May kicks off with strength…
A good day for the market overall to kick off the new month with the market grinding higher throughout the session, although interestingly it was the defensive names that did the heavy lifting with Utilities, Industrials and Consumer Staples copping most attention. The Banks were also good with ANZ closing up 0.58% to $32.95 ahead of its 1H result tomorrow morning, more on that below while Westpac was also strong adding 0.68% before they report next Monday. CBA continued to lag the sector adding 0.07% to close at $87.46.
The market chopped around for the first part of the session before finding it’s groove from lunchtime onwards. We had a range today of +/- 39 points, a high of 5956, a low of 5916 and a close of 5956, up 32+pts or +0.55%.
ASX 200 Intra-Day Chart
ASX 200 Daily Chart
At this juncture, the ‘Sell in May’ mantra is getting a decent workout and there is statistical significance for it as the chart below shows. Overall we’ve had a very good start to the year and an even better rally following the election of Mr Trump a little over 100 days ago. Clearly some caution and an increase in cash levels seems warranted at this juncture.
ASX200 Annual Seasonal Chart
We sold our position in PTM today for a loss after last week they announced plans to reduce management fees on more than 70% of its funds under management and to implement a performance fee structure. This is in direct response to increasing pressure from passive funds, (ETFs etc) that are lower cost but track rather than outperform a benchmark. Higher cost funds clearly rely on performance to attract money – it’s their value add. When shorter term performance lags, they typically see outflows. This has been obvious with Platinum in recent times. The recent change in fee structure and lack of any buy back almost 8 months after it was announced creates too much uncertainty. Technically, $4.00 is the next obvious target, although we do concede that the previously announced buy back could start at any time and this would support the share price.
Taking a step back, clearly a new strategy creates risk and the market today (and Friday) voted with its feet. Next week they will release FUM figures for April which will be key to the stocks near term performance, however in the interim, we’re more comfortable to stay on the sidelines on this one.
Platinum Asset Management (PTM) Daily Chart
Banks will be the main focus this week with two of the majors reporting 1H numbers. The sector has been a huge driver of the ASX200's recent strength gaining an impressive 23% since the US election, including ignoring an almost 12% correction by the US banks. However we have to question whether this outperformance can be maintained in May / June, particularly after the majority trade ex-dividend. We continue to hold positions in ANZ and NAB, however sold CBA on Friday.
Upcoming bank report expectations;
May 2nd (Tomorrow)
- 1H cash profit est. A$3.49b (5 analysts, range A$3.24b- A$3.58b)
- 1H cash EPS A$1.15 (4 analysts, range A$1.06-A$1.23)
- Interim div. est. A$0.80 (5 analysts); BDVD est. A$0.80
- We hold ANZ in the Market Matters Portfolio
May 4th (Thursday)
- 1H cash profit est. A$3.23b (4 analysts, range A$3.19b- A$3.25b)
- 1H cash EPS A$1.19 (6 analysts, range A$1.15-A$1.22)
- Interim div. est. A$0.99 (4 analysts); BDVD est. A$0.99
- We hold NAB in the Market Matters Portfolio
May 5th (Friday)
- FY GAAP est. A$2.13b (9 analysts, range A$2.01b-A$2.21b)
- Final div. BDVD est. A$2.55
- FY EPS A$6.16 (13 analysts, range A$5.79-A$6.57)
May 8th (Next Monday)
- 1H cash profit est. A$4.02b (4 analysts, range A$3.93b- A$4.07b)
- 1H cash EPS A$1.18 (5 analysts, range A$1.16-A$1.21)
- Interim div. A$0.94 (3 analysts); BDVD est. A$0.95
Have a great night,
The Market Matters Team
Disclosure
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