The Match Out: ASX follows typical home schooling trend, closes marginally higher, Key calls from Peter O’Connor

James Gerrish

Market Matters

The market continued to follow a very similar path to homeschooling in the Gerrish household of late, the low set in the morning – perhaps deeper than most feared before a recovery plays out later in the session and we close at the high point of the day. Today that was up just 1 point for the ASX 200 as the market continues to consolidate its recent pullback of around 200 points. 

As we highlighted this morning, the previous pullback back in June / July took six weeks to evolve before it broke out to fresh highs, the current consolidation pattern has just entered its fifth week, implying it can tread water for a few more days yet and to state the obvious, the longer it can hold above 7,400, the more likely its next stop is 7,700 – now our slight preference.

  • The ASX 200 finished up +1point / 0.02% at 7530
  • Communications, Energy & Healthcare all strong today, Materials the weakest sector with Fortescue Metals (ASX: FMG) down another 3%
  • The RBA kept rates unchanged today as expected, but delayed tapering its bond-buying program until February 22 due to Delta
  • NSW now going hard on the reopening talk with pubs etc set to reopen for the fully vaccinated in mid Oct – the reopening trade up on the news
  • Flight Centre (ASX: FLT) topping the boards today up 6.23% on that + a Credit Suisse upgrade
  • A large transaction in Global Data Centres (ASX: GDC) today with 360 Capital selling its entire 33.2% stake for $42 million – the price was $1.93 versus today's close of $2.01. This is a stock we’ve started to look at and while the overhang is now gone (positive), "insto" appetite here in the short term is likely to have been satisfied (negative). One to watch for now
  • UBS reckons that Rio Tinto (ASX: RIO) and Vale, the world’s top two ore producers, are set to miss their annual shipments guidance by up to 10m tons – that’s a marginal positive for prices which have been under pressure of late – Iron Ore up a touch in Asia today
  • Gold was down $US6 in Asia ticking around $US1817 at our close while Iron Ore Futures are up 1.13%
  • Asian markets all higher, the Nikkei in Japan +0.86% - we highlighted this chart in the AM today as a strong proxy for us locally
  • US Futures are all trading very marginally higher 

ASX200 Daily Chart

4 trade ideas from Peter O’Connor

Peter O’Connor, our Resource Analyst at Shaw sums up his current picks in the resource space this morning and I’ve included key highlights below. We own Whitehaven Coal (ASX: WHC) and Newcrest (ASX: NCM) in the Growth Portfolio + have had S32 on the radar for a while, although we now prefer to buy the consolidation of the ~$3 breakout. We also own Coronado Coal (ASX: CRN) in the Emerging Companies Portfolio which is aligned with these views. Click Here To View Portfolios

  • Gold px poised to break higher – Price has been grinding higher post the June FOMC “taper tantrum” and the latest soft US payroll data likely to see gold push higher towards US$1,900/oz as the gap to US real rates closes. Buy gold.
  • Met coal still a lot more catch up – The two best performing commodities YTD – met and energy coal. Yet the gap to China met prices is over US$100/t which combined with firm ex-China demand suggests further upside ~30%. Buy WHC, S32.
  • Alumina cum 10% upside – Australian alumina price has been tracking China import parity price higher over the past 6 months. The gap has widened to ~$40/t (12%) prior to any Guinea cost input pressure. Buy AWC and S32.
  • Bauxite at 18 month high – Supply concerns from major global exporter, Guinea, post Monday’s coup, will likely maintain price tension on bauxite in the near term. Buy Metro Mining, AWC, S32.

We remain bullish and overweight commodities

Whitehaven Coal (WHC)


Broker Moves

  • Hansen Tech Raised to Buy at Ord Minnett; PT A$6.50
  • Mineral Resources Raised to Buy at Citi; PT A$65
  • Corporate Travel Cut to Neutral at Credit Suisse; PT A$23
  • Webjet Cut to Neutral at Credit Suisse; PT A$5.70
  • Flight Centre Raised to Outperform at Credit Suisse; PT A$19
  • WiseTech Rated New Hold at Jefferies; PT A$50.26
  • Cobram Estate Rated New Buy at Bell Potter; PT A$2.30
  • Amcor GDRs Cut to Underperform at Jefferies; PT A$15
  • Lendlease Cut to Underweight at Morgan Stanley; PT A$11.40
  • GUD Holdings Raised to Buy at Citi
  • Pro Medicus Cut to Sell at Goldman; PT A$54

Major Movers Today 

 

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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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