Archives: Reports
We remain bullish on the Materials sector hence we’re always looking for the best opportunities to exploit gains across these value stocks. Today we have reviewed 2 of the best-performing stocks so far this year and one laggard as we consider the next likely tweaks in our portfolio construction, especially if we see further strength in growth names that is likely to see MM to profit from some overweight positions.
Equities caught a bid today as investors showed a more rational mindset with fears on the back of SVB eased. The local market followed the lead of the US to add ~1% today and around 75% of the ASX200 index closed higher on the session. Banks bounced back from yesterday’s selling helping the index finish more than 1% higher. Tech was the biggest gainer today while Real Estate was the only sector to finish lower.
The market-friendly inflation print reversed earlier stock market losses to take the local index up +0.25% led by ongoing strength in the Resources Sector while selling in the banks courtesy of UBS’s downgrade was enough to restrain gains on a day when surprisingly there were more losers than winners. The growth stocks in Australia continue to underperform their US peers and even with the increasing likelihood of no further rate hikes the healthcare and IT stocks delivered mixed performance on Wednesday – we still see 6-8% upside from the US NASDAQ hence we are sticking with our overweight call on the sector locally.
The market opened on the back foot today down ~20pts at the worst before CPI (inflation) data was released at 11.30am, coming in 6.8% versus 7.2% expected and down from 7.4% last month. Clearly, inflation is cooling and while it is still way too high, it’s heading in the right direction, while today’s result should cement the RBA’s decision to pause in April, the market is actually pricing in no more rate hikes from here.
Central banks are maintaining a degree of calm in financial markets which is demonstrated by the VIX trading back under the psychological 20 level. Interestingly while we have seen a washout of the bulls, we haven’t really seen a major spike in bearishness or signs of real panic which can be taken both ways when we consider what’s been happening in the banking system.
The local market had its best day in two months thanks to buying support across both banks and resources. Financials got a boost following news First Bank would buy SVB, creating a bit of stability in the space. A fuse was also lit under resources thanks to strength in oil overnight while a bid for a junior lithium miner created frenzied buying in the beaten-up space. It wasn’t all good news though as Healthcare & Tech underperformed on the back of weakness from sector heavyweights.
With the new higher interest rate environment likely to continue to influence investors’ risk appetite, as we’ve witnessed by the repricing of the growth sector, today we have revisited the defensive supermarkets which could be interesting if we do see a short-term rally in the ASX200 i.e. an area to switch to if MM wants to move down the risk curve.
A bit of a nothing session today for the ASX, the best of it was seen early with the index up ~30pts at its highs before a lacklustre afternoon session saw the gains evaporate, Energy the biggest drag overall while the banks came off as the day wore on.
At the end of last week, speculators started to “attack” Deutsche Bank, in our opinion, they are not comparing apples with apples but investors are concerned about the German bank’s exposure to US commercial real estate. We see no reason why DBK should see any contagion apart from the obvious psychological factors, we’ve avoided catching the falling knife around global banks but if the very profitable DBK breaks below its 2022 low it’s going to look tempting from a valuation perspective – a failed attempt by short sellers with DBK could ultimately restore confidence to the banking sector.
The ASX200 experienced a quiet week on the surface with the index closing down just 40 points / or -0.6% while under the hood there were some standout winners & losers but interestingly the much-discussed banking stocks were fairly quiet with the “Big 4” averaging a drop of just -1.5%. On a sector level, the banks and real estate names weighed on the index while on the stock front gold names again shone brightly while the ESG names (lithium) continued to struggle:
