APRA & the RBA help the local market shrug soft leads

James Gerrish

Market Matters

A second day of good news for the Australian banks as APRA to reduce lending requirements on new mortgages to better reflect the low interest rate environment. The regulator proposed a relaxation of serviceability measures that would effectively relax the serviceability requirements and increase borrowing capacity . In practical terms, all borrowers were assessed on their ability to repay a loan at 7% however given rates are low, the regulator has now proposed that a gap of 250 basis points be applied to the prevailing lending rate. For example, an achieved rate of 3.7% would be tested on serviceability at 6.2% increasing borrowing capacity. This is bullish for bank lending volumes, and bullish for house prices. The chorus is growing that Saturday was the low in Aussie housing.

The banks liked the news today, led once again by Westpac which added 2.7% to close on the day’s high.

RBA minutes out today from the last meeting where rates were kept on hold, however the language clearly implies they're ready to act. The Aussie Dollar was sold off post minutes and the market rallied on the prospect of lower interest rates. Another bullish undertone for the market today which underpinned the recovery from the early lows and closing on the intraday high to just sneak above 6500!

AUD Chart

Overall today, the ASX 200 added +24 points or +0.37% to 6500. Dow Futures are trading up +64pts / +0.25%.

ASX 200 Chart

ASX 200 Chart


Lynas (LYC), +14.94%, was the best on ground today with the stock surging thanks to positive comments out of its investor day. The company presented its plans out until 2025 which includes a huge $500m investment across the business including a new upstream processing plant to the company’s WA mine to remove any radioactivity, while also increasing capacity at downstream processing facilities. The company reiterated it had the support of its major lender JARE, and confirmed licence renewal application is progressing on a normal timeline. A great presentation from the company today, although they were placing into a trading halt late in the session to clarify some comments from the presentation.

Lynas (LYC) Chart

Healius (HLS) +3.68% – an article in AFR Street Talk this morning saying that Jangho, HLS’s major shareholder was assembling a new DD team to revisit the HLS takeover. They now have KPMG as their accountants working alongside Minter Ellison and Macquarie. Seems like something is progressing here, although clearly, it’s now become a pretty poorly kept secret. We own HLS and remain hopeful of a bid eventuating.

Healius (HLS) Chart

Broker moves:

· Steel & Tube Downgraded to Underperform at Forsyth Barr; PT NZ$1

· Steel & Tube Cut to Neutral at First NZ Capital; PT NZ$1.21

· Kiwi Property Cut to Neutral at First NZ Capital; PT NZ$1.52

· Woolworths Group Downgraded to Underweight at JPMorgan; PT A$31

· Westpac Upgraded to Buy at Bell Potter; PT A$28.30

· Paradigm Biopharma Rated New Speculative Buy at Bell Potter

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James Gerrish
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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