Author: james Carter
Patience Investors, there is No Hurry to Chase Stocks at Present
• A choppy session was experienced in the ASX200 today, rallying as high as 5,397, only to close 11 points (+0.2%) higher to 5,367.
• Commonwealth Bank (CBA) resumed trading and closed well, down 50c (-0.6%) to $81.27, despite its institutional raising at $78.00 a share.
• Fortescue Metals (FMG) rallied 3.1% higher to $1.84 and was the standout of the Iron Ore pack, even though one of its substantial holders noted it plans to sell its stake, however at a higher price from here.
• Investors of Newcrest Mining (NCM) welcomed its full year earnings, with the company rallying 4.5% higher at $11.44 despite no dividend being declared.
• Please click here to see our updated MarketMatters’ Top 10.
If a Market does not Fall on Bad News, it’s Likely to Rally!
- The ASX 200 index closed weak towards the end of the week, finishing down 31 points to 5,356 for the day and down 2.2% for the week..
- As with the U.S. market, our index was affected by oil and energy stocks (Oil future is currently of 0.5% at US$42.04/bbl). The worst was Santos (STO), which finished down 9% to $5.99. Woodside Petroleum (WPL) followed with a drop of $1.21 (3.5%) to $32.84, whilst Oil Search (OSH) closed down 22c (3.2%) to $6.70.
- In the Health Care Sector Sonic Healthcare (SHL) announced that they had lost a contract with the Alberta Canada Government. Possibly losing ~C$200 million in revenue. The stock was not treated too badly, finishing down 23c (1.0%) to $20.25.
Best Sector – Consumer Discretionary
MarketMatters’ views on yesterday’s 3 Big Winners & Telstra
• The ASX200 had a great session, rallying 44 points by 2:30 PM, only to fade and disappoint all and close only 6 points (0.1%) higher at 5,388.
• The 3 of the big 4 banks that were live and trading today rallied, with ANZ outperforming out of the 3, ending 0.9% higher at $29.76.
• The Iron Ore sector also recovered some of its losses from yesterday, Fortescue Metals (FMG) closed 1.7% higher at $1.82, while BHP ended 1.2% higher at $25.51. As mentioned this morning, we are interested in this space as a trade.
• Telstra (TLS) reported its earnings this morning, disappointing investors with a decline in net profit by ~1%, however reporting its dividend at 15.5c a share fully franked. TLS lost 2.2% to $6.10 with the current yield more than double of the RBA cash rate.
• In the biotech space, Sirtex (SRX) rallied 9.7% to $32.94 after the sales of its liver cancer drug contributed to its 70% increase in full year profit.
Panic Selling is Upon Us and Opportunities are Rising
• A pool of blood was splattered all over the floor in the ASX200 today, the market closed 91 points lower (-1.7%) at 5,382, its biggest one day loss in 7 months!
• The trigger from today’s selloff was China devaluing its currency against the $US for the second time in 2 days – sending a wave of further global economic concerns, particularly with the commodity exposed countries.
• The news above overshadowed Commonwealth Bank’s (CBA) healthy earnings of ~$9.1bn, $2.22 fully franked dividend and a $5bn raising via rights issue.
• BHP Billiton (BHP shed 4.3% at $25.20 and Fortescue Metals (FMG) down 8% at $1.79 as volatility in the market rose.
The Peoples Bank of China (PBOC) Stopped the Markets in their Tracks
• The ASX 200 failed to follow through overnight leads as expected. The Index finished down 35 points (-0.6%) at 5,473.
• The banks were once again the main detractor in keeping the market down. Only Commonwealth Bank (CBA) managed to keep its head above water until the match, finishing only 2c lower at $82.12 ahead of its reporting tomorrow. Australia New Zealand Bank (ANZ) closed down 1.7% to $30.07, National Australia Bank (NAB) closed 2.6% lower at $32.46 and Westpac (WBC) of 1.9% at $32.05.
• The market is expecting CBA to report a big number (~$9.15b profit). The major thought/worry is whether they also announce a capital raising.
• The Chinese Government lowered the reference rate of the Yuan by 1.9% against the USD, which in turn sent the A$ tumbling. AUD is currently trading ~ US$0.7317. The obvious ramification is that this weakness in the Yuan also pushes up the US$; which in turn pushed DOWN the price of gold.
• Spot Gold fell around 1% this morning to US$1093.00 oz, but regained a little to creep back up above US$1100.00 oz. Currently, Gold futures is trading down 0.3% at US$1,100.60 oz.
Really bullish, there's more to go in the reflation rally
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