Australian Investment Blog

WHAT MATTERED TODAY

1. Another tough session on the Aussie market today with the index closing below 5000pts – at 4999.40….Once again, value was low ($4.28bn) and although we breached and closed below 5000, it was only by a whisker

2. Still, we’re now less confident that the Aussie market can rally up towards the 5300 level we’d previously flagged even though the US market may go and re-test their recent highs – as we’ve been predicting

3. The obvious issue/concern about Aussie stocks has been the ease at which selling pressure has overcome any semblance of buying EVEN THOUGH U.S markets have remained reasonably strong.

4. If U.S markets roll over – as we expect they will in time, our market could be in real trouble….and a move into the mid 4000’s would certainly be on the cards.

BANKS

5. Banks were once again the weak link with the big four taking -30pts off the overall index….ANZ off another -2.77% - CBA down -2.58%, NAB down -2.13% and WBC off -2.31%

6. From their recent highs, banks are off between 13% (ANZ) and 7% (CBA) and have been the single biggest weight on the index over the past 7-10 days as concern around rising bad debts eats away at investor confidence…

7. We think the reaction is overdone HOWEVER investor sentiment is extremely weak towards the sector and that suggests more downside could easily prevail…

8. We’ve got three banks in the portfolio – CBA, ANZ & Bendigo (BEN) with a weighting of 25% after selling out of Bank of QLD (BOQ) recently at around $12.40 (now $11.83). We’ve got cash of 27% and reasonably defensive positions elsewhere

9. We’re very conscious of the poor sentiment towards the banking space at the moment, and given the sector has such a high index weighting, the negative impact this has across the entire market…

10. As a result we’d ideally like to move towards 40% cash in the near term by knocking off one bank holding and reducing one other…Stay tuned for alerts early next week

11. Bank reporting kicks off shortly with BOQ leading the way next week with MQG, ANZ, NAB and CBA reporting in the first week of May. BEN also has a strategy day in mid-April.

Resouces
12. Were good today in a relative sense after some better than expected Chinese Economic data….Chinese Manufacturing PMI came in at 50.2 v 49.4 expected which was a very good result and ignited some decent buying in RIO, BHP and FMG….all finished in the green…

13. Obviously Chinese PMIs have been tracking down for some time now however it’s a decent turnaround on today’s number and it’s another reason why we need to be looking in the resource sector for some of our positional trading opportunities


STOCKS ON THE MOVE

1. Recall Holdings (REC $8.04, +7.20%) – Regulatory approvals starting to roll in

• US based Iron Mountain has a takeover offer on the table for Recall Holdings (REC) – and it now looks likely to complete – hence the stock rallied today
• The concern has always been around regulatory approval from competition agencies in the US, Australia (ACCC), the UK and Canada however it seems they’re all starting to get behind the deal
• Iron Mountain confirmed that they are on track for 2nd May close
• Assuming deal completion, investors (owning less than 5,000 shares) on the register as at 11 June 2015 will receive A$8.50 cash.
• Investors who buy or bought REC stock post 11 June 2015 will receive Iron Mountain scrip and thus the potential outcome is leveraged to the IRM share price and AUDUSD exchange rate. So, your purchase date and position size will dictate whether or not you continue to hold given current price of $8.04. For those looking to simplify the process - $8.25 seems like an achievable target without waiting for the cash from Iron Mountain

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