A quiet end to Budget week with across the board losses in most sectors. Usual suspects were hurt but merely flesh wounds as financials led us down. National Australia Bank Limited (A$33.49, -0.3%) was the best of the banks with Commonwealth Bank of Australia (A$80.40, -1.0%) the worst ,as news of a $200m civil action hit the media. BHP Billiton Limited (A$38.08, -0.5%) though was strangely firm considering as they top off a good week. Fortescue Metals Group Ltd (A$4.58, -2.6%) and RIO Tinto Limited (A$61.95, -1.4%) however did not fare so well nor Bluescope Steel Limited (A$5.88, -3.6%). An increased bid emerged today for Goodman Fielder Limited (A$0.665, -1.1%) at 70c plus 1 c in divs and Sfg Australia Limited (A$0.865, +18.5%) also received a merger proposal from the Independent order of odd fellows ,IOOF Holdings Limited (A$8.25, +1.5%). Seems to be a regular occurrence at the moment. Telstra Corporation Limited (A$5.29, unch) also remained very firm as they completed the sale of their HK biz this week. What to do with the cash?
Industrials slid with NEC, Crown Resorts Limited (A$15.67, -1.1%),Flight Centre Travel Group Limited (A$49.89, -3.4%),REA Group Ltd (A$45.20, -1.5%) and Fairfax Media Limited (A$1.04, -1.4%) not looking so rosy. Retailers were pretty much unchanged. One issue they will face when GST goes to 12.5% is the increase in online buys from overseas again. Healthcare stocks continue to retreat following the co-payment proposals. Primary Health Care Limited (A$4.56, -1.3%),Sonic Healthcare Limited (A$17.18, -1.3%),ResMed Inc. (A$5.36, -1.5%),Sigma Pharmaceuticals Limited (A$0.695, -0.7%), ANS and Virtus Health Limited (A$7.95, -2.2%) all weaker.
In resource land Nickel stocks got poleaxed with Western Areas Limited (A$4.15, -5.0%) a shocker ,Oz Minerals Limited (A$3.91, -3.7%).Independence Group NL (A$4.15, -5.0%),Sandfire Resources NL (A$6.06, -3.3%),Bougainville Copper Limited (A$0.585, +2.6%),RXM# and Hot Chili Limited (A$0.22, -15.4%) not so hot at all!
The market fell 32 points back to 5479 with the weekly change a rise of around 19 points. WhooHoo!! There does feel like something will happen soon,as this range trading cannot last forever.
On the podium today in pink were Sfg Australia Limited (A$0.865, +18.5%),Energy World Corporation Ltd (A$0.305, +3.4%),Virgin Australia Holdings Limited (A$0.405, +5.2%),Drillsearch Energy Limited (A$1.52, +3.8%),Evolution Mining Limited (A$0.87, +3.6%),Sirius Resources NL (A$2.94, +3.2%) and #BLT# and Crowe Horwath Australasia Ltd (A$0.52, +14.3%) in small caps while falling to the back of the peloton were Donaco International Limited (A$0.87, -12.6%),Bougainville Copper Limited (A$0.585, +2.6%) in small caps as Western Areas Limited (A$4.15, -5.0%),Arrium Limited (A$0.975, -4.9%),Independence Group NL (A$4.15, -5.0%),Henderson Group PLC. (A$4.25, -3.4%),Sandfire Resources NL (A$6.06, -3.3%) and #NEC# all suffered front wheel punctures.
Volume was dismal at around $2.7bn ,which is pretty woeful, as the big players are still processing the implications from the budget. That is of course if it ever gets through the Senate. The Aussie dollar was becalmed around 93.50 with digital tulip at $476 and Gold at $1297.
Asian markets were sold off with Tokyo down nearly 2% Shanghai down 0.6% and HK down 0.3%.Tensions are increasing between Vietnam and China on disputed island in eth South China sea.
Stocks and Stories
SFG Australia have jumped after agreeing to a takeover by larger financial services rival IOOF Holdings for about $670 million. The SFG board has unanimously recommended the deal to shareholders. SFG shares are at a record high at 84 cents. Under the terms of the merger proposal, SFG investors will be offered 90 cents for their shares and will control 22 per cent of the enlarged IOOF. The price has been struck at a premium of 24.6 per cent to SFG’s volume weighted average price to May 15.
This is not a good sign with news today that Chinese banks had the biggest quarterly increase in bad loans since 2005 as a slowdown in the world’s second-largest economy causes defaults to rise. Non-performing loans rose by 54 billion yuan ($8.7 billion) in the three months through March to 646.1 billion yuan, the highest level since September 2008.
Volatility is back with Nickel the latest to come in for some serious moves. Up now 35% for the year, last night we saw the price drop 6.5% after bigger intra-day falls. Two bad days have hurt its prior 56% rise! Just in time for BHP to try to sell off their Nickel assets.
Donaco International Limited (A$0.87, -12.6%) had a shocker today and have been hard hit as their Vietnamese casino is completely reliant on Chinese visitors. All well and good until the current tension reared its head. China says its oil rig will continue drilling in contested waters in the South China Sea. General Fang said Beijing could not “afford to lose an inch” of territory, blaming Hanoi for stirring up trouble in the region. Priceless. General Fang!
Seek Limited (A$17.12, -2.3%) today filed an amended registration statement with the US SEC for its proposed IPO giving revenue up 15%.
Tomorrow’s News Today
After counting the 570 m votes in the largest Democracy in the world, Mumbai shares are up 3.2 per cent, posting their biggest jump in five years. The value of Indian equities has climbed as Narendra Modi from the opposition party appears look set to take the helm. The benchmark S&P BSE Sensex index has risen 17 per cent this year to an all-time high. Apparently they outsourced the counting to Detroit!
Shanghai steel rebar futures have slumped 13.6 per cent in 2014 and is trading around CNY3152 ($US505.89) per tonne. Rebar futures hit a record low on Thursday, CNY3130 per tonne.
News that Uber is valued at $10bn seem just a bit crazy to me. Of course it’s different this time. It always is.60% of the time it’s different every time.pinterest is now valued at $5bn up from $2.5bn a year ago. Wotif.com Holdings Limited (A$2.36, -1.3%) is Pinterest?
Strange but true. Riot police in Brazil have fired tear gas to disperse thousands of protesters in Sao Paulo and Rio de Janeiro who marched against the cost of hosting the football World Cup.
Reasons to be cautious Part III. “Market is overvalued, particularly tech stocks: No economic growth, risk of deflation: End to Fed stimulus: Highly levered market: China slowdown.” So says Paul Tudor one of the world’s leading hedge fund managers. Tend to agree.And super bear Jim Chanos who just loves shorting things is turning his attention to Australian coal stocks and leveraged iron ore stocks. He was famously shorting Macquarie Group Limited (A$58.88, -0.5%) during the GFC as he knew they would go bust. How did that work out for you Jim? Last year his fund lost 14%.Still probably paid himself a billion dollar bonus just because he could.
As GE continues to stalk Alstom, the French Prime Minister, Manuel Valls ,has signed a decree giving the government new powers to block foreign takeover bids for companies deemed “strategic”. Seems they want Ze Germans to take charge. Wasn’t it ever so.
Good to see ‘Big Nath’ at the ICAC. Suspect he now knows what it is!
Have a great weekend On Sky TV at 5.30 Friday and Follow me on twitter @henryj007