The Match Out: ASX gets smacked 2% as a new risk emerges

The daily Match Out for Friday 10 February with Market Matters' James Gerrish.
James Gerrish

Market Matters

A shocker to end the week with the ASX sliding 2.3% weighed down by financials as US banks came under huge pressure last night on concern around SVB Financial Group’s solvency. The bank, which is big in providing banking services to Silicon Valley (hence the name) was urging customers to hang in there, however, a number of high-profile VC funds were asking their portfolio companies to get their money out. This is the sort of left-field event that markets haven’t been thinking about / pricing that can create more meaningful moves – more so than the well-understood trajectory of interest rates.

  • The ASX 200 finished down -166pts/ -2.28% at 7144
  • The Utilities sector was best on ground (+0.61%) and the only sector to close up. Communications (-0.75%) & Staples (-0.82%) outperformed the weakness.
  • Energy (-3.36%), Materials (-3.13%) and Financials (-2.78%) the weakest links.
  • Clearly a risk-off session today with ~90% of the market closing lower.
  • The edgier / risk sectors hurt the most, Lithium stocks were an obvious example with Allkem (ASX: AKE) -8.59%, IGO (ASX: IGO) -7.24% and Pilbara (ASX: PLS) -7.01% all hit as Lithium prices continued to fall.
  • Global Lithium (ASX: GL1) -4.14% outperformed the sector after announcing more positive drilling updates at their Manna project. We expect a sizable upgrade to the resource over the next few years
  • The only real place to hide was Gold - Newcrest (ASX: NCM) +0.30%, Evolution (ASX: EVN) +1.09% & Northern Star (ASX: NST) +1.74%
  • Shares of Asian banks slid, as did our own with Comm Bank (ASX: CBA) -3.25% the hardest hit of the Big 4 – not something that generally happens.
  • Metcash (ASX: MTS) – was hit ~5% at its worst before closing down ~3.2% following a downgrade from Goldmans - they said moderating inflation and increased competition will hurt the Australian supermarket chain’s food sales and earnings. We disagree and continue to hold MTS in our Income Portfolio seeing value sub $4. If we didn’t own, we would be a buyer.
  • We added Seek (ASX: SEK) to the Growth Portfolio as it traded back to the $24 alert level.
  • Xero (ASX: XRO) -0.31% saw universal upgrades this morning following yesterday’s change in focus towards better profitability, with earnings +20-50% higher over the next 3 years according to most analysts – the stock rightfully outperformed. We own.
  • US 2-year bond yields have actually fallen 31bps from this week’s high while the Aussie 3-year fell by 10bps today, and is now 3.34%.
  • The focus has turned from higher rates to concerns around the financial system more broadly – ultimately a by-product of higher rates but another reason why we think bond yields have seen their peak.
  • Iron Ore was ~4% higher in Asia today – it didn’t really help the sector with Fortescue (ASX: FMG) -2.71% & Rio Tinto (ASX: RIO) -3.26%
  • Gold was flat at ~US$1828 by our close.
  • Asian stocks were weak Hong Kong down -2.43%, Japan fell -1.66% while China was off -1.10%
  • US Futures are lower, down around -0.70%
  • Employment data out in the US tonight will be key, Non-Farm Payrolls to be +225k and the unemployment rate to be stable at 3.4%

ASX 200 Chart - Intraday

ASX 200 Chart - Daily

Market Matters Weekly Video Update – February Performance Update

In this week’s video update, Portfolio Managers James Gerrish & Harry Watt cover portfolio performance for February, along with FY23 returns from four Market Matters portfolios. The Flagship Growth Portfolio is having a particularly strong run, up ~19% by the end of February, strongly outperforming its objectives.

Click Here to Watch the Video Update

Sectors This Week – Source Bloomberg

Stocks This Week – Source Bloomberg

Broker Moves

  • Evolution Raised to Neutral at Macquarie; PT A$2.80
  • Newcrest Raised to Outperform at Macquarie; PT A$26
  • Gold Road Raised to Outperform at Macquarie; PT A$1.70
  • Capricorn Metals Raised to Outperform at Macquarie; PT A$4.70
  • Raised to Outperform at Taylor Collison
  • Myer Cut to Sell at CLSA; PT 90 Australian cents
  • Metcash Cut to Sell at Goldman; PT A$3.50
  • Woodside Energy Cut to Underweight at JPMorgan; PT A$34
  • Santos Cut to Neutral at JPMorgan; PT A$8.30
  • Worley Cut to Underweight at JPMorgan; PT A$13

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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