Market Matters Afternoon Report Monday 27th June 2016

Afternoon Report 27/06/2016

Market Matters Afternoon Report Monday 27th June 2016

Good Afternoon everyone

Market Data

What Mattered Today

Another fairly volatile day of trade today versus normality however everything seems somewhat tame relative to Friday's session. Stocks with UK earnings exposure still struggled, offset by some support for the yield names, defensive earnings streams, miners and even the banks were well bid up from their intra-session lows.

Off -62pts was the worst of it and that happened early before sustained buying saw the mkt close near the session highs. A range of +/-103pts. 5051 low, 5154 high and a close at 5137; up +24pts or +0.47%. Not a bad bounce really and the recovery is encouraging.

Listed Fund Managers are continuing to get hit, especially those exposed internationally. 4 out of the top 10 losers today were Fund Managers. They get hit from two areas – and in some cases 3. The assets they manage are worth less which equates to lower funds under management which = less fees. We also get negative FUM flow – so redemptions tick up during volatility which equates to lower FUM and lower fees and finally those that have overseas earnings in currencies that have gone down (think the British Pound) get hit further on the currency translation. It’s not hard to see why these guys have copped such a beating. HOWEVER, this trade can turn quickly, and it will at some stage. The key is staying liquid to take advantage of it if/when it happens…

Seek (SEK) was sold today from the Market Matters portfolio for a couple of reasons. Last week SEK announced increased ownership stakes in offshore investments with Brazil Online and SEEK Asia, as well as providing a preview range of FY17 NPAT between $215m to $220m. At first glance, the numbers were OK however on second run through, it seemed to us to be an earnings downgrade – by about 10%. The investments they announced were earnings accretive yet they maintained previous guidance. Without the additional benefit at the NPAT line from the acquisitions, focused EPS numbers would have been down by 10%.

SEK is a high PE growth stock which has done exceptionally well over time, however at 24.3 times FY 17 earnings, and a growth profile that is under some near-term pressure coupled with a weakening technical picture, we thought it prudent to sell out at this point in time.

We’ll review stocks with UK exposure in tomorrow mornings report…Keep an eye out

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

Global FUTURES are somewhat muted waiting for more updates on the timetable of the BREXIT. ECB President Mario Draghi speaks tonight and Mark Carney - Bank of England Governor stands ready to unleash stimulus – so he says. Clearly, central bank activity is now the X-Factor for markets in the coming days.

Regards,

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 27/06/2016. 9:00AM.

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