Insurers drop, Challenger soars…
The first day of Q2 for Aussie stocks and the market ticked in and out of positive territory for much of the session after a reasonably weak open. Most pain early was felt by the miners following a weaker than expected manufacturing print from China out on Saturday however they did well to recover and close near enough to their daily highs. RIO probably to most interesting here with strong buying obvious when it ticks under $60.00…we’re long this stock and see higher levels in the near term.
We had a range today on the boarder market of +/-33 points, a high of 5873, a low of 5840 and a close of 5872, up+7pts or +0.13%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
The insurance sector was obviously in focus following the disastrous events in QLD and northern parts of NSW over the past few days with the likelihood of more to come for some areas. IAG and SUN with most exposure to these storms while QBE is also in the mix. From our understanding, SUN has an allowance for ~$620m plus $300m extra re-insurance protection until 30 June 2017 which suggests that the impact from Cyclone Debbie is likely to be zero for them. QBE has a total cap on large hazards of $960m so it’s fairly safe to say the impact to them will be very limited.
IAG seems to be most exposed given they have an allowance of $680m plus an extra $96m re-insurance cover, however their maximum event retention is $140m currently, so Debbie could have an impact here, the level of which could easily be around the $100m mark depending on damage. So, key takeouts here is SUN and QBE should be OK but IAG may have an issue. The other aspect to consider is around re-pricing of cover post such an event which is normally good for earnings.
Suncorp (SUN) Daily Chart
Henderson Group (HGG) had a good session today breaking out of its recent trading range and closing near the highs. Last week they provided an update on the Janus tie up with the combined entity being capped around ~US $5.6 billion. HGG account for around 57% of the merged group and Janus approximately 43%. Interestingly, the Dai-ichi Life Insurance Company, which is Janus’ largest shareholder, intends to further invest in the combined company to increase its ownership to at least 15%. We own HGG
Henderson Group (HGG) Daily Chart
Changing focus to the more speculative area of the market, a small cap energy coy Challenger Energy (CEL) had a cracking session today adding +84%, albeit from a low base. CEL has a very good Shale Gas asset in South Africa that has been held up in political / environmental red tape for a number of years, however rumblings now that the Govt is likely to push the button on shale development in the Karoo Basin prompted volume in the stock and a big uplift in share price. After todays rally, the company is still only capped at ~$17m.
Challenger Energy (CEL) Daily Chart
Have a great night,
The Market Matters Team
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