The Match Out: ASX rallies, banks lead, Materials look tired

James Gerrish

Market Matters

The market continued its trend of being a choppy mess, today rallying by +1.3% after falling on Friday by a similar amount. The influential banks were strong pushing the broader financial sector +2.46% higher while the Materials look tired after a cracking run of late, today falling -0.34% to be the only sector in the red. We posed the question in this morning's Macro Monday report Has Russia created a blow off-off top in commodities? Click here to read.

  • The ASX 200 finished up +85pts/ +1.21% at 7149
  • The Financial sector was best on ground (+2.49%) while Healthcare (+2.16%) was also strong.
  • Materials (-0.34%) dragged the chain while the Utilities (+0.28%) underperformed the broader strength.
  • US Futures opened higher this morning and that created a positive backdrop for our market on open, we went against weakness in Asia.
  • China has imposed partial lockdowns in the major commercial hubs of Shanghai and Shenzhen as it grapples with a surge in COVID-19 cases.
  • UK facing stocks rallied today, Pendal (PDL) +6.56% and Virgin Money (VUK) +4.96% - we own the latter and increased sub $3.
  • Elders (ELD) +11% on guidance upgrade, the trend in the Agricultural sector remains hot!
  • Magellan (MFG) -1.41% saw more fund outflows, although the stock was off over ~5% at its worst, hitting a new 7-year low in the process.
  • Banks were a standout, ANZ +2.8%, CBA +2.6%, NAB +1.5% & Westpac (WBC) put on +2.5%.
  • Uranium prices were down overnight, Uranium stocks fell overseas and that filtered into weakness here, Paladin (PDN) -7.5%, a very volatile area of the market.
  • Iron Ore was down 3.5% in Asia
  • Gold was fell another US$15 in Asia today, to be around $US1973 at our close
  • Asian stocks were mostly lower, Hong Kong fell -3.21%, Japan +0.36% while China was off -1.35%
  • US Futures are all higher, up between +0.45% for Nasdaq & 0.71% for the Dow.

ASX200

Elders (ELD) $13.32

ELD +11%: the agricultural services business jumped to more than decade-highs today on the back of a strong trading update. Full-year guidance was given for the first time in FY22 for the September year-end, the company predicting EBIT growth twice as strong as consensus estimates, in the range of 20-30%. They’ve benefitted from strong conditions across the sector with bumper crop volumes, strong livestock prices and a broad increase in activity across their business lines. Clearly a solid update and while management has been doing well to improve the business, it’s clearly been given a head start this year with strong macro tailwinds. They’ve left the door open for a miss in case of supply chain disruptions, weather events or a sharp move in commodity prices.

Magellan (MFG) $14.00

MFG -1.41%: Down today after updating the market on Funds Under Management (FUM). They now have $69.1bn under management which compares to around $118bn at its peak last year. Since their last update on the 25th Feb, there have been net outflows of ~$5bn, $4.7bn from institutions & $300m from retail. They now manage $39bn in Global Equities., $20.4bn in infrastructure & $9.5bn in Aussie Equities. Clearly not a good trend here and while the market is expecting outflows, we suspect that these outflows need to bottom out or at least reduce in magnitude before the stock will bottom.

Broker Moves

  • Dicker Data Rated New Overweight at Morgan Stanley; PT A$16

Enjoy your 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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