A sea of red despite easing global tensions (Z1P)

James Gerrish

Market Matters

The market traded in the red for most of the session, although the local index did finish far from the intra-day lows set early in the session. The Aussie market followed the weak US lead lower after employment data disappointed on Friday night. Energy was the biggest drag with oil trading in the red following the poor data with investor’s global growth targets under pressure. Healthcare also fell more than 1% as a sector, although CSL was a clear deadweight on performance today, pulling back -1.6%. Although materials were lower, gold names held up well. Resolute Mining (RSG) was higher by +1.81% despite noting it will miss production expectations for 2019.

Two contrasting sectors topped the boards today – tech and REITS. A flight to safety obvious in the RIETs buying, catching a tailwind in the strong demand for credit in the first few weeks of the year which trickles down into the income-based stocks where REITs sit. Tech doing well with Afterpay (APT) helping the sector higher catching the tailwind of a stellar 2Q report from rival Zip – more on this later.

Overall, the ASX 200 closed down -25pts or -0.37% today to 6903, while the Dow Futures are currently trading +76pts or +0.26%.

ASX 200 Chart

ASX 200 Chart

CATCHING MY EYE;

Zip Co. (Z1P) +3.12%; Buy Now Pay Later (BNPL) names seem to have picked off some market share from traditional payment methods if Zip’s quarterly update is anything to go by. The second quarter was a record in terms of revenues which hit $38.5m, more than double 2Q18. Total transactions saw extraordinary growth of 85% year on year to $562.6m while gross receivables cracked the $1b mark.

Fears Zip was starting to see a slowdown have been quashed with customer numbers up 24% in the quarter while repeat spending from existing members also climbs. Acquisitions are also bolstering the company’s outlook with the Part Pay integration driving the UK expansion. For now, though, we remain neutral Z1P with a slight bullish bias.

Zip Co (Z1P) Chart

BROKER MOVES;

· Evolution Cut to Neutral at Macquarie; PT A$3.80

· Evolution Raised to Outperform at Credit Suisse; PT A$4.30

· Steadfast Cut to Sell at Morningstar

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Portfolio Manager
Market Matters

James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...

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