It’s not a stock market, but a market of stocks
Another attempt and another fail by the market today to break out of this frustratingly long trading range – now well into its 12th week between 5629 and 5836 – today the early high was 5792 set at 10.16am before a wave of selling buffeted the index before the midday low…it simply can’t back up solid days with sustained buying the following session, however we are seeing a lot of stock specific volatility – the old saying that it’s not a stock market, but a market of stocks is ringing very true at the moment.
Worth reiterating though, the mkt will break out at some point, and with volatility priced so low traders will be forced to scramble and moves will be amplified. We speak with a lot of trading desks around the mkt both here and in Asia and this theme is a known known, but it’s still hard to counter + active fund managers are being so squeezed by low cost passive funds they simply can’t afford to buy cheap protection. Anyway, it’s easy to comment on risk after it’s played out, rather than thinking about it ahead of time – at MM we’ve always tried to do the latter and sometime this can drag on for longer than we think - however it’s still a relevant concern for us, hence our high cash levels at the moment.
All the sectors were in the red today, the best in a relative sense was the staples down -0.14% while a weaker than expected result from Transurban dragged down the Utilities’ - an overall range of +/- 70 points, a high of 5792, a low of 5722 and a close of 5743, off -30pts or -0.52%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
Transurban (TCL) – this is a stock we’re negative on, more in terms of the macro backdrop given the likehood of higher interest rates than anything in terms of how the company is progressing, however todays result was met with some selling after they missed slightly in terms of earnings. Dividend guidance of 56cps showed growth of +8.7% on pcp however it still puts the stock on a yield of around 4.7% unfranked in a rising interest rate environment. In simple terms, that yield looked better when Aussie 10 years were yielding 1.8%, but less so now we see a yield around 2.62% and that trend will continue as yields creep up. The stock closed down -1.84% at $11.72 today.
Transurban Daily Chart
James Hardie (JHX) - had a tough day after delivering a fairly mixed outlook. Again, this is a stock we’d avoid given headwinds in terms of the US building sector as rates rise and housing cools. Wage growth remains sluggish in the US despite good jobs data and so, we simply sit back and conclude there are better places to be invested. We have no interest in JHX. The stock closed down -5.79% today at $17.90
James Hardie Daily Chart
Elsewhere, IOOF (IFL) had a great session after beating expectations with earnings of $169m v $160m expected and a better dividend – the stock up + 6.05% to close at $10.70. SCA Property (SCP) was another out today with results and we like to keep a handle of trends here even though we don’t own the stock.
As a reminder, they own 75 grocery-anchored neighbourhood and sub-regional shopping centres in AUS, with WOW contributing 34% of gross rent and Coles 10%. In short, SCP has maintained pretty high occupancy in its portfolio and is still generating positive rental growth as well as sales productivity despite the challenging retail environment. This provides good read through for RETAIL REIT landlords.
SCA Property Daily Chart
Have a great night
The Market Matters Team
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