Market Matters Afternoon Report Monday 20th June 2016

Afternoon Report 20/06/2016

Market Matters Afternoon Report Monday 20th June 2016

Good Afternoon everyone

Market Data

What Mattered Today

A day in the sun for Aussie stocks with the index up strongly as the BREXIT trade starts to unwind following more favourable polls for the STAY camp over the weekend. The betting agencies have also tweaked their odds with Betfair now offering $1.37 for STAY v $3.65 for LEAVE.

Clearly market sentiment has started to turn with stocks up, the Sterling up, Bond yields up (prices down) and Gold down. As we’ve written in recent times, when the market is positioned disproportionately in one direction, then it’s easier for the alternative scenario to prompt a big market reaction as we saw today.

On the ASX we had a range of +/-87pts. 5178 low, 5256 high and a close at 5256; up +94pts or +1.82%. Energy stocks ripped higher with Origin Energy (ORG) up +9.35%...the sector was up an impressive +5.3%

Metcash (MTS) on the other hand fell 12.5% after releasing full-year results that were slightly below market. MTS is a stock heavily short-sold, has major structural headwinds in the sectors they operate and is facing increasing competition from Aldi in their stronghold of WA. The stock has run up well over the last year as the chart below shows, so a lot of upside already baked into the cake, however, nothing in this result warms our heart. 12.13% of shares short sold, which equates to around 112m shares – about 14 trading days to cover.

We’ve written widely in recent notes about stocks that could benefit if the BREXIT does not happen, and the U.K remains part of the Euro – more on these stocks below.

Our thesis is fairly simple. An event that it widely known, is discussed, is pondered, is most likely positioned for, is said will cause huge volatility – probably won’t. If the market is positioned for it, and there’s not some type of twist at the end of the story, then that positioning has to unwind, either before or after the event. We started to see some unwinding today…

At the end of last week, we looked at ten stocks and wrote about them in our Morning Note’s on Thursday & Friday – we’ve bought three of them, allocating 15% of the Market Matters portfolio. We went from cash of 36% to now hold cash of 21%.

We BOUGHT…

We discussed, however, did not BUY… Clydesdale (CYB), Ramsay Healthcare (RHC), Westfield (WFD), BT Investment Management (BTT), Goodman Group (GMG), QBE Insurance (QBE), Flight Centre (FLT). These stocks have earnings exposed to the UK/Europe and had been sold down to various degrees. We liked some – were cool on others.

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

Some BIG moves playing out in FUTURES markets as we write with the DOW up +182pts, the S&P 500 up +23pts, in the UK the FTSE is likely to open sharply higher – with the FUTURES up +165pts….

Global FUTURES Markets as @ 5.14pm

Source; CNBC

Regards,

The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000.

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 20/06/2016. 5:00PM.

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