Another round of selling hits the ASX – AMP sinks 25%
WHAT MATTERED TODAY
It’s hard to put a positive spin on the market today with the index opening down around 70points, it tried hard to rally when Asian markets came online but failed and selling ticked up into the close – the index closing on the lows of the day. From the ASX 200 10 of the 11 sectors closed in the red, 186 stocks from 200 down on the day, the biggest point contributor was BHP which fell 4% dragging the material sector down 3.2% - ouch! Apart from the odd flicker of green in the Gold space (NCM +0.66%) it was all a sea of red with the ASX 200 down -8.75% this month with 5 trading days remaining…
Stocks in the ASX 200 that made 52 week lows today
AMP was hit the hardest down -25% after they sold a whack of assets to raise capital, but ultimately by doing so it strips away around 30% of their earnings. More on that below from Harry however it seemed the reaction was about right given the earnings impact. The stocks closed at $2.50 – a far cry from its June 2001 high of $14.07.
Not a pretty sight today with the ASX 200 down -164 points or -2.83% at 5664. Dow Futures are up a touch +44pts/0.17%
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE;
Broker Moves;
· AGL Energy Downgraded to Reduce at Morgans Financial; PT A$16.89
· Super Retail Downgraded to Neutral at Macquarie; PT A$8.70
· Super Retail Upgraded to Overweight at JPMorgan; PT A$9.50
· Super Retail Upgraded to Neutral at Credit Suisse; PT A$8.39
· Super Retail Downgraded to Sell at Bell Potter; PT A$7.35
· Nufarm Upgraded to Buy at Morningstar
· Rio Tinto Downgraded to Hold at SocGen; PT 38.30 Pounds
· Myer Downgraded to Underweight at JPMorgan; Price Target A$0.43
· Cleanaway Upgraded to Add at Morgans Financial; PT A$1.89
· TPG Telecom Upgraded to Neutral at JPMorgan; Price Target A$7.90
· Senex Upgraded to Neutral at JPMorgan; Price Target A$0.47
· Bellamy’s Downgraded to Hold at Morgans Financial; PT A$8.75
· Harvey Norman Reinstated at Goldman With Sell; PT A$2.70
· JB Hi-Fi Reinstated at Goldman With Neutral; PT A$21.30
AMP Limited (AMP) $2.50 / -24.47%; announced the sale of their wealth protection + a few other mature businesses as they called it, in transactions totalling $3.45b. The sales come at the end of the portfolio review the company embarked on 12 months ago as AMP looks to simplify the business and ease balance sheet stress. The deal will see around $2b of cash for AMP, allowing the company to reduce debt by $800m, reducing the need for a capital raise, whilst also having left over funds to redeploy into cost cutting programs (but also likely to be chewed into by fines and further customer remediation).
The deal certainly takes some pressure off the balance sheet, but also will significantly reduce earnings in the years ahead. The divested assets contributed around $340m of AMPs 2017 earnings, or over 30%.
On top of this news, AMP announced a $1.5b net outflow over the third quarter. This is clearly a big number and along with a 30% earnings hit, it’s easy to see why the stock got .
AMP Limited (AMP) Chart
OUR CALLS
Growth Portfolio; We looked to add WSA today, however it never reached our target of around $2.20 which implies +/- 1%.
Have a great night
James / Harry & the Market Matters Team
Disclosure
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