Archives: Reports
Over the weekend the market news was again fairly thin on the ground although it was very pleasing to again see no new locally transmitted COVID cases, just imagine the US and UK are still posting over 160,000 & 30,000 fresh daily cases respectively. With a vaccine scheduled to be rolled out in March it feels pretty good on both the humane and economic front assuming we don’t become complacent. We should be positioned to recover far more rapidly than many of our trading partners but it’s the ongoing COVID global disruption that’s likely to keep our interest rates lower for longer – remember in November the RBA committed to maintain 3-year bonds at 0.1% enabling banks to offer 4-year fixed home loans under 2%.
The ASX200 keeps climbing the wall of worry, the 6700 magnet is threatening to pass its mantle onto the new 6800 handle and on Friday we closed less than 6% below 2020’s all-time high. The rate of ascent has diminished as the buyer’s appetite for different stocks / sectors rotates almost daily while the underlying index sets its sights on 7000, but it appears in no hurry to reach the next major psychological level. Already in 2021 while the index has ground out a ~3% gain we’ve seen 27 stocks rally by over 8% and 15 stocks fall by the same degree with some interesting names on both sides of the respective ledger:
The ASX200 continued to make fresh 11-month highs yesterday with again only 60% of the index posting gains but with the exception of CSL Ltd (CSL) the winners were focused were it mattered from a points perspective propelling the market over 50-points higher e.g. The “Big 4” Banks, Wesfarmers (WES), BHP and RIO all rallied well over 1%. Global equities are clearly embracing the combination of ongoing huge fiscal / monetary stimulus plus the hope that Joe Biden will deliver stability around global trade.
However it wasn’t all roses under the hood as Cleanaway Waste (CWY) fell over 8% following the retirement of its Chief Executive Vik Bansal after 5-years’ in the seat – the bullying incident and associated uprising a few months ago clearly the catalyst for his departure. While we’ve had Cleanaway on our hitlist for a while, the pullback hasn’t convinced MM that its time to buy back into the business. We are keener on a few stocks that already appear to have found a decent swing low such as Aristocrat Leisure (ALL) which we touched on yesterday – watch for alerts today.
A solid session for the ASX today with our recently frustrating BNPL stock Zip Co (Z1P) rewarding our patience rallying +23% following a positive quarterly update – we cover the high notes below. Their move helped the IT sector lead the gains adding +2.7% in a session that was clearly risk on. The ASX 200 breaking out of its ~8 week trading range which now sets up a move towards all-time highs. I caught up with a good friend this afternoon who’s heavily involved in property, particularly in the Western Suburbs of Sydney. I hadn’t caught up with him for a year and some of the prices being achieved for properties in that region have been extraordinary relative to the feasibilities we’d talked about only 12 months ago, clearly the trend is being supported be low rates and plenty of liquidity, a theme we expect will continue.
The ASX200 made fresh 11-month highs yesterday illustrating even though we feel a pullback may occur MM has no interest in losing our significant core exposure to equities, remember “the trend is your friend” and its clearly been up since last March – we may take some money off the table in the coming months but it simply still feels too early. Wednesdays push to multi month highs was reasonably broad based with 60% of the index advancing as the performance baton was passed from the Banks back to the IT Sector, there’s no rest for the bears as buyers still look keen to buy any dips.
After struggling over recent months the IT Sector was the standout yesterday advancing +2.5% but interestingly, Afterpay (APT) aside, it’s some of the weaker names like Wisetech (WTC) and Bravura (BVS) that have started leading the charge with one on the star performers of the last 6-months Xero (XRO) appearing to be seeing some profit taking as it corrects almost 20% in just a few weeks – investors are getting on the front foot and rotating between stocks / sectors as we expected, MM definitely expects to be on this train through 2021.
We’re tweaking the Income Portfolio to better reflect prevailing macro conditions, with interest rates rising we are reducing our exposure to long duration assets / bond proxies.
Equities were on the run again today as investors look to the Biden inauguration tonight, heralding the expected reduced volatility that comes with a post-Trump world. The local market closed at a new post-March high, on the brink of breaking out. Tech was the standout – led by Afterpay closing at a new record on the back of an initiation we discuss below. Despite the strength though, the big 4 banks took a breather with all closing lower on the session resulting in the financials being the worst of the sectors.
Miners continue to be in focus with a raft of quarterly production reports coming through – the gold names kick off tomorrow but BHP was centre stage today. UBS were running the numbers on real estate today, and while are reasonably keen on the sector as low interest rates and a vaccine recovery take place, they so see the retail reopening trade as largely complete and downgraded VCX & SCG.
The ASX 200 finished up 27pts / 0.41% to close at 6770. Dow Futures are trading off -17pts / -0.06%.
Stocks bounced back today in solid fashion with the retailers the shining light, our note this morning clearly a topical one however it was some of the other names in the space that caught my attention. Adore Beauty (ABY) has been a struggle since listing last year however a good session today saw it up 6.55% to close at $5.86, while Dominoes (DMP) enjoyed a broker upgrade and rallied +7.97% to close at $89.59. All in all, a solid session with the buying broad based, only 10% of the ASX 200 finished the session down and it was the recently hot stocks that suffered at the hands of some profit taking. Bingo (BIN) was a standout after announcing takeover interest – we used to hold this and like the stock – frustratingly we don’t hold it currently – while Tyro (TYR) put out a good rebuttal to the short thesis published last week.
The ASX200 gave back over 50-points yesterday with 65% of stocks falling, declines were led by the Banks and Resources with some clear “risk off” profit taking washing through the market. The news was thin on the ground but in unison with a pullback in the Aussie and a wobbly US futures market we saw the buyers simply back off letting the sellers win the day, importantly there was nothing aggressive / scary about the session plus remember our “Gut Feel” is we see the index dip under 6500 before the uptrend resumes.
Over the weekend the market news was fairly thin, but it was interesting to see it in black and white that the RBA expects their current aggressive stance on interest rates to fuel a surge in house prices, they actually anticipate such a move to be somewhere between +10% and +30% over 3-years depending on whether homeowners / investors become complacent that it’s the new norm. The message beneath the surface is clear in our opinion:
1 – If house prices pop too hard expect the RBA to again act to rein in the gains through increasing interest rates.
2 – The RBA are watching the loan to value data closely simply because they don’t want to see a major outbreak of negative equity when interest rates rise and housing prices potentially correct.
