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Happy New Year. ASX 200 closes up a very solid 50 points as optimism spills over into the New Year. M&A activity helping. Caution remains though with sellers happy to back off on low volume.
The other Asciano!
- Looking back. For the month, June was down 5.51 per cent, its worst monthly performance since May 2012 when it logged a 7.29 per cent decline. July is historically the second-best performing month of the year (April is historically the strongest), averaging a 4.6 per cent gain over the past three years.
- Cautious optimism descended on the ASX today despite news that the Greeks are now officially ‘In Arrears’ to the IMF. Glenn Stevens was speaking in London overnight and suggested that the Greek fiasco will have a very limited effect on the local economy. Financials led the way in cautious trade with Commonwealth Bank(CBA) + 1.05 % as the stand out with the rest around 0.5%-1.2% higher. Insurers and money managers also put in a good performance with Macquarie Bank (MQG) +1.41%, AMP +2.99% and Insurance Group Australia (IAG) also doing well +0.54%.
- Infrastructure stocks had a big day especially the companies holding strategic assets like Sydney Airports (SYD) +6.22%, Aurizon (AZJ) +5.85% and Transurban (TCL) +4.52%.The big kicker was the unexpected bid for Asciano (AIO) +16.8% by Canadians Brookfield Infrastructure at a massive 40% to the price and valued at nearly $9bn if it goes through.
- Logistics is the hot sector at the moment as the Canadian company Brookfield Infrastructure Fund and Asciano, an operator of ports and rail freight infrastructure announced they were in merger talks. The stock immediately jumped to 819c against an offer price, in scrip and cash, of around 905c.Some profit taking and scepticism crept in as the day wore on but they still closed up a massive +17%.Tagging on the M&A train was also Qube (QUB) + 5.53% as the Moorebank terminal is also seen as a strategic asset and follows the $6.5bn takeover for Toll Holdings by Japan Post. Seems a distinct possibility that this one will not remain a wallflower forever.
- In other takeover activity, Briscoe in NZ confirmed plans to takeover Kathmandu(KMD) – 2.55% at around (NZ$1.80) 158c with a cash and share bid of 5 for 9 and 20c in cash. Slightly disappointing but with a 20 % stake already it is hard to see rivals emerge to make it competitive.
- Not such a fun place to be was the Iron Ore stocks today as the price fell below $60 a tonne and BHP – 1.48%,RIO – 1.38% and Fortescue Mining (FMG) – 4.19% all struggling to gain traction. This despite BHP now starting to look like a yield stock.
- Energy stocks also benefitted from a higher oil price and some positive news fromWoodside (WPL) + 1.26% on plans to commission three floating LNG vessels. Woodside says the Browse joint venture partners have agreed to enter an engineering and design phase for the proposed development which is on track for a final decision in the second half of 2016. Gold shares were mixed despite some risk unwinding in the metal price. Leader Newcrest (NCM) – 2.23% fell but Evolution Mining (EVN) + 3.9% bucking the trend.
- In the gambling space Macau casino operator Melco Crown Entertainment surged the most in more than three years amid reports that a year-old transit visa restriction affecting the world’s largest gambling hub will be lifted. This fed through to Jamie Packer’s Crown Resorts (CWN) + 5.1%.An unravelling stock market also helps draw the gamblers back to a more predictable environment of Blackjack, Baccarat and Roulette.
- In mid-caps AJ Lucas (AJL) – 10.26% continued its horror run after being knocked back by the Lancashire council in the UK on their upcoming fracking project.
- New entrant Mitula Group (MUA) + 6.67% started life on a positive note. These guys are a vertical search website operator. They have 51 websites in 38 countries in 14 languages. Looks a big valuation a at around $170m but it’s different this time right.
- Money3 (MNY) + 14.47% a loan provider ran hard today following settlement of a long running issue with ASIC about some of their products. In other small stocks having a good run, Tassal (TGR) + 8.11% netted its catch in the shape of De Costi Seafoods, as it confirmed its agreement to buy the seafood company for a two tier $50m deal.
- In economic news, boding well for the construction industry, (what is wrong with CSR?) A massive pipeline of housing construction is expected to help slow soaring home prices in the coming year as a record $57.6 billion of new homes were approved to be built in the past 12 months, which means over 200,000 dwellings are expected to be constructed across Australia this year. In May, dwellings approved for construction bounced back from a fall the previous month to rise 2.4 per cent for the month and 17.6 per cent for the year.
- Seems that 2014 was not a great year for Hedge funds as a report today stated the average annual net return for a single-manager hedge fund and fund of hedge funds was 4.2 per cent, down from the previous year’s 14.4 per cent average and 7.8 per cent average in 2012.Spare a thought though for Chinese hedge fund managers, the worst three are down a whopping 77% .In a month. Have to love leverage.
- Still overseas, China was a far more sanguine place today after the wild gyrations of the past few days. As we go to press, it’s down a modest 0.7% with the Hang Seng up around 1% following June PMI numbers missing expectation slightly, coming in at 50.2 unchanged from May. The huge level of margin lending has meant mornings have been abuzz with margin calls as the market fell and punters were stopped out.Investors (and I use the term loosely in China) have racked up margin of around $339bn which is double the amount at the start of the year. And that is just the margin that brokers are lending their clients. There are other sources for margin lending online sites, wealth management products and even more dodgy lenders who have loaned another $300bn. About 40 online lenders helped arrange more than 7 billion yuan of loans for stock purchases in the first five months of 2015, according to one Shanghai based group, which tracks China’s more than 1,500 such credit providers. And they charge up to 22% for the privilege.
- “To get rich is glorious. To get rich on margin is even better” to paraphrase Deng Xiaoping!
Useless trivia for the day. The Greeks actually invented defaulting on their loans. Way back in 377BC, 11 Greek city states defaulted on loans from the wealthy temple of Delos, with about 90 per cent of the money having to be written off.
And finally a screenshot from Angela Merkels’ computer.
Sunday cannot come quick enough. Bookmakers’ Sportsbet have ‘Yes’ vote as favourite. But then what?