Indices: Australian ASX 200
The ASX200 has already fallen -8.2% from its February high and we believe it’s time to slowly start accumulating into weakness although we will remain very stock and sector-specific as another test of 6500 cannot be totally discounted i.e. the markets have already fallen and risen by over 1100-points over the last year, why not one more time. Coming into lunchtime yesterday we were actually down -1.25% for 2023 illustrating the fickle but exciting nature of the market we’re currently navigating i.e. everyone was bullish and optimistic in January!
Through 2023 MM has been pointing out how equities were ignoring rising bond yields i.e. the previous 4 times we saw local 3-year yields above 3.5% the ASX200 was under 7000. However, ironically this month has seen the local index plunge towards 7000 as yields finally turn lower following the collapse of SVB – a great example of what drives markets transitioning over time.
The ASX200 fell another -0.5% yesterday as concerns washed through financial markets of a deep and painful fallout from the demise of Silicon Valley Bank (SIVB US), amazingly after being valued at $US45bn in November 2021 overnight we saw HSBC buy SVB’s UK arm for just $1 – sounds like something from the movie Trading Places. In the US regulators stepped up to bail out customers of SVB which included hundreds of tech start-ups promising all depositors would be repaid in full plus they established a new line of funding to protect US regional banks.
Volatility is certainly back in town with the VIX jumping +9.7% in the US on Friday as their Banking Sector tumbled -11.5% over the week, understandably far worse than our own which slipped just -1%. Similarly, the ASX200 ended last week down just -1.6% with all of the damage unfolding on Friday as the SVB news reverberated through financial markets.
The ASX200 closed unchanged yesterday which was a good performance with many market heavyweights such as BHP Group (BHP), RIO Tinto (RIO and CSL Ltd (CSL) all trading ex-dividend. Sector performance was very skewed as investors received their much-awaited income but the one group which again caught our attention on the upside was tech which is embracing the RBA’s dovish rhetoric and moves by companies to refocus their attention on profitability as opposed to simply growth at all costs – according to the AFR, over 125,000 local tech sector jobs have already been culled in 2023.
