The ASX200 open well as expected yesterday but for a pleasant change it continued to rally strongly with 80% of the market closing up on the day. There were a number of obvious standouts on Monday including the $39bn bid for Afterpay (APT) and Santos (STO) raising their offer for Oil Search (OSH) but a few other less obvious moves also caught our attention:
- The ASX200’s +1.3% rally took its 2021 gain to 904-points / 13.7% – remember last Monday we highlighted a statistical target of 7600 -7700 if the local market stays in sync with the strong years post the GFC.
- Our best “guess” is we see a test of the upper band of the range before some consolidation between 7400 and 7700.
- However 2nd guessing when a market will “top out” adds little value, the markets bullish and buying pullbacks / stock selection is the way to add value until further notice.
Elsewhere the banks remain strong with the sector devoid of any meaningful selling while another underlying theme on a day of takeover frenzy was buying of the laggards and if any funding was required sell the recent top performers:
Winners : Crown (CWN), a2 Milk (A2M) and Appen (APX).
Losers : Janus Henderson (JHG), Iluka (ILU) and IRESS (IRE).
Subscribers must remember the likes of fund managers, private equity and super funds are awash with cash and sitting in bonds for too long leads to painful underperformance which usually results in capital outflows, the death knoll for fund managers. Importantly as we saw yesterday when US companies come knocking even huge companies can be swallowed up like small fry e.g. Square (SQ US) which bid $39bn for Afterpay (APT) has a market cap above $150bn!
Overnight US equities relinquished their strong start to the session with the S&P500 finally closing down -0.2%, the SPI futures are calling the ASX200 to open down around 20-points on the open today with BHP Group (BHP) down ~1% in the US.
MM remains a buyer of weakness across most stock market sectors
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