Archives: Reports
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.
The ASX200 fought its way to a small 7-point gain yesterday while the sector story remained the same as Energy / Resources and Banks rallied while the yield sensitive stocks / sectors struggled. Many lucky market players are still enjoying an extended break which is reflected by the quiet roads, with school holidays running up until Australia Day I don’t really expect too many fireworks in the near future even with President Trump again being impeached. Yesterday’s extremely tight intra-day trading range says it all as does the markets 8-weeks of consolidation since late November, in our opinion the longer stocks can hold the 6700 area the greater chance that the next decent leg will again be higher.
It’s now only 4-days until Christmas but for people in NSW and all of Australia watching the COVID outbreak on Sydney’s Northern Beaches its likely to feel much longer – 30 fresh cases yesterday and while we saw zero spread outside of the area the full city lockdown scenario currently feels around 50-50, at least the Avalon area has the reputation as being the “insula peninsula” for a reason, it may just save both our Christmas and New Year.
The ASX200 soared to its highest level since February as over 80% of the market rallied led by the unusual combination of resources and IT with the later the standout led by Afterpay which gained 5% to breach $120 for the first time ever – its now incredibly a bigger business than both Coles (COL) and Woodside (WPL). Throughout Thursday the market rallied without taking a meaningful backward step, as we’ve trotted out almost at nauseam recently this time of year regularly delivers a dearth of sellers.
The ASX200 had a very quiet 2nd week of December finally closing up just +0.1% after posting fresh 10-month highs on Wednesday. Although the market has rallied strongly for an impressive six consecutive weeks it feels a little tired, it’s amazing how often the much-publicised seasonality influences are almost self-fulfilling – “fund managers make sheep look like independent thinkers”, a gem of a saying from Joe Bo who sits on our institutional desk at work and has a strong arsenal of one liners. We wouldn’t be surprised to see the local index correct a few percent next week, perhaps on lessening optimism around the COVID vaccines, but MM remains bullish and will consider increasing risk into any pullback – at least this side of Christmas. The “Santa Claus Rally” theoretically should start sometime next week and while 2020 has most definitely not been a normal year its already getting close to now or never for this seasonal bullish phenomenon.
