these into investment decision-making.Some were concerned by this suggestion, but Billing said asking pension funds to consider the wishes of their members regarding how their money was invested should not be seen as “a big ask”.The obligation could be fulfilled in many different ways, depending on the asset owner and its structure, he said.“I think it’s a reasonable ask for anyone managing other people’s money to try to do that in a way which is in line with what the interest of that beneficiary is,” said Billing. “If you feel that that is a big ask I think you have an issue with your service.” Magnus Billing, CEO of Swedish occupational pension provider Alecta, is a member of the high profile expert body that advised the European Commission on a sustainable finance strategy for the EU. IPE spoke to him after the group published its final report last week.Appointed by the Commission in late 2016, the High Level Expert Group (HLEG) on sustainable finance had quite a mission. In the words of Commission vice-presidents Valdis Dombrovskis and Jyrki Katainen: “The group was given a mandate to prepare a comprehensive blueprint for reforms along the entire investment chain, on which to build a sustainable finance strategy for the EU.”And this, the Commissioners said, is exactly what it delivered.Alecta’s Billing was one of the two main occupational pension provider representatives on the group, alongside Claudia Kruse, managing director for global responsible investment and governance at APG, the investment manager for €403bn Dutch civil service scheme ABP.last_img read more

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Accrual roundup: Retail scheme warns for accrual drop to 1%

first_imgIn order to keep the current pensions accrual, premiums had to be raised to 33.1%, they argued.A third option would be that contributions are raised and accrual is reduced at the same time, employers and workers said in their letter to the minister.However, they made clear that they preferred a quick elaboration of the pensions agreement through legislation.Social partners in other sectors are also worried about the impact of cost-covering contributions, with trade unions warning for a steep accrual drop at the €459bn civil service scheme ABP and asking for a “quick solution”.The €5.7bn pension fund for the cleaning sector (Schoonmaak) has urged the minister to loosen the discount rules for liabilities.It said it would have to raise contributions from 22% to 30%, if it wanted to keep accrual at the current level.A spokesman for trade union FNV, who couldn’t provide further details, said that several other sectors would address the issue in a letter to Koolmees.He added that approximately 4,000 FNV members had signed a model letter to the minister since the union had launched the initiative last week.Trade union CNV said that a petition against rights cuts, premium increase and accrual reduction on its website had been signed 24,000 times. Accrual at ING CDC scheme to drop by one quarterThe €1.6bn Dutch ING CDC pension fund plans to reduce annual pensions accrual by one quarter, as a result of declining interest rates.In a message to its participants, it stated that the current accrual rate of 1.738% would be decreased to 1.3% as of next year.André Hollenkamp, the scheme’s chair, explained that the declining interest rates had driven up the prime cost of pensions, leaving the fixed contribution insufficient for the existing accrual level.The scheme’s board further warned that next year’s accrual reduction wouldn’t necessarily be the last one.In September, it is to assess the accrual rate again. It indicated that the possibility existed of a further reduction if interest rates remained at the current low level.The scheme’s fixed premium amounts to 31.5% of the pensionable salary, and already exceeds the fiscally allowed maximum of 27% expected to be introduced in the new pensions system.In more bad news for its participants, the pension fund announced that it would not grant an inflation compensation next year.At September-end its coverage ratio stood at 110%.The ING CDC pension fund has 14,000 active participants and 359 pensioners.Earlier, the €31bn pension fund for ABN Amro announced that it would cut annual accrual by 20% to 1.48%.Several other pension funds, including the Dutch company scheme for Philips, as well as the trade unions for government staff, have warned for looming premium rises and accrual reductions in 2021.Recently, the multi-sector pension fund PGB said that its contribution had to rise by 4 percentage points to 28% next year.However, the €29bn scheme indicated that it had postponed the implementation in order to allow employers and workers breathing space for assessing the future of their pension arrangements.The developments were triggered by the introduction of a lower prescribed discount rate for liabilies next year, the new fiscal ceiling for contributions as well as the requirement of a costs-covering premium in the new pensions system. Employers and workers in the Dutch retail sector have warned social affairs minister Wouter Koolmees that the annual pensions accrual would drop to 1% of the pensionable salary if contributions remain at the current level while costs-covering.They added that premiums at the €26bn sector pension fund must rise by no less than 47% were the accrual to be maintained at 1.56%.The maximum tax-facilitated pensions accrual in the Netherlands is 1.875%.According to the social partners – employer and employee representatives – the accrual drop is necessary if the current contribution level of 22.5% remained unchanged but was made to cover costs.last_img read more

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​Swedish Pensions Agency says special funds too costly for premium pension

first_imgOverall, however, the agency said it supported the 860-page proposal published in November.“We believe that the proposal for a procured fund marketplace will contribute to higher quality and lower costs for pension savers and pensioners,” it said, adding that having a smaller number of funds would simplify choices for pension savers.However, it disagreed with the proposed division of responsibilities between itself and AP7, which is to be given more tasks and change its name to the ‘Authority for the Premium Pension Fund Management’.The agency – which is currently responsible for the whole area of pension choice within Sweden’s general or state pension, which includes the premium pension – said putting the new authority in charge of designing the choice architecture for the new premium pension would make the development work very difficult.“For these reasons, we recommend that the responsibility be pooled at the Pensions Agency and reject the proposal to transfer responsibility for the choice architecture to the new authority,” it said.It also rejected the choice architecture’s proposed design, saying it had not been tested on pension savers.As for the idea of AP7 being in charge of setting requirements for fund trading and fund information, the agency said that it would hamper its ability to take operational responsibility for these two areas.“For this reason, today’s fund agreement should be replaced by two supplementary fund agreements, which each authority enters into with the fund manager,” it said.However, the Swedish Pensions Agency was on board with the principle of giving AP7 extra duties rather than forming and entirely new authority for the premium pension.Separately, in another consultation response published on the Ministry of Finance’s website, the Swedish House of Finance (SHOF), a financial research centre at the Stockholm School of Economics, questioned the whole notion of freedom of choice in the premium pension system. In the debate over the future of the Swedish premium pension system, a key government agency has spoken out against the inclusion of “special funds” – a Swedish category of alternative investment fund that includes hedge funds – on the platform offering investment options to pension savers, saying to do so would be too costly.In its consultation response to the sweeping changes being proposed to the first pillar defined contribution (DC) system, the Swedish Pensions Agency (Pensionsmyndigheten) said: “Allowing special funds with weekly trading and valuation would cause pension savers significant costs from building up support for this in the system, without providing corresponding benefits.”While special funds are not allowed onto the current platform – the funds marketplace (fondtorget) which is to be replaced by a more selective procured set of options under the reform plan – the proposal says it should also be possible to procure special funds and foreign equivalents of such vehicles for the funds marketplace.But the pensions agency rejected the idea, saying the new procurement rules for funds should be designed to work together with the agency’s mutual fund model and its need for daily valuation and trading. “A conflict of interests would arise if the authority should both run its own fund that competes with the funds in the marketplace, and at the same time select and monitor its competitors”Swedish House of Finance (SHOF)The proposal contained little information, it said, about why the new premium pension system should be governed by the principle of freedom of choice. But that at the same time, the think tank argued, this principle was being used to justify the very existence of a procured fund marketplace.“We find it problematic that the principle of freedom of choice is justified on the basis of its intrinsic value,” said SHOF.“If the sole purpose of the principle of freedom is to give individuals the opportunity to choose for themselves, it should be sufficient to offer savers a number of state-managed alternatives,” it said.The financial research centre also saw “a big problem” in the idea of having the fund marketplace managed by AP7.“A conflict of interests would arise if the authority should both run its own fund that competes with the funds in the marketplace, and at the same time select and monitor its competitors,” it said, adding that this became especially problematic when the procurement criteria were partly discretionary, and the decision on the number of funds was delegated.Political risk would grow, it said, as AP7’s default option within the system grew – an expansion that it said was likely to happen because the new regime would lead to more and more pension capital falling into the fund.“There is a risk that when the fund’s mission is broadened to include funds marketplace management, it will also be easier for future politicians to influence the fund’s investment strategy, which would be very problematic,” the institute said.last_img read more

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Vendor’s million reasons to stick to asking price

first_imgSOLD: 8 Flinders Court, Mount Ommaney sold for $1.105 million.PATIENCE and “sticking to your guns” is the key to achieving a million plus price tag in Mount Ommaney, according to Place Bulimba lead agent Thérèse Carmichael.Ms Carmichael, who sold 8 Flinders Court for $1,105,000, said while the property took seven months to sell, she did achieve the owner’s original expectations of a “offers over $1.1 million” listing.“I had four offers,” she said. “I got one quite quickly that the purchaser derived his income from overseas, not in Australia, but he wanted to borrow in Australia.“It had complexities there, so they made a pretty good offer, which was probably the benchmark for the other three.“They’re (the owners) very happy with the outcome and they were very happy that I held steady,” she said.More from newsDigital inspection tool proves a property boon for REA website3 Apr 2020The Camira homestead where kids roamed free28 May 2019“You’ve got to be patient because there is a buyer out there, it’s not a case of just dropping the price, what I might be proud of is maintaining the integrity of the value of the home.”According to CoreLogic, it is the highest sold property in Flinders Court by $430,000, with 3 Flinders Court selling for $675,000 back in 1990. The pocket is tightly held, with the next most recent transaction taking place in 1994, when 4 Flinders Court sold for $200,000.Flinders was on the market at offers over $1.1 million and it ended up negotiated at $1,105,000. >>FOLLOW EMILY BLACK ON FACEBOOK<< Ms Carmichael said the buyers, a young, local professional couple with children, fell in love with the open plan and “beautiful” swimming pool, which really suited their family. Video Player is loading.Play VideoPlayNext playlist itemMuteCurrent Time 0:00/Duration 2:28Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -2:28 Playback Rate1xChaptersChaptersDescriptionsdescriptions off, selectedCaptionscaptions settings, opens captions settings dialogcaptions off, selectedQuality Levels576p576p480p480p320p320p228p228pAutoA, selectedAudio Tracken (Main), selectedFullscreenThis is a modal window.Beginning of dialog window. Escape will cancel and close the window.TextColorWhiteBlackRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentBackgroundColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyOpaqueSemi-TransparentTransparentWindowColorBlackWhiteRedGreenBlueYellowMagentaCyanTransparencyTransparentSemi-TransparentOpaqueFont Size50%75%100%125%150%175%200%300%400%Text Edge StyleNoneRaisedDepressedUniformDropshadowFont FamilyProportional Sans-SerifMonospace Sans-SerifProportional SerifMonospace SerifCasualScriptSmall CapsReset restore all settings to the default valuesDoneClose Modal DialogEnd of dialog window.This is a modal window. This modal can be closed by pressing the Escape key or activating the close button.Close Modal DialogThis is a modal window. This modal can be closed by pressing the Escape key or activating the close button.PlayMuteCurrent Time 0:00/Duration 0:00Loaded: 0%Stream Type LIVESeek to live, currently playing liveLIVERemaining Time -0:00 Playback Rate1xFullscreenBrisbane market wrap up02:28last_img read more

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