Australian Investment Blog

WHAT MATTERED TODAY

Early optimism quickly faded today as the market was taken to the cleaners on light volume and a lack of buyers to soak up the broad selling. With many in the market on school holidays there was not much resistance to the selling that happened throughout the morning similar to the sustained weakness seen in yesterday’s trading. The banks took a beating with more commentary coming from the interim Royal Commission report suggesting the final outcomes will be much harsher than what Commissioner Hayne has suggested in his initial submission.

The RBA rate decision threw up no surprises with another month of no change, and commentary was similar to the September decision, still looking for an uptick in inflation through 2019 and 2020 which may finally prompt a move from Australia’s central bank.

Australian Dollar (AUD) Chart

Energy moved higher with supply concerns out of the middle east as well as a falling rig counts in the US shale market. Oil is currently trading at levels not seen since 2014. Lithium names were also strong with Orocobre leading the charge up +11.43%. Surprisingly Pilbara fell despite their announcement that their first shipment was seaborne as expected. The consumer discretionary sector was the weakest today and CSL broke the $200 resistance level we have been quoting recently to close at $199.33 down -1.96%, dragging Healthcare down and contributing the most to the index’s weakness with -5.8 index points.

Overall, the index closed down -46 points or -0.75% today to 6126. Dow Futures are currently trading down -0.2%, Hang Seng (Hong Kong Futures) are down -2.6%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE

Broker Moves; News flow from the brokers was light thanks to the public holiday yesterday – just the one downgrade with Citi citing LNG demand as their reason for staying cautious on Woodside. A move we agree with in the short term given how energy prices have run in recent weeks however a sector we are watching closely.

Woodside (WPL) Chart

RATINGS CHANGES:

· Woodside (WPL AU): Downgraded to Sell at Citi

Pilbara Minerals (PLS) $0.90 / -1.64%; The WA based lithium name announced today that their first shipment of Lithium concentrate had hit the seas as expected. This news had been flagged for weeks leading up to it but it is key for the company in terms of how the market will now treat the stock. Companies pre-production are much more volatile as they are unable to lock in current prices which many believe are elevated due to a lack of supply. Commentary from the analysts show that lithium is expected to go into oversupply early in the next decade with companies in asset development or even assessment stages, more prone to fluctuations in the lithium price and any increase funding costs. Despite the good news, Pilbara edged lower today.

Pilbara (PLS) Chart

OUR CALLS

We sold A2 Milk in the Growth 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 2/10/2018

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