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Month: November 2015

Morning Report Monday 9 November 2015

by james Carter

Most local investors are aware of the extremely tough year BHP has experienced falling approx. 30% compared to the index falling around 6% – see chart 1. Obviously BHP has had the proverbial kitchen sink thrown at it this year with the collapse in both iron ore and crude oil prices combined with a weak showing from copper – see charts 4-6.

Afternoon Report Monday 9th November 2015

by james Carter

  • The ASX 200 sold off heavily today, with the index finishing down 96 points after hitting its low of 113 points at around 2.30pm.
  • The market got hit hard at 11:30 a.m, when selling concentrated to Bluechip’s, such as banks, Telstra and the supermarket owners, plus gold stocks. The selling mainly due to an impending US rate rise and weak Chinese trade data.
  • The sea of red was dominated by the resources, as fund managers look to raise funds for the Santos placement, BHP Billiton (BHP) was sold down, hitting a low of $21.42 on the close. These low’s have not been seen since November 2008. RIO Tinto (RIO) surprisingly held up from its low on Friday ($48.89) finishing the day at $49.00, down $1.80.
  • The banks were also weak, but not to the same extent. Commonwealth Bank (CBA) had a low today of $75.02 and closed down 75c to $75.58, down $1.32. Australia New Zealand Bank (ANZ) closed down 61c to $25.36, National Australia Bank (NAB) closed down 57c to $28.08 and Westpac Bank (WBC) down 36c to $31.29.
  • Gold miners were hit particularly hard after the precious metal’s price slid nearly 2 per cent to below $US1100 an ounce on Friday in the wake of strong US jobs numbers, which strengthened the case for a Fed rate hike in December. Newcrest (NCM) down 5.5% to $11.29, Regis Resources (RRL) down 7.3% to $1.85 and Oceanagold (OGC) down 4.6 % to finish at $2.50. We are watching this space closely for future opportunities.
  • As mentioned above, the big corporate news is Santos who announced the appointment of a new CEO alongside $3.5 billion of capital initiatives, including an asset sale, a $500 million private placement, and a $2.5 billion capital raising. Santos will use the proceeds to reduce its heavy debt burden that has exposed the company to predators following a collapse in the oil price. The new Santos boss will be Kevin Gallagher, who currently heads up engineering services group Clough. Gallagher will start in “early 2016” the company said. The cash call is in the form of a fully underwritten accelerated pro-rata renounceable entitlement offer with retail entitlements trading and is priced at $3.85, well below the last trading price of $5.91. The company also announced a $500 million private placement at a 15 per cent premium to last close to an affiliate of the China-based international private equity firm, Hony Capital. Finally, the Adelaide-based gas company has announced it has earned $520 million from the sale of an interest in Kipper gas field to Mitsui E&P Australia. Santos also announced a new dividend framework, setting the payout ratio at a minimum of 40 per cent of underlying net profit. The company said it will target a payment of 5 cents per share for the 2015 final dividend. Market Matters are watching this all very closely with an option position currently on this stock.

Best Sector – Health Care
Worst Sector – Materials

Morning Report Friday 6th November 2015

by james Carter

Three interesting charts generating very different signals / ideasGood morning everyone and welcome to a glorious Friday morning here in Sydney

Afternoon Report Friday 6 November 2015

by james Carter

  • The ASX200 finished the week on a better note with the index finishing up 22 points to 5,215 after being sold off in the morning to intraday lows of 5152. For the week though it finished down 24 points or 0.5%.
  • The banks performed well, having been sold off terribly all week. Yesterday we saw National Australia Bank (NAB) hit savagely after going ex. dividend; but today Australia New Zealand Bank (ANZ) go ex. dividend 95c and the stock fell just 68c to close at $25.97. NAB closed today up 9c to $28.65. It is positive to see a day of stability with the aggressive selling we have seen of late through the big four banks.
  • In corporate news, the market awoke to find that Brookfield Infrastructure; currently attempting a takeover of Asciano Ltd (AIO), had bought 14.99% of AIO yesterday at $8.80, bringing their holding to 19.99%. Qube Holdings (QUB) already holds 19% of AIO and was due to vote down the proposal from Brookfield in Tuesday’s meeting. AIO has now postponed next week’s vote. The board is still recommending the Brookfield offer of $6.94 cash plus 0.0387 shares in Brookfield – currently worth ~$9.22.
  • BHP Billiton (BHP) had a poor finish to the week. News of possibly up to 16 people dying in a burst dam accident in Brazil put extra selling pressure on the stock, following on from its weak performance last night in London. BHP finished the day down $58c to $22.70; recovering from a low of $22.02. We have identified BHP as a potential trading opportunity in the coming weeks, as it has historically bounced $4 of levels just below where it closed. (see chart 2 below)
  • The Reserve Bank said today in its statement that rate cuts this year and the currency’s depreciation are supporting growth, indicating interest rates are likely to remain on hold. As we have continually said rates will be lower here for longer.
  • The energy sector was the weakest link today with Woodside Petroleum (WPL) down 2.1% to $29.98; Santos (STO) was down 1.7% to $5.91. Oil-search (OSH) which we hold managed to poke its head above ground, and closed 1 cent higher at $7.91.
  • Traders are now heavily focusing on the latest US non-farm jobs data, due Friday night, as a key indicator for whether the US will lift rates from their zero levels. We are of the opinion that this is a healthy thing for markets, and is inevitable.
  • Look out for the weekend report. Have a great weekend!

Best Sector – Food, beverage and tobacco
Worst Sector – Energy

Morning Report Thursday 5 October 2015

by james Carter

Investors regularly make comments similar to “I am a conservative investor and only buy Blue Chip stocks” but does this make sense?

Afternoon Report Thursday 5 October 2015

by james Carter

  • The ASX200 slid below 5200 points, led down by NAB which was trading ex-div, after a broad sell-off on Wall street stalled on the back of Fed chair Janet Yellen talking up the chance of a December rate hike. The market is pointing to a 50% chance of a hike in December with a near-term fed fund futures contract falling to the lowest levels in a month or longer. We are leaning towards a rate hike in the US in December and feel this is a healthy thing for markets as the longer it is put off delays the inevitable.
  • NAB shares hit a two-year low closing at $28.56, down 4.51%, trading ex-dividend. CBA closed 1% lower to $75.85, while ANZ closed 0.8% lower at $26.65, and WBC 0.51% lower to $31.10.
  • Glenn Stevens has been quoted saying any rate move would ‘almost certainly’ be a cut, but he has also showed he is in no hurry. We think lower rates are here for longer and the cash rate could find itself below 2% over the short to medium term.
  • CBA’s quarterly profit edged up as, quite surprisingly, bad debts continued to fall. CBA is well held in the Market Matters portfolio, and is something we would look at either adding to into weakness or for sophisticated investors selling calls on anticipated weakness.
  • Miners weren’t much help, with BHP down 0.8 per cent and Rio 1.4 per cent. South32 managed a 1 per cent gain, however. Woodside gained 1 per cent and was the biggest single point of support for the ASX 200. Our only real exposure in this space is currently STO and OSH which both held up ok with STO up 0.33% and OSH coming back strongly intraday to be down only 1% at the close.
  • The Australian Competition and Consumer Commission today approved the $3 billion merger between M2 Group, which owns Dodo and iPrimus, and Vocus Communications in a move that will create the fourth-largest telecommunications provider in Australia. Earlier this year TPG Telecom bought Perth-based rival iiNet for $1.56 billion. We used this announcement to take profit on our VOC in September.
  • The gold sector closed weaker again, following the movements from its underlying commodity. Newcrest Mining (NCM) lost 3.3% to $11.89, while Regis Resources (RRL) closed 3.8% lower to $2.01. We recently recommended closing out gold longs, and are now sitting watching for potential future opportunities.

Best Sector – Health Care
Worst Sector – Financials

Morning Report Wednesday 4th November 2015

by james Carter

Oil looks to be shinning more than gold into ChristmasGood morning everyoneOverviewMarket Matters hope a few people backed Prince of Penzance to win the Melbourne Cup, as the race again proved why we stick to financial markets!The US stock market continues to race ahead with the S&P500 now only 1.1% below its recent all-time high, perhaps the recent correction locally is over and optimism will return?Technically, Market Matters has been predicting this bullish move in the S&P500 with an ideal target ~2200 now only around 4% away. The million dollar question remains how far can the ASX200 rally with all the existing headwinds….5600-5700 resistance area would be ideal.However, within the stock market gold and oil stocks look to be in very different positions.Turning to the MarketOil stocks

Afternoon Report Wednesday 4th November 2015

by james Carter

  • The ASX200 had a strong open, up as high as 5,313, only to reverse and most of its day’s gain, ending only 3 points higher at 5,242.
  • CSR was the diamond in the rough today, up 4.1% to $3.03 after releasing a positive half-year result.
  • NIB Holdings (NHF) rallied 3.4% to $3.68 after upgrading its profit guidance.
  • In gaming sector, Echo Entertainment (EGP) was the weakest link as revenue has decreased. EGP closed 6.3% lower to $4.80.

Best Sector – Materials
Worst Sector – Telcos

Morning Report Tuesday Melbourne Cup Day 3rd November 2015

by james Carter

Recent historical statistics should help us relaxGood morning everyoneOverviewAfter the ASX200 was hammered 1.4% yesterday and seeing the Dow rally another 165 points we thought today we would start today’s report with something positive for Australia – The Melbourne Cup!We like Fame Game a lot, but who doesn’t looking at the odds and for some value at the Excess Knowledge – good luck to the punters and we hope everybody has a fun afternoon!Turning to the MarketAfter the strong gains in overseas markets, the ASX200 looks set to open up around 50 points, initially recovering around 2/3’s of yesterday’s losses.The S&P500 is now only an amazing 1.6% below its all-time high whereas the poor ASX200 is languishing 14% below March’s high- see charts 1 & 2.As Market Matters has been mentioning for some time now, we are in a very strong “seasonal period” for equities into January but within that October-January timeframe there is also a very clear weak period.Over the last 5 years there have been uncanny pullbacks with uncannily similar characteristics that were then followed by excellent rallies into Christmas:

Morning Report 2nd November 2015

by james Carter

Should we be more nervous than in previous weeks? Good morning everyone and welcome to not only a new week but a new month! Shame about the Wallabies but I guess you have to admit the Kiwis were pretty impressive… Overview On the surface everything is following the previously predicted picture i.e. a strong rally into Christmas / January from the 4900 area – see chart 2. Remembering that Market Matters has been identifying for some time that from mid-November to January is seasonally a very strong period for Australian equities with the potential impetus coming from the RBA where they may cut interest rates on Melbourne Cup day! The market gave us a solid 467 point (9.5%) advance in a few weeks and has so far corrected 146 points (31%) of the advance, this all sounds normal and healthy. However, the concerns are around the internals and relative strength of the ASX’s move e.g. The S&P500 has rallied 11.3% and only corrected 15 points (6.7%) of the advance – see chart 1. Most Australian investors are used to the recent relatively poor performance of the local market compared to the US but the question is if they correct a decent % of the October rally, how will the ASX200 fare? A number of investors are becoming increasingly concerned over the next 5 years for Australia even with a new Prime Minister; can Malcolm Turnbull turn us around like Steve Jobs did for Apple? For many Australians their confidence is being hit on a number of fronts, viz 1. the recent changes to our Banking regulations stemming from the Murray Inquiry;

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