Australian Investment Blog

Another bullish session for ASX stocks and it seems we’ve got money chasing performance + we’re even seeing the AFR headline the afternoon edition with a fund manager now talking up the prospects for banks post the +10% rally in share prices! Technically, we can see another ~6% upside in the near term which fits our overall view of the market, but then we should be reducing exposure. Don’t get caught up in the hype.
ASX Banking Index (Monthly Chart)

More love again today for the resource names with Rio trading through $60 & BHP nearing $26…It’s highest level in over a year and we’ll see a lot written about the sector this afternoon, however what you won’t read is the buying today in the ‘bond proxies’, Transurban, Sydney Airports and the like. Stocks that clearly hurt under higher interest rates BUT the market knows it – and the stocks have fallen a long way from their highs.
TCL was up over 3%, SYD up nearly 3% and both look poised for higher levels despite the expectation for a US interest rate hike. As it stands, the interest rate markets are now pricing 100% chance of a December hike from the US federal Reserve, 2.6 hikes through 2017 and 4.3 through 2018. Before the ‘surprise’ Trump victory, mkts were factoring in 1.7 hikes in 2017 & 2.4 in 2018 – HOWEVER as we wrote yesterday, what is priced to happen, and what actually does is two very different things. The Dec hike will happen – done deal – but the trajectory of rate hikes in 2017 and beyond is the variable.

Transurban (TCL) Daily Chart

Rio through $60 – with money clearly chasing the resource trade…but we think caution is warranted now

Magellan (MFG) looks interesting even though it’s been stuck in a range for the past 10 months of so. If we are to get a blow off style top in the US market, as we’ve been writing about all year, the high beta international fund managers like Magellan will see buying in the near term, but be prepared to exit pretty quickly – we’re playing this theme through Macquarie but clearly MFG would also benefit…

Magellan (MFG) Daily Chart

Buying was obvious early today and was sustained throughout the session on good volume with more than +$5bn though the bourse…a range of +/- 69 points, a high of 5488, a low of 5419 and a close of 5484, up +71pts or +1.31%.

ASX 200 Intra-Day Chart

ASX 200 daily chart

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