Market Matters Afternoon Report Wednesday 13th July 2016

Afternoon Report 13/07/2016

Market Matters Afternoon Report Wednesday 13th July 2016

Good Afternoon everyone

Market Data

What Mattered Today

Stocks higher again today with some BIG moves in the mid-cap commodity space…Nickel coy Western Areas (WSA) was up +13%, Independence Group (IGO) put on +7%, Fortescue (FMG) up +5.52% to $4.40 – a very long way from the Jan 16 low of $1.45. Iron Ore up +4% in Asian trade helped and we saw buying flow into the larger caps with RIO up +2.79% to $50.78 and BHP up +3.26% to $20.58.

The Nickel coys are interesting here headlined by WSA, with the price of Nickel starting to edge up from multi-year lows…

Western Areas (WSA) - weekly chart – breaking out of the range.

Looking more broadly, the market opened up, sold off until lunchtime before a strong rally played out during the afternoon session. A range of +/-29pts. 5362 low, 5391 high and a close at 5388; up +35pts or +0.66%.

Post BREXIT we ran the following table showing the drop in UK exposed stocks – it was fairly savage. The UK is ‘sort of’ out of the headlines, and we’ve started to see tentative signs that the Pound is moving higher despite an 82% chance of an interest rate cut. Simply put, it seems to be priced in so we naturally get some buying in the stocks that were battered. CYB the most highly exposed to the UK economy and currency, followed by HGG and BTT. The currency right now is likely to dictate where these stocks trade in the short term, and right now, the Pound, on the back of a New Prime Minister is firming

Shorts

Bellamy’s (BAL) has risen up the short list in the last few months and we now see 9.75% of issued capital held by shorts. In January that number was just 0.42% of issued capital. It’s pretty clear that the market has turned cautious the stock, cautious Chinese regulation and some funds think the stock will drop.

We’ve traded BAL briefly in recent months however we’re now out. Worth noting the proportion of shorts now sitting in BAL make the stock susceptible to a big upside move on any good/better news. 9.4m shares sold short and total stock traded today of 549k shares. When this stock starts to move, it should have a decent rally.

….AND the TOP 20 SHORTS

The other interesting aspect on the short tables this week is in CSR. We’ve seen the 2nd biggest drop in shorts for the week and it’s the 10th biggest mover over the past month. We now see just 1.61% of issued capital sold short which is down from 5% around the end of June – which equates to buying of 17m shares. Seems the market is starting to get a little more comfortable with this stock and we now see a good chance of a re-rate.

We’re looking for CSR to re-test recent highs around $4.40

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

…Some big data points later this week with Chinese GDP, Retail Sales, Fixed Asset Investment all out of China on Friday. JP Morgan reports in the U.S tomorrow night, Citigroup on Friday. FUTURES mixed

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 13/07/2016. 9:00AM.

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