Market Matters Afternoon Report Thursday 24th March 2016

Afternoon Report 24/03/2016

Market Matters Afternoon Report Thursday 24th March 2016

Market Matters Afternoon Report Thursday 24th March

Good afternoon everyone & Happy Easter

Market Data

ASX 200	5,084.20	Best Sector
ASX % Change	-1.13	Health Care	1.51%
ASX Point Change	-58.07	Utilities	1.08%
ASX High	5,142.30	Consumer Disc.	0.80%
ASX Low	5,069.20	Worst Sector
Value	$4.5b	Materials	-1.71%
		Financials	-2.50%
June SPI Futures	5,081.00
AUD/USD	0.7500
June S&P E-mini Futures	2,025.75	RBA Cash Rate	2.00%

What Mattered Today

1. Another soft day on the Aussie mkt with the index opening lower and being offered for most of the session. Banks the main drag after ANZ increased their loan provisioning (covered below), while the classic type defensive sectors, such as Healthcare, Telcos & utilities were well supported. Resources were also soft following the rally in the USD overnight and weakness in commodity prices.

2. It’s obvious from the chart below that it wasn’t a broad based selloff despite the index finishing off -58pts. There were a lot of bright spots in an otherwise soggy market. The banking sector accounted for -47pts on the ASX 200 today, while BHP and RIO accounted for -8pts. Today’s trade really does highlight the issue with the Aussie market, and the dominance of two sectors!

3. In terms of the Market Matters portfolio, the banks were obviously a drag with BEN, CBA & ANZ in the red, while the other positions in Healthscope (HSO, Regis (RRL), Mirvac (MGR), Ansell (ANN), Suncorp (SUN) & Telstra (TLS) were all resilient. 27% in cash helps on days like this.

4. Iron Ore Futures were down more than 5% at their worst today – which was the biggest fall since November last year. RIO was hardest hit off -3.56% to close at $42.30, BHP was down -3.41% to close at $17 on the nose. Fortescue (FMG) was off, but relatively strong v the sector which is a positive sign. Shares closed at $2.57 – off -2.28% for the day. Iron Ore futures were trading around 2.5% lower at time of writing

5. On an index level, we’ve been targeting a short term pullback; largely given the market was too complacent leading into the Easter break.

6. For the week, the market was off -99pts or -1.91% to close at 5083 – around the levels we targeted in Mondays morning note for a potential retracement. Risk/Reward on the long side is now looking more reasonable.

***There will be no Weekend Report on Saturday given the Easter Break – we’ll resume the following Saturday – Enjoy the four days off***

Stocks On The Move

1. ANZ Bank (ANZ $24.02, -5.21%) – Announced an increase in bad debts - stock got whacked

ANZ gave a credit update today, increasing their bad debt provisioning by ‘at least’ $100m for the first half. They had $800m pencilled in so now expecting somewhere north of $900m
The issue today seemed to be the language used of ‘at least’, rather than offering a range given that $100m isn’t that big of a number (about a 1% impact on earnings). One of the biggest gripes with ANZ now is their lack of earnings visibility. That’s why the stock is cheap, trades at a discount to its peers, and got even cheaper today.
ANZ report on the 3rd May (Ex-Dividend on the 9th) and there is some concern they’ll look to amend their dividend policy
We hold ANZ in the portfolio, we think the stock is cheap, but not cheap enough to average into at this stage.

ASX 200 Movers

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

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