Australian Investment Blog

WHAT MATTERED TODAY

A good session for local stocks to finish the week thanks mostly to some improving rumours out of the US-China trade talks. Reports are now indicating a partial deal is expected to be struck before the weekend Trump meeting the Chinese Vice Premier tonight. Some reasonable chatter out of the UK overnight also helped markets higher with talks progressing regarding the Ireland back stop issue – one of the main sticking points in the BREXIT mess. The news sent both bond yields and equities higher.

Today resource names were well bid with oil and iron ore rallying well overnight. Yield names lagged on the rally in bonds with utilities the only sector that was weaker today. The market finished 1.38% higher for the 5 sessions, rebounding from last week’s freefall.

Overall today, the ASX 200 closed up +57pts or +0.88% to 6606. Dow Futures are trading up +113 points or +0.43%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE:

**VIDEO** Current Portfolio Positioning – James Gerrish & Harrison Watt – CLICK HERE – stocks discussed include: ORI, PGH, NCM, EVN, WSA, OZL

**Correction – Pilbara (PLS)** In yesterday’s morning note (click here) we mentioned the Pilbara Mineral (PLS) share purchase plan writing that under the SPP, holders could purchase stock at the lower price of 30cps or a 10% discount to the 5 day VWAP during the offer period (which closed this afternoon). In fact, it should have read a 1.0% discount, not a 10% discount. The pricing period closed this afternoon with the 5 day VWAP being 30.55c, hence we would expect the SPP to be priced at 30.25c

Perpetual (PPT) –0.56%; fell today – a rarity for money managers when the market rallies, however Perpetual came out with some poor FUM flows for the September quarter. Despite reasonable investment performance, the firm saw net outflows of $1.8b offset in part by appreciation adding $700m. All withdrawals were seen in their Australian equity portfolios while the bulk of it stemmed from institutional redemptions. The draw down is around 10% of their Aus equities, and ~7% of total FUM. Performance in the funds has generally been behind the market which has led to net redemptions in each quarter since July 2017. We own PPT in the Income Portfolio – and still like it given its low multiple and solid yield although flows are concerning.

Perpetual (PPT) Chart

Fortescue (FMG) +4.14%; was strongly higher today thanks in part to the iron ore price, but also in news it has extended the buy-back program it started in 2018. $500m program was set to end this month with the company buying less than $140m worth of shares to date with average price below $4 compared to the current share price which is more than double. Understandably the company didn’t want to chase the stock as the share price moved, and have now giving themselves at least another 12 months to utilize the facility which will provide reasonable support in the stock in the event of a pull back. We like FMG, and own it in the Growth portfolio

Fortescue (FMG) Chart

Sectors this week:

Stocks this week:

Broker Moves;

• PolyNovo Cut to Sell at Baillieu Ltd; PT A$2
• Netwealth Cut to Sell at UBS; PT A$7.50
• Netwealth Downgraded to Underperform at Credit Suisse; PT A$7.60
• Domino’s Pizza Enterprises Cut to Neutral at Macquarie
• Cleanaway Rated New Buy at Citi; PT A$2.40
• Bingo Industries Rated New Neutral at Citi; PT A$2.40
• Sky Network TV Cut to Underperform at Macquarie; PT NZD0.88
• Orora Rated New Buy at Jefferies; PT A$3.50
• Orora Raised to Outperform at Credit Suisse; PT A$3.40
• Orora Downgraded to Neutral at JPMorgan; PT A$3.25
• Centuria Rated New Neutral at Credit Suisse; PT A$2.83
• Sundance Energy ADRs Downgraded to Neutral at Seaport
• Western Areas Downgraded to Neutral at JPMorgan
• Independence Group Cut to Underweight at JPMorgan
• South32 Upgraded to Neutral at Goldman; PT A$2.40
• Alumina Downgraded to Neutral at Goldman; PT A$2.40
• Brambles Upgraded to Neutral at Credit Suisse; PT A$11.20

OUR CALLS

No changes today

Watch out for the weekend report.

James, Harry & the Market Matters Team

Disclosure

Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.

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