The Match Out: ASX rallies, China backstops developers, Shorts are for the beach!

James Gerrish

Market Matters

A solid session for the ASX keying off a bullish night in the US, however, news that Chinese developers were getting a state-backed lifeline gave the market another kick into the afternoon. Some big moves in individual stocks, particularly those with large short exposure a clear theme while the resources were the sector to be in!

  • The ASX 200 finished up +66pts/ +0.97% at 6889
  • The Material sector was best on ground (+2.43%) while Energy (+1.30%) & Property (+0.84%) were also strong.
  • Utilities (-1.81%) and Healthcare (-0.04%) the weakest links.
  • The ASX 200 traded up into our target area today – we trimmed a few of our large positions.
  • The People’s Bank of China will initially issue about 200 billion yuan of low-interest loans, charging about 1.75% a year, to state commercial banks, according to the FT report, the move is designed to backstop developers.
  • Iron ore extended its gains for a 5th straight day – China stepping up to the plate is certainly helping – now trading at US116/tonne, up ~20% in the past week.
  • Fortescue Metals (FMG) +2.86% released quarterly production with iron ore shipments of 49.5 million tonnes (mt) for the quarter and 189.0mt for FY22, exceeding full-year guidance – more on this tomorrow.
  • Atlas Arteria (ALX) -6.14% down after IFM Global Infrastructure Fund ceased talks with the toll road owner.
  • Audinate (AD8) +9.64% rallied hard on a great update, FY22 preliminary results were strong and so was guidance.
  • Kogan (KGN) +50.16% whacked a few bears today after better than feared sales numbers – the rest of the e-commerce stocks rallied on the back of it, Temple & Webster (TPW) +13.5% and even Adore Beauty (ABY) put on +11.28%.
  • Macquarie (MQG) +2.97% held their AGM today and talked about taking a more cautious stance given the current environment – we tend to agree.
  • Market Matters weekly video update this week covers the Macro with research lead Shawn Hickman – Click here
  • Gold was up ~$US6 to ~US$1741 at our close.
  • Asian stocks were okay Hong Kong down -0.17%, Japan +0.18% while China was up +0.23%
  • US Futures are all marginally weaker.

ASX 200 Chart

Audinate (AD8) $9.10

AD8 +9.64%: audio-visual technology business surprised the market with a strong earnings pre-release today. Revenue is now expected to come in around $US33.4m when they report next month, over 10% higher than the guidance provided in June, up 33.4% for the year. EBITDA is also expected to grow ~30% to between $US3.8-4.3m, well above expectations around $US1.2m. The company said a significant improvement in the semi-conductor market late in the year contributed to the improved numbers, giving them a strong launchpad for FY23 and beyond. Audinate is the market leader in the space.

Kogan.com (KGN) $4.70

KGN +50.16%: shares in eCommerce business Kogan.com surged to 3-month highs today on the back of better-than-expected performance in the business. Sales for FY22 are expected to come in marginally above the prior year, beating out expectations of a fall from the COVID-supported growth of FY21. While sales are up, EBTIDA is expected to fall to $19.1m, which is still a small beat to consensus. Impressively they have managed to reduce inventory levels from $228m down to $161m, which includes $22m already in transit. Warehousing costs had been an issue for Kogan with inventories blowing out requiring expensive overflow capacity. Importantly it appears stock has been moved without the need for significant discounting.

Broker Moves

  • Mader Group Raised to Buy at Bell Potter; PT A$3.35
  • News Corp GDRs Cut to Neutral at Macquarie; PT A$32
  • Sonic Healthcare Cut to Underperform at Macquarie; PT A$32
  • HT&E Raised to Outperform at Macquarie; PT A$1.40
  • Mincor Cut to Hold at Bell Potter; PT A$2.10
  • IDP Education Rated New Overweight at JPMorgan; PT A$30.50
  • Capricorn Metals Cut to Hold at Canaccord; PT A$3.90
  • Healius Cut to Neutral at JPMorgan; PT A$4

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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