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Over recent sessions, weakness in the ASX has also been amplified by several heavyweight stocks trading ex-dividend. Subscribers have probably gleaned from reports that September is historically the market’s weakest month since 1992, declining on average over -0.9%, almost twice as bad as the infamous May! However, putting this into perspective, the ASX200 has already fallen over twice its usual decline in September.
The first week of September proved to be a week to forget for the ASX200 as it fell -1.67%, with most of the weakness unfolding over the last three days. The sell-off was broad-based, with 10 of 11 sectors closing lower, with the Materials, Consumer Discretionary and Tech sectors faring the worst. In contrast, only the Energy Sector closed positive edging up just +0.6%. Under the hood, the falls were distorted in places by some significant names trading ex-dividend, but some of the movers which caught our attention over the week are as follows:
Materials were once again weighing on local equities today, resigning the index to a fourth consecutive decline. An honourable fightback late in the day did see the ASX200 finish 20pts above the day’s low, and winners and losers were almost split evenly from a sector and stock point of view. The ASX200 finished down -122pts/-1.67% for the week with Energy the only sector to finish higher.
Yesterday we saw major activity on the share register of Liontown Resources (LTR) which led us to reconsider whether other local lithium names could find themselves in the sights of overseas/local companies looking to grow through acquisition. Half of the lithium mines put on the market since 2018 have been bought by Chinese companies for an estimated $12.3bn illustrating the country’s appetite for global battery metal although future moves may prove far harder with national interests likely to be put ahead of shareholders.
Shares were under pressure from the get-go as strong US economic data overnight put upward pressure on interest rate expectations, downward pressure on the Aussie dollar and an appetite to sell for equity markets. The ASX200 fell for the third consecutive session for the first time since early July, though the final result was impacted by a number of stocks paying some chunky dividends
A 20% increase by the $US against the $A should by definition deliver a major tailwind for the ASX businesses who earn a significant portion of their revenue in $US with the healthcare and miners initially coming to mind followed by some specific industrials. Ironically the Healthcare Sector is enduring a tough year, especially by its standards, while the miners are struggling to capitalise due to uncertainties from China.
The ASX drifted lower throughout the day with no meaningful leads from overseas indices, and better-than-expected economic growth was ignored with some investors potentially guilty of considering September’s negative seasonal reputation.
US indices experienced a mixed session overnight with the Dow falling -0.56% while the tech based NASDAQ edged +0.11% higher, weakness was fairly broad based outside of the tech and energy names. Oil prices rose as Saudi & Russia extended voluntary supply cuts bolstering the Energy Sector but creating a headwind for the broader market, Treasuries also edged higher on the inflationary read-through which didn’t help risk assets – Importantly MM believes the current advance by oil is maturing fast. The “Goldilocks” scenario is gathering momentum with Goldman Sachs cutting its recession odds to 15% while also calling the Fed to skip a rate hike this month, our first thought being equities may have already enjoyed the sugar hit, hence the question, what can push them higher into Christmas?
The ASX was down sharply early on, off ~50pts at the lows however a spirited fightback played out, pre, but more so post the RBA decision to keep rates on hold at 4.1% as widely expected, the final call for Dr Philip Lowe.
The “risk on” towards China theme was repeated across European bourses when they opened last night with mining giants Glencore Plc (GLEN LN) and Anglo American (AAL LN) trading higher from the opening bell although AAL saw its gains fade away throughout the day – MM holds Glencore in our International Equities Portfolio. Also, luxury-focused stocks that are heavily reliant on China for sales enjoyed a notable bid tone as investors/traders started to position themselves for a Beijing stimulus-led recovery. At this stage, we are getting some glimmers of hope from China’s economy but once the picture does become clear we believe the horse will have bolted in terms of increasing portfolio exposure to an economic turnaround.
