ASX200 closes barely changed at 4881.2 up 6.2 points after fighting back from early losses especially in the banking sector. Options expiry day adding to the volatility. Results again dominate as the ‘pick n mix’ performance of individual companies continues. China slips 3.79% with Japan up 1.58%. US futures up 14.
Another disappointing days as early gains evaporated into the mist of company reports. After the carnage of the session on Wednesday and a turnaround in oil and the Dow, we had expected a firmer opening. No such luck as continued weakness in major blue chips snuffed that out. It could have been the February options expiry hurting sentiment and creating volatility but banks were once again in the firing line although not quite as brutal as the moves yesterday. Resource stocks picked up with the jury still out in BHP. Asian markets were mixed with China sliding again down 3.79% with Tokyo up 0.7%. As the afternoon wore on the ASX 200 managed to eke out a small gain as the banks recovered their poise. There is a huge amount of ‘rumourtrage’ occurring in the banking sector with predictions of a property crash making headlines almost daily. Most of it is just scare mongering and very wide of the mark but hedge funds are shorting Australian banks and with locals stuffed to the gills with them, it is hard to find new buyers.
ASX 200 Index Today Aussie Dollar Today US71.75c
According to Citi the great dividend splash may be coming to an end. Certainly judging by the result season this February that is not something we are seeing unless you are a resource company shareholder.
Stocks and Sectors
- Banks were once again under pressure but well off their lows. Commonwealth Bank (CBA) -0.36% hit a low of 7006 cents before rallying back It was similar story in the other three with National Bank (NAB) +0.24% turning around from a low of 2401 cents. Other financials rallied with Perpetual (PPT) +5.3% after results as IOOF (IFL) +5.9% and Macquarie Group (MQG) +0.25% Insurers fell away led by QBE -3.09% and NIB Holdings (NHF) -2%.REITs were firm too as Westfield Corp (WFD) +1.55% and Vicinity Centres (VCX) +2.95%.
- In resources BHP -1.11% and RIO -1.67% were weak despite oil price rises and a stable iron ore price. Fortescue Metals (FMG) +3.5% were in demand following the cracking results yesterday and South32 (S32) +3.54% were cheered by the results today. Gold stocks were a little all over the place as Perseus Mining (PRU) +9.59% and Resolute Mining (RSG) +9.38% knocked the lights out but the majors like Evolution Mining (EVN) -1.1% went nowhere.
- Energy stocks finally ground out some gains. Origin Energy (ORG) +4.42%, Oil Search (OSH) +0.45% and Santos (STO) +1.92%. Coal stocks are having a small renaissance Whitehaven Coal (WHC) +6.8% and New Hope (NHC) +1.45% both firming.
- Industrials were mixed, consumer stocks Wesfarmers (WES) -2.7% and Woolworths (WOW )-1.97% both under pressure together with Metcash (MTS) -3.17%.
- Gaming stocks missed the jackpot totally. Crown Resorts (CWN) -4.62% set the tone, Donaco International (DNA) -28.77% had a shocker and Ainsworth Gaming (AGI) -3.4%.
- Telstra (TLS) +0.97% had a rare day in the sunshine today as some buyers returned pre the stock going ex-dividend on 1st March.
- Dick Smith will close all stores with a loss of 3000 jobs.
- RIO has been downgraded by Moody’s to Baaa1 from A3. The ratings could be downgraded should Rio Tinto’s leverage, as measured by the Debt/EBITDA ratio remain above 2.5 times, (CFO – dividends)/debt is less than 25% and liquidity contracts, Moody’s said. The ratings could be upgraded should Rio Tinto evidence a sustainable debt/EBITDA ratio of no more than 2 times and (CFO-Dividends)/debt ratio of at least 35%, it added.
- South32 (S32) +3.54% with underlying earnings falling to US$26m after a statutory loss of US$1.7bn in impairments was taken into account. More cost cutting and job losses and production reduced in South African manganese operations. No dividend.
- SEEK (SEK) +7.88% showing that class counts. Profit jumped 50% to $275m with revenue up 22%. Underlying profit was up 9% after taking out some of the asset sales out.
- Ramsay Healthcare (RHC) +1.12% upgraded full years’ guidance after a 17.5% rise in interim profits to $224.9m. France was a stand out.
- Surfstitchup (SRF) -34.1% after abandoning profit guidance to spend more money on digital marketing. The boys at Surfstitch seem keen to emulate the Billabong model and create content to enable them to sell board shorts off the back of it. Creating content is expensive far better to create a platform were users can contribute. The maiden profit since floating in December 2014 produced a profit of $5.7m up around 40%. SRF did not reaffirm FY EBITDA guidance, which was between $15 million and $18 million compared with $7.7 million in 2015. Analysts had been forecasting EBITDA of $21 million.
- Perpetual (PPT) +5.3% rose after announcing a 10% jump to $64.4m on a slight 2% drop in revenue.
- Blackmores (BKL) -4.81% shot the lights out with a vitamin jab as profits rose 159% to $48.3m from $18.62m. Dividends have risen to 200 cents almost triple that of a year ago. Direct in-market sales in Asia surged 73 % in the first half-year, while sales of vitamins in Australia also climbed 73 % to $238 million. CEO Christine Holgate has given staff 22 days pay as a bonus across the board. There will be singing in Mona Vale tonight.
- Adelaide Brighton Cement (ABC) -0.62% struggling to supply enough concrete for the east coast housing boom after unveiling a 20.4 % jump in profit to $207.9 million. Adelaide Brighton reported a 5.6% rise in revenue to a record $1.4 billion. Final dividend of 11 cents and a special of 4 cents.
- APN News and Media (APN) +5.0% swung to a $10.2 million loss for calendar 2015 from a year-earlier $11.5 million profit. A non-cash write-down of $50.8 million on Australian Regional Media (ARM) contributed to much of the loss. Barring one-offs, net profit fell 7% to $70.2 million. Revenue edged 1% higher to $850 million. It will also exit its regional publishing business to concentrate on outdoor advertising and radio.
- Crown Resorts (CWN) -4.62% the glow is wearing off as the Barangaroo Casino is delayed by another 18 months to 2021. Seems that life under Barry ‘Grange’ O Farrell was significantly easier than under Mike ‘Lock out’ Baird. Meanwhile in Macau net profit plunged 35% to $210m as growth in the Australian casinos could not make up for the losses overseas. Crown’s equity-accounted share of net profit from Melco Crown, the Macau casino operator it operates in a joint venture with Lawrence Ho, crashed by 89% to $9.4 million. Privatisation is just looking cheaper and cheaper for Jamie.
- Nine Entertainment (NEC) +5.17% has moved to name ex Treasurer Peter Costello as Chairman. The record of ex-poliies on a board or as chairman is not a good one. Hopefully this will turn out better. Still the one.
- Dog of the day was Temple and Webster (TPW) -67.46% as the recent float starts to sink. A downgrade to prospectus forecast by 10% as marketing had not worked as well as expected. There’s a surprise for anyone who is on their mailing list.
- Fourth-quarter business investment (capex) grew 0.8 %, which is better than the expected 3 % drop. It’s also a remarkable rebound from the previous quarter’s 8.4 % drop in capex. But the first estimate for investment in the next financial year came in at just $82 billion, or about $10 billion below economist expectations.
- CAPEX rises 0.8 % in Q4, tops forecasts of -3 %.
- Q4 GDP seen rising around 0.5 %, 2.6 % for year.
- Early spending plans for 2016/17 looking very soft.
- Sharp has agreed to a US5.9bn bailout package from Foxconn.
- In Japan 40 year bonds fell below 1% yield.
Europe and US
- Good chart from Bloomberg on the looming problem that US energy companies have with their debt profile.
- If oil stays at $30 this will become a big issue. US drillers have US$237bn of OPM outstanding. OPM is other peoples’ money. Reminds us of the old saying ‘If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem’. Ironic that it was Paul Getty that said it.
Credit to UBS for pointing out where the bubbles are.
Ahead in Europe
- FTSE +98 points.
- DAX -275 points.
- CAC -82.50 points.
- Volume was $6.73bn (Daily average $4.656bn financial year to date)
- Dow Jones Futures up 16 point.
- Dow Jones was up 53 points overnight.