Resources remain in vogue at the expense of the banks

James Gerrish

Market Matters

A bullish open for the local market this morning as traders pushed stocks sharply higher into an early top just below 6400, however that was the best of it as sellers emerged from the woodwork – the mkt closing about 35points from the early highs. However, the composition of the move was interesting, banks were on the nose with sustained selling throughout the session as money flowed into the resource sector – Fortescue Metals (FMG) up another ~6% to stand out while both RIO and BHP were strong, adding more than 2% a piece.

Overall today, the ASX 200 added +37pts or +0.59% to 6365. Dow Futures are trading down -75points / -0.29%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE:

ANZ -3.04%: shares hit after New Zealand's central bank revoked the ability of the bank's local subsidiary to autonomously assess its risk capital requirements due to "persistent weakness" in its processes. It seems continuous issues with how the bank calculates its risk capital has propelled the regulator to act. Increasing capital requirements have been muted in NZ + now the regulator is regulating with more vigour – that’s ultimately a negative story for ANZ and the rest of the banks generally. We saw some decent sell flow on the banks today through our desk and the selling grew throughout the day as this ANZ news broke. ANZ the hardest hit down -3.04% while CBA fared best down by -0.68% to close at $72.83.

ANZ Bank (ANZ) Chart

BHP +2.45% - we added to the MM Platinum Portfolio on open this morning and the stocks continued to be well bid throughout the day. It seemed money coming out of the banks was finding aa natural home in the miners – although FMG remained the standout. We remain bullish BHP targeting a quick assault on the ~$40 region again.

BHP Chart

Sectors this week; Materials clearly in focus this week with some big moves, while financials were weak although a large portion was dividend related.

Stocks this week; FMG up on special dividend + buoyant Iron Ore price, NRW won a good new contract while Lend Lease (LLC) is getting taken over (apparently!)

Broker Moves;

· Mayne Pharma Downgraded to Neutral at Citi; PT A$0.60

· Dexus Upgraded to Buy at Citi; PT A$14.10

· Auckland Airport Upgraded to Buy at Citi; PT NZ$9.40

· GWA Group Downgraded to Sell at Deutsche Bank; PT Set to A$2.85

· St Barbara Downgraded to Underperform at Macquarie; PT A$2.70

· APN Industria REIT Raised to Hold at Moelis & Company; PT A$2.75

· Harvey Norman Upgraded to Hold at Morningstar

· Amcor Downgraded to Sell at Morningstar

· Xero Downgraded to Underweight at JPMorgan; PT A$53

· Brickworks Upgraded to Hold at CCZ Statton333

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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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