Banks provide the backbone for market bounce
A strong recovery for the ASX today with news that the SA Libs would oppose the State based bank tax enough to get buyers off the sidelines pushing the banks up between +1.89% (CBA) and +3.29% (WBC) - on a combined basis the BIG 4 accounted for +33 index points for the ASX 200 – a strong effort although on a day where the index was up +100pts you’d expect that. Buying was very broad based however building on from today’s AM note, the ‘reflationary trade’ was still clearly the standout.
A good open this morning however the sustained buying we saw throughout the session was impressive and goes a long way to suggest the July low for the ASX is now in place. An overall range of +/- 95 points, a high of 5792, a low of 5697 and a close of 5783, up +99pts or 1.75%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Our most recent purchase for the MM portfolio was best on ground amongst the banks with Westpac benefitting from 1. The Libs in SA and 2. They’ve launched a very aggressive mortgage deal with rates below 4% at a time when competitors are turning the screws on existing customers. Clearly they’re looking to take market share in a low growth environment and the mkt appreciated the move, bidding the stock up strongly. We added to WBC last week around $30.60.
Westpac (WBC) Daily Chart
The Retailers were strong today, JB Hi-Fi (JBH) the best of them adding +5.29% to close at $24.48 on the back of stronger than expected retail sales data. Clearly the retailers are coming off a low base and the headline risk around Amazon is high, however any ‘less bad’ news will see big rallies in a sector that has a high amount of shorts playing around in it. We’ve thought retail was simply too hard however we took a contrarian income play in Wesfarmers last week as a lower risk way of playing the huge negativity in the sector. Times when negativity is super high, and we see the media pundits unable to find a silver lining for a particular stock / sector its often a decent time to step up and go against the grain.
Wesfarmers (WES) Daily Chart
No trade tonight in the US given its Independence Day. Subscribers, keep an eye out for the NEW INCOME REPORT due out tomorrow around lunchtime.
Have a great night
The Market Matters Team
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