Resource stocks sold off hard – market down 45pts
The market was reasonably well supported at the open however some pretty solid selling from around 10.15 onwards saw the index cop it on the chin for most of the session. We had a range today of +/- points, a high of 4777, a low of 5729 and a close of 5739, off -45pts or -0.79%. As we’ve suggest for some time now, resources were overdue for a correction despite some very good earnings numbers in the last week or so and it was that sector that really felt the brunt today – Iron Ore Futures in China were trading down ~4.5% at time of writing. As we continue to suggest, results needs to be interpreted in the context of how the shares have traded leading into them, and the resource coys had priced in a lot of optimism. We currently have a short position on in Fortescue (FMG) targeting the ~$6 region. Today we saw FMG drop by 3.38% to close at $6.57 . Elsewhere, RIO was down by 4.15% and BHP fell by 3.08% to close at $25.06. We’ll step up to the plate and buy this pullback in the not too distant future – more details in the weekend report on Sunday.
RIO Tinto (RIO) Daily Chart
BHP (BHP) Daily Chart
Fortescue (FMG) Metals Daily Chart
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Platinum Asset Management (PTM); Reported yesterday afternoon (after market) and the result was weak on the headline numbers but some better underlying trends were a positive – which we like. The reference above about looking at a result in the context of how the market is positioned is clearly relevant here. In terms of their 1H17 numbers , revenue was down, earnings were down but that was to be expected. The result beat slightly (about 3%) consensus numbers. One interesting aspect was around their ‘alleged’ share buy back which when announced last November the stock rallied hard but to date, no shares have been bought back. No doubt they’ll be some pressure on them now to start buying back stock, which would be good for the share price. Worth remembering that they have $360m cash on the balance sheet.
The key take outs for us; Investment performance improving, which has been weak in recent times and those weak results led to outflow of funds. Fund outflows stopped in the half, and we’re now seeing positive FUM flow (by +2%). They are managing expenses well – costs to income ratio continues to be sector leading at 15%. Earnings trends seem to have bottomed, the yield is good at 15cps divi = 6% yield FF and it’s cheap, the market has hated it in recent times + gotten overly negative on the stocks (and probably the sector). Platinum (PTM) was up 3.65% to $5.11. We own PTM
Platinum (PTM) Daily Chart
Here’s a quick look at the performance of the Market Matters portfolio this week
Have a great Weekend (a rainy one for Sydney siders) and watch out for the weekend report on Sunday,
The Market Matters Team
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