The Match Out: ASX rallies hard, tech leads

James Gerrish

Market Matters

A very solid session for Australian stocks with a buoyant open built on throughout the day as Asian markets + US Futures rallied on growing optimism towards the current pickle in the UK. Risk was back on the table led by strong buying amongst the IT stocks along with Real-Estate, the only segment of the market that fell was Energy as some money rotated into the more beaten-up areas.

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  • The ASX 200 finished up +114pts/ +1.72% at 6779
  • The IT sector was best on ground (+4.19%) while Property (+3.21%) & Communications (+2.26%) were also strong.
  • Energy (-0.60%) the only sector to finish lower – some profit taking obvious amongst the coal stocks
  • The British Pound extended gains after the Financial Times reported that the Bank of England is set to further delay quantitative tightening till the gilt market calms.
  • Certainly a day to have portfolios skewed towards Tech and we continue to think this trade has upside from currently depressed levels – investors are underweight stocks (particularly tech) which opens the door for sharp bear market rallies.
  • Megaport (MP1) +8.02% is the high beta way to play it, while Xero (XRO) +5.89% is a stock that has been under significant pressure + they report next month (10th November).
  • HUB 24 (ASX: HUB) +14.18% topped the board today on a very strong quarterly update – we own HUB, it’s our favoured pick in the platform space and today they showed why with sector-leading flows. We will cover HUB in further detail tomorrow morning in our Portfolio Positioning Report.
  • Treasury Wines (ASX: TWE) +2.05% reconfirmed guidance at that AGM today.
  • Pilbara Minerals (ASX: PLS) +0.21% Released results from their latest lithium auction held via the Battery Metals Exchange (ASX: BMX), and while the latest price was up on the last, it was only by a small 2% margin.
  • St Barbara (ASX: SBM) -21.64% delivered a very poor quarterly with production down and costs up – the only reason to hold SBM is for corporate appeal it seems…
  • Westpac (ASX: WBC) +2.35% confirmed it is in talks to buy payments business Tyro Payments (TYR).
  • Brambles (ASX: BXB) +0.26% said its guidance for financial 2023 of sales growth at 7-10% and underlying profit growth at 8-11% is still on track
  • Stocks we own in the International Equities Portfolio that report this week include Blackstone (BSX US), Freeport McMoran (FCX US) & HCA Healthcare (HCA US)
  • Iron Ore was ~1% lower in Asia today
  • Gold was up overnight to ~US$1650 before edging another US$6 higher in Asian trade today, settled $US1657 at our close.
  • Asian stocks were all up, Hong Kong added +1.21%, Japan +1.65% while China was up +0.10%
  • US Futures are all higher, around +1.5%

ASX 200 Chart

Treasury Wines (TWE) $12.96

TWE +2.05%: Held their AGM today + also gave a 1Q23 trading update that was in line with company expectations, saying demand has been consistent in Premium / Luxe segments. They reiterated FY22 guidance for top-line growth and high single-digit average earnings growth over the long-term. They said that costs were expected to remain in line with FY22 although they talked to a likely improvement from FY24 onwards – i.e. not a short term influence. They also went on to highlight their expectations for solid growth and EBITS margin expansion towards the 25%+ Group target in FY23. All in all, a good update and while this is a stock we don’t own, we like the cut of their jib!

Pilbara (PLS) $4.80

PLS +0.21%: Released results from their latest lithium auction held via the Battery Metals Exchange (BMX), and while the latest price was up on the last, it was only by a small 2% margin. More interestingly however is that the bid was made and accepted pre-auction, much like the majority of properties at the moment! Pre-auction sales invariably mean either (i) An outstanding/must take price or (ii) worried about how the actual auction might pan out – while it is not clear in this case plus it’s worth noting that this is the 2nd time that PLS has accepted a pre-auction outcome which in each case was a skinny change on the prior period, our inclination is that demand is slowing and prices may as well. We also understand that a leading lithium industry consultant is foreshadowing (another) lithium price crash precipitated by a global economic recession in CY23 and near-term supply exceeding recessionary demand (short term thesis only).

Broker Moves

  • Whitehaven Cut to Hold at Bell Potter; PT A$10.20
  • Beach Energy Raised to Buy at Citi; PT A$2.10
  • Integral Diagnostics Rated New Buy at Canaccord; PT A$3
  • Capitol Health Rated New Buy at Canaccord
  • Bank of Queensland Cut to Equal-Weight at Morgan Stanley
  • HomeCo Daily Cut to Equal-Weight at Morgan Stanley; PT A$1.35
  • Bendigo & Adelaide Raised to Overweight at Morgan Stanley
  • SCA Property Raised to Overweight at Morgan Stanley; PT A$3
  • Centuria Office REIT Cut to Underweight at Morgan Stanley
  • Charter Hall Retail Raised to Equal-Weight at Morgan Stanley
  • Costa Raised to Buy at CLSA; PT A$2.70

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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