OPEC Hope sends energy higher on a down day (SYR, WHC)
WHAT MATTERED TODAY
Early support for the market faded as the day rolled on with sellers slowly grinding the buyers down. The banks were all up today, and reasonably so which is rare for a day where the market falls. Much of the buying here came on the back of yesterday’s credit numbers which showed signs of some growth for the first time in a long time. Along with financials, energy was the only other sector to finish in the green. Oil has seen some buying with the commodity heading higher on reports OPEC will be curbing production sending Santos (STO) to a 4 year high.
Healthcare was once again dragged by heavyweight CSL which went ex-dividend today – the stock did fall $6.55 on a $1.48/sh dividend as it continues to pull back from all-time highs. Tech also went the wrong way today. Tech has seen reasonable selling of late as money appears to be cycling out of momentum and into value. Wisetech (WTC), the biggest tech stock on in the ASX, was off nearly 7% although it did close at all-time highs yesterday. Similarly, the NASDAQ was lower last night despite the broader S&P500 closing flat.
Overall, the ASX 200 fell 33pts today or -0.51% to 6614, Dow Futures are now trading down -16ts /-0.06%.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE;
Syrah Resources (SYR) -33.33%; Graphite miner and processor Syrah has taken a big hit today on the back of a company update regarding spot prices of their product in China. The company recently dipped out of the ASX200 index at the June rebalance and seems to be going out the back door with this update. Prices received have dropped around 12% in the current quarter versus what the company was receiving the Q2, down to $US400/t, blaming the fall on a falling Chinese Yuan as well as concerns around inventory levels saying “supply growth has outpaced demand” despite China becoming a net importer at the start of the year. To put this in context, the feasibility study the company undertook prior to the development in 2015 used a long term price of $1,000/t…
In response, Syrah has moved to cut production and review cost levels at their Balama facility as well as flagging an impairment charge of up to $US70m and writing down inventory levels. The company talked up its cash levels despite the disappointing prices. The asset has a long mine life and high grade, so not all is bad however their all in costs are well above the spot price – so if the company can remain solvent, the long term outlook is positive for SYR. Not one for us yet though
Syrah (SYR) Chart
Broker moves; Whitehaven Coal (WHC) +5%, was the best on ground for the top 200 today on the back of a note from UBS. Whitehaven have an investor day on Thursday – a first for WHC – and UBS expects them to outline how they plan to develop new sites to replace the falling reserve levels, as well as further detail on the cost cutting including autonomous vehicles. We own WHC in the income portfolio and are looking for a reasonable exit price from the position.
Whitehaven Coal (WHC) Chart
· Ramsay Health Upgraded to Buy at Citi; Price Target A$74
· BHP Upgraded to Buy at Goldman; PT A$41.90
· Vicinity Centres Cut to Underperform at Macquarie; PT A$2.34
OUR CALLS
No changes to the portfolios today.
Major Movers Today
Have a great night
Harry & the Market Matters Team
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