Australian Investment Blog

What Mattered Today

An interesting session today from a sector perspective with the names that have struggled recently copping some well overdue buying with the likes of Stockland (SGP) up +2.70, Scentre Group (SCG) up 1.39% and Mirvac (MGR) up 0.97% after delivering an operational update and reaffirming earnings guidance. Resources were pretty well bid, particularly the high beta plays like Fortescue Metals (FMG) – which broke out to new highs today adding +6.46% and Rio Tinto (RIO) which put on +2.44%. Iron Ore was up strongly in China intra-day and that put a BIG bid underneath the Iron Ore names. So much for ‘oversupply’ putting massive pressure on prices in 2016 as the market was positioning for….!

Rio Tinto (RIO) Daily Chart

It’s interesting to think about seasonality here given we’ve been banging on about it within the banking sector. As we know, banks perform well in October but poorly in November hence we’ll be reducing exposure there into strength. Energy prices, on the other hand, are entering a seasonally weak period from the end of October through to early December and this is worth considering in terms of allocating capital to the energy plays. We hold Origin (ORG) which we remain comfortable with but will be reluctant to increase exposure any further until later in the year.

We had a range today of +/- 48 points, a high of 5455, a low of 5407 and a close of 5442, up 34pts or +0.63%.

ASX 200 Intra-Day Chart

ASX 200 daily chart

Elsewhere, we’ve got a position in Mantra (MTR) which is starting to look interesting – not because it’s beginning to move higher but more so because it’s doing it in the face of rising short positions and negative news flow relating to Chinese Tourism. In the last week or so we’ve had the Crown news which in theory should be a negative headwind for Australian tourism stocks – including Mantra, while we’ve also got a significant short position which has been built up since September. We now see over 20m shares short sold in a stock that traded 3 million shares today. Poor news + selling volume from shorts yet the stock goes up. It suggests that the legitimate buying volume is solid and if we see some type of catalyst that prompts short covering, this stocks could really motor.

Mantra (MTR) Daily Chart

Mantra (MTR) Short Position

Aconex (ACX) had their AGM today and topped the leader board by adding +13.1% . This is a stock we’ve written about in the past but haven’t bought (yet). They’re a very interesting tech growth stock with a cloud-based platform used in running, managing and delivering large-scale construction and engineering projects. They’ve got the who’s who in the sector as clients, have a big pathway of future growth and are only in their infancy. The issue is around valuation and whether or not earnings will grow quickly enough to justify the price. The slide on ‘outlook’ seems to have gotten the market excited. One to watch.

Aconex (ACX) Daily Chart

Sectors

ASX 200 Movers

Inflation data is out tomorrow in Australia and this is being touted as the driver for any further interest rate moves by the RBA. 0.4% expected for the quarter but we think the risk is to the upside given the movement in commodity prices of late. A weak number (anything sub 0.3%) may get the RBA thinking about a cut on Melbourne Cup day following the soggy employment data last week however it would still remain unlikely in our view. Market pricing has now moved, and it seems we’re now done – no more cuts to rates and for those thinking about locking in a mortgage, then now might be the time…

Source; Shaw and Partners

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FUTURES higher….

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