The buybacks keep coming for Rio (RIO)
WHAT MATTERED TODAY
A mostly subdued day on the market today which lacked the volatility many were expecting following the September futures contracts expiring. The index spent most of the day in a tight ~22 point range between 6163 & 6185. Materials caught a bid again although the buying wasn’t across the board – mostly focussed on gold stocks and the big end of town which is poised to return capital to shareholders. Rio Tinto announced a big share buyback today which helped shares climb over 3.5% - more on that later. Healthcare was also strong following CSL, which we discussed in yesterday’s report, bouncing off the $200 support it reached early in the trading day. On the other end of the spectrum, anything tied to interest rates were sold off as US Treasury yields hovered around year to date highs of 3% – industrials, consumer facing & REITs all finished lower.
Overall, the index closed down -20 points or 0.33% today to 6169. Dow Futures are currently trading flat.
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves; No broker moves today however there was an interesting note out from Citi late yesterday pondering the market impacts on banks from the interim Royal Commission report which is due out over the next week or so. The bank suggested that the report would focus on responsible lending and advice failures suggesting that the market positioning on the big 4 may not be negative enough. There’s no doubt it will be an important step in identifying the long term impacts of the commission, however it could also be the beginning of a recovery for the banks as a lot of negativity / uncertainty has been priced in.
Rio Tinto (RIO) $78.10 / +3.58%; The wait is finally over for Rio shareholders as the company announced how they plan to return capital from the coal asset sales back to its investors. Rio had for a long time signalled that the proceeds would make it to the pockets of shareholders, and today launched a $US 3.2b ($AUS 4.4b) buy back, comprising of on and off market components. Up to $US 1.9b worth of the Australian listed shares will be bought back, which will largely be paid for through a fully franked dividend as the miner looks to reduce its franking balance.
We always knew this announcement was coming – whether it was a buy-back or special dividend – however the market still liked the confirmation and the stock has rallied over 3.5% today outpacing most peers. We expect similar news out of BHP in November thanks to their sales of US shales that topped $US 11m.
Rio Tinto (RIO) Chart
OUR CALLS
No changes to either portfolio today
Have a great night
Harry & the Market Matters Team
Disclosure
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
Disclaimer
All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 20/09/2018
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