The Match Out: ASX fades with inflation concerns, Wesfarmers (WES) makes a bold call on API, Tech & REITs struggle

James Gerrish

Market Matters

It was a pretty soft session for the local market which followed the US lead. The tech-heavy Nasdaq was weak overnight and it showed up in tech stocks on the ASX today which felt the worst of the selling. 

Real Estate and telcos were also notably weak. The focus was on US inflation pressures following their PPI data overnight, though the news wasn’t showing up in bond markets, equity markets did feel the pinch. 

The Producer Price Index (PPI) came in at its highest annual gain in more than a decade with +9.6% for November raising concerns the Fed would have to ramp up efforts to reduce inflation faster than the market had expected.

  • The ASX 200 finished down -51pts/-0.7% at 7327
  • Utilities were the only sector to finish the day higher
  • CSL spent the day in a trading halt as they look to raise capital to complete the acquisition of Vifor. The institutional placement will be done at a maximum price of $285/sh looking to raise $6.2b, with a $750m share purchase plan to follow. We like the deal and are long CSL.
  • Helloworld (HLO) rallied after receiving a bid from Corporate Travel (CTD) for their corporate and entertainment travel business. Helloworld will get $100m in cash and $75m in CTD shares in the deal, pricing the deal at 8x FY19 EBITDA. Corporate Travel is looking to raise at $21/sh, it last traded at $22.29
  • Wesfarmers (WES) came out with an aggressive push for Australian Pharmaceutical Industries (API) saying it could match any offer deemed superior to its proposal – the bidding war is on with Woolworths (WOW). This comes after Woolworths offered $1.75/sh.
  • APA Group (APA) announced the 1H div was likely to come in at 25cps, a 4.2% jump from last year’s interim div. Shares were marginally weaker on the back of the news.
  • Gold was flat again in Asia today at $US1770 at our close
  • Iron Ore was marginally lower in Asian trade
  • Asian markets were higher today despite our weakness, Nikkei +0.10%, Hong Kong +0.21% while China +0.10%.
  • US Futures are up, all around 0.15% higher

ASX 200

Broker Moves

  • Santos Raised to Outperform at Macquarie; PT A$8
  • Stockland Cut to Underperform at Macquarie; PT A$4.21
  • CSL Raised to Buy at Citi; PT A$340
  • Santos Resumed Neutral at Citi; PT A$7.01
  • 29Metals Rated New Buy at Citi; PT A$3.20
  • Biome Australia Rated New Speculative Buy at Canaccord
  • CSL Raised to Positive at Evans & Partners Pty Ltd; PT A$315
  • South32 Rated New Buy at Investec; PT A$4.63
  • Macquarie Group Rated New Overweight at Barrenjoey; PT A$230
  • Alumina Raised to Overweight at JPMorgan; PT A$2.10

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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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