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MM is buying PDN into weakness
The ASX200 along with most global indices has taken a dive this month, its amazing how fundamentals have a habit of delivering events which coincide with the dominant seasonal trends i.e. September is regarded by many as the worst month to invest in equities. The fascinating impact of human psychology as it swings between “Fear & Greed” is evident when a market falls as expected only for investors to then find themselves questioning their fortitude to stand up and buy when things feel bad – an action which is usually but not always the correct course…
Trading on the ASX was dominated last week by China Evergrande as the massive property developer watched its stock continue to crash as doubts whether it could meet looming interest payments intensified by the day – the company only owes a mere $US305bn, or more than twice the market cap of BHP Group (BHP)
The ASX fell today with real-estate the biggest drag as the IMF highlighted issues with our hot local property market – their expectation for another +20% gain this year is a bullish one + their rhetoric comes on the back of both ANZ and CBA flagging similar concerns. House prices are clearly hot, even boat prices are as well and everything in between as low rates and a lack of overseas travel fuels demand.
The penultimate day of the trading week saw local stocks stage a strong recovery and we commence today’s session with the index down less than 0.5% for the week, what Chinese property panic! The market enjoyed broad based buying yesterday with over 80% of stocks rallying led by the Energy and IT names although impressively all 11 sectors managed to post gains. The re-opening / economic recovery trade came back into focus as NSW’s vaccination rate continues to increase above all but the most optimistic expectations, at the current pace 90% of the eligible population…
A strong day out for the index with gains in technology and energy leading the way while Healthcare and Materials were the main laggard, though still managing to eek out gains of ~0.2%. Talk out of Fed meetings in the US was the main topic on investors’ minds today while Evergrande took a back seat. The embattled Chinese developer saw shares rally 10% in Hong Kong today as Government support seems to be on its way.
Wednesday saw the ASX200 rally strongly from early sharp losses after the PBOC (China’s central bank) injected more Yuan than anticipated into its banking system coupled with embattled property group Evergrande announcing it would make an interest payment today – the latter is a small step along a long journey but the action out of Beijing implies the communist party intends to “manage” the situation. The market reaction wasn’t so much one of huge “risk on” as opposed to a strong bounce / sigh of relief after a tough period with the recovery most noticeable in the large cap iron ore names:
The market was down early however news that China’s central bank boosted its daily liquidity injection plus confirmation that Evergrande had reached agreement with bondholders on a repayment due Sept. 23 got the buyers back out of hiatus and the market pushed higher.
MM is adding to OZL in the Flagship Growth Portfolio
The ASX200 staged a strong recovery yesterday after initially taking Septembers sell-off to 343-points / 4.6%, coincidentally testing our 7200 target area in the process. Ultimately Tuesday was a frustrating session for MM as we sat poised to increase risk into the pullback but our targeted purchases all fell short of our ideal levels discussed in recent reports. We must always remember that investing is rarely a perfect science and our main focus running into October will be more around whether MM pays up…
