The Match Out: ASX drifts, defensives shine in a quiet session

James Gerrish

Market Matters

A quiet session to kick off the new trading week with the ASX drifting lower as the day progressed, a lack of interest really which is what we saw in the US on Friday night as well. The defensive sectors did best while the growthier parts struggled.

  • The ASX 200 finished down -12pts/ -0.18% at 7139
  • The Utilities sector was best on ground (+1.82%) while Industrials (+1.05%) & Staples (+0.89%) were also strong.
  • Materials (-1.54%), IT (-1.53%) & Energy (-0.85%) underperformed.
  • Markets @ Midday is our daily podcast detailing major movers intra-day – hosted by Portfolio Manager Harry Watt – Listen Here
  • Paul Skamvougeras, Head of Equities at Perpetual has resigned with the Deputy Head Vince Pezzullo taking the reins. This supports the reported view that the PPT Investment team were not happy with the proposed takeover of Pendal (PDL)
  • Perpetual (ASX: PPT) -1.37% fell as a result while Pendal (ASX: PDL) was off -0.41% – the court ruling on the scheme is due this afternoon. Regal Partners (RPL) was flat at $3.40
  • Whitehaven Coal (ASX: WHC) +3.17% rallied on stronger coal prices - since the 25% buy-back was announced, they have bought back over 22m shares equating to around ~8% of traded volume over the period – a fairly aggressive rate!
  • AGL Energy (ASX: AGL) +4.23% led the ASX 200 today and is a stock we think goes higher – we own in our Income Portfolio.
  • Lovisa (ASX: LOV) +2.52% bounced back following Friday’s sell-off, UBS writing a positive note on the stock.
  • Sandfire (ASX: SFR) +1.47% did well trading higher following their capital raise – a clear sign of underlying strength.
  • QBE Insurance (ASX: QBE) -0.56% fell after increasing catastrophe claim expectations for CY22.
  • Morgans & Canaccord both lowered their call on Nanosonics (ASX: NAN) pushing shares -12.23% lower.
  • Healius (ASX: HLS) -4.22% traded back to its pre-Covid levels today with the COVID bump in testing well and truly over and their underlying business continuing to struggle…JP Morgan saying “We have cut our forecasts sharply after Healius’ chief competitor, Sonic, revealed a larger than expected drop in earnings as Covid testing declined and cost pressures rose”.
  • Altium (ASX: ALU) -2.92% fell on a disappointing tax ruling – although not a surprise, however, we suspect they were also weighed by a broader pullback in tech.
  • Dusk (ASX: DSK) +2.8% held their AGM today with no quantifiable FY23 guidance provided as expected – given the seasonal skew to Xmas period, although everything seems to be tracking along pretty well. Danny Younis saying…. DSK is now recapitalised for growth, has no debt, a very healthy yield of ~8%, management expertise is high and the risk/reward equation compelling
  • The government is weighing legislation that would see BNPL firms “operating within the normal guardrails that operate with other credit,” Minister for Financial Services Stephen Jones said.
  • Iron Ore was ~1.5% lower in Asia today dragging Fortescue (ASX: FMG) down -3.76% lower.
  • Gold is trading down a touch at $US1746 at our close.
  • Asian stocks were mostly lower, Hong Kong down -2.35%, Japan +0.07% while China was off 1%
  • US Futures are all down, around -0.30%

ASX 200 Chart

QBE Insurance (QBE)

QBE -0.56%: the insurer struggled today after increasing catastrophe claim expectations for CY22. Claims for the first 9 months of the year were $880m with the company now expecting over $1b in the year, up around 10% from the previous expectation of $962m. Claims relating to the Ukraine war and US hurricanes caused the adjustment. Offsetting this in part was strong Gross Written Premium (GWP) growth, up 13% in Q3 on a constant currency basis, aiming to achieve rate increases at inflation or better.

Broker Moves

  • Nanosonics Cut to Hold at Canaccord; PT A$4.86
  • Link Administration Cut to Reduce at CLSA; PT A$3.60
  • Nib Raised to Neutral at JPMorgan; PT A$7.50
  • Healius Cut to Underweight at JPMorgan; PT A$2.95
  • Sandfire Cut to Neutral at Citi; PT A$5.40
  • Sandfire Cut to Underweight at JPMorgan; PT A$3.60

Major Movers Today

Have a great night

The Market Matters Team

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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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