The Match Out: Market gives Budget thumbs up, What stocks will benefit from the cash splash?

James Gerrish

Market Matters

It was a positive session for the market today as we approach the end of the month and quarter – a period that’s been extremely volatile with a raft of reasons for the market to be down. But instead, the rally continues for a seventh straight session. Today it was IT stocks that led the line, bouncing nearly 4%, while Energy fell away on news of de-escalation between Russia and Ukraine. The news cycle has been dominated by the Federal Budget, which has been reasonably well-received, some specific stock beneficiaries are discussed in our Weekly Market Matters Video Update below.

  • The ASX 200 finished up +50pts/ +0.67% at 7514.
  • The IT sector was best on the ground (+3.84%) while Healthcare (+1.36%) & Industrials (+1.32%) were also strong.
  • Energy (-0.84%) and Materials (-0.29%) the weakest links.
  • The Federal Budget released overnight continued a recent trend of very large fiscal stimulus aimed at alleviating some of the cost of living pressures that have recently begun to weigh on consumer sentiment.
  • Cost of living tax offset benefits retailers exposed to low-income groups, stocks that would benefit here include Super Retail Group (SUL), City Chic (CCX), Adairs (ADH) and Collins Foods (CKF) which are all well-positioned to benefit from a less downbeat low-income consumer.
  • Fuel excise reductions are supportive of vehicle kilometres and automotive-related stocks such as Ampol (ALD), Bapcor (BAP), GUD Holdings (GUD), AMA Group (AMA), Eagers Automotive (APE), Autosports Group (ASG) and Viva Energy (VEA).
  • Infrastructure spending aims for industrial hubs in regional Australia and should benefit stocks such as Downer (DOW), Service Stream (SSM) and Seven Group Holdings (SVW).
  • Ultimately, it is earnings that matter most to equity markets, and this budget does not detract from the positive earnings momentum that we have seen from Aussie companies this year.
  • We discuss the stocks that could benefit from the budget in this week’s video update – Click Here.
  • Some big moves on the market today and with one day left in the quarter, it was nice to see strong outperformance across most of the MM Portfolios.
  • IT stocks front and centre here with big moves in Xero (XRO) +5.28% & Life 360 (360) +9.63% while at the smaller end of town Nitro (NTO) +12.77% and Whispir (WSP) +7.56% caught my eye.
  • Magellan (MFG) +8.53% was also strong for the second session in a row, some love going back into US tech certainly helping.
  • On the flip side, it seems the energy trade is now taking a break, Whitehaven Coal (WHC), a stock we like but recently sold fell-3.53% to $4.10, ditto for Coronado Resources (CRN) -4.57% while the Oils fell by less than 1%.
  • Telstra (TLS) -0.76% CEO Andy Penn is retiring, and chief financial officer Vicki Brady will succeed him in the top job from September 1.
  • The independent expert has given Blackstone’s bid for Crown (CWN) the green light, saying the offer was “fair and reasonable”, considering the “significant uncertainty” facing Crown and the possibility of Crown facing a multi-million dollar fine from Austrac for allegedly facilitating money laundering.
  • I had lunch today with Chamath De Silva from Betashares, previously from the RBA, talking about all things fixed income. He solidified some of our current thinking in the space and I look forward to sharing some of that with subscribers in later updates.
  • Iron Ore was around 1.7% higher in Asia today.
  • Gold was marginally higher today up +US$4 to ~US$1923.
  • Asian stocks were mostly higher with Hong Kong up +1.33%, Japan flat while China was up +1.62%
  • US Futures are flat.

ASX 200 chart

Weekly Video Update

In this week’s Market Matters Weekly Video update, James and Harry discuss stocks that should benefit from the Budget. Be sure to subscribe to the Market Matters YouTube Channel and ‘Like’ the video if you do – thanks!

Click here to view

Broker moves

  • Universal Biosensors GDRs Rated New Speculative Buy at Canaccord

  • Gold Road Cut to Hold at Bell Potter; PT A$1.70

  • Anglo American, BHP and Rio Tinto All Upgraded at Liberum (1)

  • Uniti Group Cut to Neutral at JPMorgan; PT A$5

  • Rio Tinto Raised to Hold at Liberum; PT 5,650 pence

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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