The Match Out: Market lower, commodities fall while bargain hunters target property stocks

James Gerrish

Market Matters

A fairly quiet Monday given US markets are closed tonight although selling was the more obvious impulse overall. Iron Ore fell hard in Asia, down 9.5% as Shenzhen put in place some sporadic lockdowns due to COVID while wider growth fears permeated into the energy and resources complex with some big pullbacks right across the sector.

  • The ASX 200 finished down -41pts/ -0.64% at 6443
  • The REITs sector was best on ground (+3.50%) while Consumer Discretionary (+2.77%) & Healthcare (+2.42%) were also strong.
  • Energy (-5.19%) and Materials (-4.63%) are the weakest links.
  • Iron stocks hit hard today, Fortescue (FMG) -8.6% to close at $17 – we’ve flagged the potential for growth fears to spill over into the resilient commodities sector and that certainly played out today. BHP -5.32% took a whopping -34 points off the index today showing just how influential it now is – the market was only down 41!
  • Property stocks rallied today, one catalyst being a better update from Vicinity Centres (VCX) +6.32% with the mall operator talking up operational performance & property revaluations.
  • The property sector is very cheap – it is where contrarians with a medium-term horizon should be looking and it will bounce if we get signs that inflation (and thus rates) are under control.
  • Technology stocks also did well today, as we suggested this morning we think that tech stocks will play some performance catch-up against the recently hot energy sector - the elastic band has clearly been stretched through 2022 but if / when tech can find some bargain hunters we believe some meaningful reversion will unfold.
  • While traditional energy took a hit, so too did the peripherals, Paladin (PDN) -13% while Whitehaven Coal (WHC) -9.20% looks like it has finally rolled over and due a pullback.
  • PointsBet (PBH) +18.6% rallied hard after Susquehanna bought a $94m stake at $2.43/share, a 13% premium to Friday’s close.
  • Bega (BGA) -8.05% hit new 52-week lows on a UBS downgrade. This was one they really liked however higher milk prices are hurting.
  • Gold was flat in Asia trading around ~US$1843
  • Asian stocks were treading water - Hong Kong was up +0.26% while China was flat
  • US Futures are all up, S&P +0.50% while Nasdaq Futures +0.70% - no trade in the cash markets tonight 

ASX 200

PointsBet (PBH) $2.55

PBH +18.6%: global arbitrage, market maker and prop trading powerhouse Susquehanna has become the largest shareholder after taking a placement in PointsBet. The $94 million stake was placed at $2.43/share (13% premium to Friday’s close) through their subsidiary SIG Sports Investments. The deal will also see SIG affiliate Nelle Analytics provide services to PointsBet Europe to enhance their available data, allowing PointsBet to offer more markets and better odds. Alongside the deal, shareholders will receive a Deferred Bonus Equity Options (DBEO) for every 20.2 shares held that will allow them to purchase $10 worth of PBH shares at a 20% discount to the market price come 8 July 2024 or upon the company’s decision to call them.

Vicinity Centres (VCX) $1.85

VCX +6.32%: the shopping centre owner popped today on the back of strong valuations and better guidance. The book value on their assets was increased by $245m ahead of the end of the financial year, largely on the back of tighter cap rates which fell to 5.31%, from 5.35% with 56% of their assets independently valued. Funds from operations (FFO) guidance was also increased to at or above the top end of the previous 11.8-12.6c/share guidance that was reaffirmed last month, though distribution guidance was amended to the lower end of the 95-100% range. The update said that foot traffic had continued to improve and collections had followed as a result, with rental collections up to 91%.

Broker Moves

  • Generation Development Rated New Buy at Shaw and Partners; PT A$1.80
  • Carnarvon Energy Ltd Raised to Outperform at Macquarie

Major Movers Today

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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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