Archives: Reports
As we look right across the suite of Market Matters Portfolio’s with an eye on increasing their defensive qualities, the Income Portfolio stands out as one that is already set very defensively, both in terms of overall asset allocation (49% in Equities, 37% Bonds & Hybrids, 8% in Property & 6% in Cash), but also in terms of the types of equities held, with a skew towards predictable earnings (some regulated), high yielding, low beta stocks. While this stance will cost us ‘upside’ in a strong market, it will help to smooth returns amid choppier conditions while maintaining strong levels of income, with the portfolio yielding over ~7% inclusive of franking.
The ASX traded to within 2-points of an all-time high this morning hitting 7630 just before a materially softer-than-expected retail sales number printed, which got the sellers off the sidelines, the ASX 200 finishing ~30 points off the morning highs ahead of a very big weak of data and company results, particularly in the US, but also a bunch locally headlined by local inflation data tomorrow.
Yesterday, China Evergrande Group received a liquidation order from a Hong Kong court, which was no major surprise when we consider the company’s share price over recent years. China’s property crisis continues to unfold, although a market nadir is often plumbed on headline bad news. The collapse of this previous poster child is by far the largest failure in the world’s 2nd largest economy’s property market, which has witnessed several defaults by developers, aka a falling pack of cards. In the short term, the move by Judge Linda Chan is likely to see some asset sales in a property market lacking liquidity and confidence; the world will be watching closely.
The market continued to push higher as sector rotation rather than any sign of liquidation/cashing up continued, although, to MM, it does seem the market is slowly losing some momentum after a strong run and ahead of local reporting season– the Market Matters Reporting Calendar linked below.
Reporting season, both locally and in the US, has already started to increase volatility on the stock level, with the majority of companies still to face the music, e.g. winners so far include ResMed (RMD) and Kogan (KGN) & losers Dominos (DMP) and Nanosonics (NAN). However, on the index level, we are still targeting a push to fresh highs by the ASX200, now less than 2% away. It’s important to reiterate that MM is looking to migrate down the risk curve into such a move, but we are only looking to tweak portfolios as opposed to adopting an outright bearish stance.
The ASX200 ended the shortened week up +1.8% and remains on track to post fresh all-time highs in the coming few weeks. Strength came from the most influential market sectors, including the banks/financials, energy, healthcare and resources names. On days when we saw profit-taking in the banks, where Commonwealth Bank (CBA) again posted all-time highs last week, the resources tended to surprise on the upside, i.e. any selling we did see appeared to be more rotational in nature as opposed to exiting the market.
Materials & Energy stocks underpinned the fifth straight session of gains for the ASX heading into the Australia Day long weekend, while our IT sector is failing to mirror strength overseas and Real-Estate was under the pump as Barrenjoey pushed through a bunch of downgrades.
Materials & Energy stocks underpinned the fifth straight session of gains for the ASX heading into the Australia Day long weekend, while our IT sector is failing to mirror strength overseas and Real-Estate was under the pump as Barrenjoey pushed through a bunch of downgrades.
Beijing has announced the PBOC will cut the bank’s Reserve Requirement Ratio by 0.5% effective the 5th of February, the announcement sent stocks in Hong Kong surging up over 3.5% in rapid fashion, its largest daily gain in four months. The move is aimed at stimulating the economy by relaxing lending restrictions as the banks aren’t required to hold as much cash in reserve, a significant move which frees up about $US140bn. As we know, Beijing is also likely to put “pressure” on the banks to put this money to work, which should help their goal of kick-starting the economy.
A choppy session played out locally with the market hot early only to give back the morning gains by the close, a ~60-point trading range and a fair dose of volatility at the stock level thanks to a flurry of company updates, particularly in the mining sector.
