Archives: Reports
It would have been very easy to change the structure of today’s report with the elevated volatility in many pockets of the ASX but we opted for 4 stocks that we are considering adding to/buying if we see further weakness over the coming weeks although obviously, this list may evolve depending on news flows and the respective performance of stocks we are monitoring closely and holding in our respective portfolios.
We are amending holdings in the International Equities Portfolio.
A dose of reality today with some broad-based selling right across the market, as aggressive selling knocked the ASX back from seven-week highs, the recently hot IT sector in the cross-hairs however over 90% of the market finished in the red. Asian markets were down as well, but not by as much while US Futures remained resilient, only trading marginally lower.
The Competition Tribunal gave some early Christmas cheer to Optus while frustrating both TPG Telecom (TPG) and Telstra (TLS) on Wednesday as it upheld the ACCC’s original ruling to block TLS from sharing mobile network infrastructure with TPG. An appeal is still a distinct possibility, especially as building mobile towers in regional Australia is not always commercially viable putting into question whether the consumer will benefit alongside Optus – perhaps they could have allowed it with some strict guidelines skewed in favour of the consumer?
The market snapped its seven-day winning streak today with ~60% of the market closing lower, led by weakness in the Energy stocks which succumb to Crude Oil’s decline overnight, while the consumer discretionary sector was hit by a downgrade from UBS. The afternoon session saw the most action as the market slid sharply lower into the close chalking up a bearish close.
We are making multiple changes to the Flagship Growth Portfolio
Tuesday saw the ASX200 embrace the balanced RBA minutes advancing almost +0.9% on broad-based gains that saw only 20% of the main board close down on the day. There were a few pockets of weakness on the stock level but as we’ve been saying for weeks the path of least resistance remains on the upside even following weak seasons on overseas bourses. Further stimulus from Beijing and the local market could be testing its all-time in a matter of weeks i.e. it’s less than 4 % away now.
A surprisingly positive session for the ASX today, courtesy of the RBA minutes that showed a July 0.25% rate hike in perhaps, not a fait accompli, with the RBA still more data dependent than the market had given it credit for. Bond yields fell after the 11.30 am release, and so too did the Australian dollar and that put a bid tone under the market which built on its impressive 6-day advance now totalling ~220pts/3%, chalking up a 7-week high in the process
Insurance stocks generally like higher bond yields because they hold collected premiums in bonds garnering interest before paying out on claims as and when required i.e. higher interest rates generate higher income from these funds. Hence the dramatic move in yields over the last 12 months has been a clear tailwind for the sector’s revenue. Also, recently we have seen companies start to demonstrate their pricing power with Insurance Australia Group (IAG), which owns the well-known NRMA, hiking the cost of household insurance by +20% and car insurance by +14% – a touch more than inflation!
A rebound in the Banks and Healthcare stocks underpinned a solid start to the week with the ASX treading its own path today ahead of a public holiday (no trade) in the US tonight. Resources have been on fire so far this month, with the Material Index +7% in June to date, however, we wouldn’t be surprised to see some performance reversion in the short term, particularly if the $US finds some support – that was certainly the case today.
