Viewpoint: Bullish
Z1P was the markets top performer yesterday rallying almost 14% following the news that unlisted US BNPL giant Klarna had taken a 4% in Z1P. As we mentioned yesterday there’s a huge 8% short position held in Z1P and personally I would be extremely uncomfortable to be amongst this particular crowd in today’s aggressive M&A environment.
Markets are becoming increasingly more jittery towards the risks from COVID, both in NSW and overseas. Australian 10-year bond yields have already slipped 30% from their late February high – suddenly the jury is out around the impact of new COVID variants on the speed of the global economic recovery.
Yesterday saw stocks rally strongly early in the morning only to steadily decline from their mid-morning high as the value stocks reversed early gains to close down on the day – primarily the banks but the resources did close well below their intra-day highs. The bottom line is equities appear to becoming rattled by the worsening COVID picture both locally and overseas and whatever the path that the delta strain and others take – some important market points should be remembered:
Z1P +13.73%: we touched on Zip in this morning’s report following the AFR reporting that US BNPL giant Klarna had picked up a 4% stake in the company. Traders jumped on the news today and Zip tracked higher through the session, taking top honours in the index today.
Motor vehicle accessory business ARB has been a standout performer on both the operational and share price front.
On line retailer KGN was not surprisingly the sectors top performer yesterday as NSW’s lockdown was extended for at least 1-week. The ‘bump’ in sales will help their much publicised inventory issues which have led to an engrained downtrend through 2021.
The locally listed ASIA ETF has corrected ~27% from its February high with the 50 largest Asian tech stocks (ex-Japan) significantly underperforming their US peers.
US stocks rallied slightly overnight but there was nothing which particularly caught our attention.
Local tech powerhouse XRO rallied almost 4% yesterday as the on-line accounting business continues with its holding pattern of 2021. For the budding chartists out there this stock is forming a classic flag structure which usually is the precursor for trend continuation, which in this case is up.
CGF was the indexes best performing stock yesterday soaring +8.8% as Athene bought a $720m stake in the business and appears to want more – importantly the Bermuda based life assurance business is currently merging with M&A powerhouse Apollo Global Management. At MM we managed to avoid the huge declines experienced by CGF over recent years but the risk /reward is now looking interesting for this “situation play”.
