Indices: Australian ASX 200
The ASX200 is almost flat after a fascinating first half of September, although under the hood, it’s a very different story, with the Energy Index up +3.6% while the Real Estate sector is down -3.2%. Unfortunately for the index, the heavyweight financials and materials sectors are also positive, while the other eight sectors are all negative to date for September.
Hi guys, sorry, another quick question re: ASX index.
As always, appreciate the time to reply to questions and the easy to read reports.
I seem to be firing off the questions every few weeks over the last few months.
For a while now you’ve been saying your neutral towards the ASX200, however, on Friday morning in the report you say that you’re bullish on materials, financials and tech. I haven’t done my sums and actually worked it out, but I would think that if you are bullish in these sectors, and have also mentioned the elastic band on health, these would be quite a large chunk of the ASX200, which in theory would give a slightly bullish read through for the index wouldn’t it?
The ASX200 again recovered from early weakness to close up +0.2% although we still saw more stocks decline led by the Energy Sector although the market appears to have got this one wrong following crude oils pop over $US91/barrel last night. This morning may see many short-term players hang on the sidelines ahead of this month’s important inflation data out of the US.
Markets usually form bottoms when things look their worst and China has certainly endured a tough few years but the worlds 2nd largest economy is trying to regain traction in the face of weak consumer sentiment and ongoing property turmoil. Last month’s monthly loans came in at a 14-year low, while the Yuan bounced yesterday after making 16-year lows last week against the $US.
The ASX200 has commenced September in a very inauspicious manner, closing down -2% month to date on Friday, with most of the weakness unfolding in the 2nd half of last week in the Tech, Consumer Discretionary and Materials Sectors.
Tuesday saw the RBA leave the Cash rate unchanged at 4.1% for the 3rd consecutive month, this was no surprise to us or the market with very few economists expecting Philip Lowe to hike at his last RBA rate meeting. In our opinion, the RBA is now assessing whether the sharpest increase in rates in 30 years has done enough to put the inflation genie back in the proverbial lamp, only time will tell. Unfortunately, it is not all celebrations with borrowing costs still at a 12-year high and likely to remain so until inflation returns to the RBA’s 2-3% target zone.
The ASX200 rallied +0.6% on Monday courtesy of strong performances by the Energy Sector and Materials Sectors, both rallied well over +1.5% led by some influential names e.g. Fortescue Metals (FMG) +4.7%, South32 (S32) +3.8%, IGO Ltd (IGO) +3.1% BHP Group (BHP) +2.7%, and Woodside Energy (WDS) +1.7%. We have been echoing our view for weeks that China’s ongoing stimulus will take hold and turn the world’s 2nd largest economy around and this opinion is starting to gain traction across global equities – a major tailwind for the ASX if we are also approaching peak interest rates.
The ASX200 ended August on a strong note, last week saw gains of +2.3% as all 11 sectors closed higher led by the Consumer Discretionary, Materials and Financial Sectors. We have adopted a neutral stance towards the ASX over recent months as the markets continued to rotate within a few hundred points of the 7200 area but taking into account our short-term bullish outlook for both tech and China-facing stocks our preference is the local index will at least test its 7500-7600 resistance area before Christmas i.e. both the value and growth sectors look strong.
