The Match Out: Stocks rally into the weekend, iron ore bounces, EML Payments hurt (again) by the Irish regulator

James Gerrish

Market Matters

It was a positive end to the week for Aussie shares, supported by the US agreeing to extend the debt ceiling and China coming back online after a week-long holiday, which has seen equities actually moving higher despite the barrage of negative rhetoric that’s been dribbling out of the Middle Kingdom lately. The Shanghai market gained around 1% while Iron Ore rallied around 5%. Other commodities also did well, the bulk miners in Australia enjoying the change of trend.

  • The ASX 200 added +63 points /+0.87% to 7,320 today

  • Materials were strong (+1.77%) today thanks to the rally in Iron Ore prices with RIO +4% the standout while BHP Group (ASX: BHP) put on around 3% and Fortescue (ASX: FMG) up 2.4%, although all sectors finished higher with 72% of the ASX200 up on the day

  • EML Payments (ASX: EML) fell 14.59% after getting an update from Irish regulators – this is a stock we own, as covered off by Harry below

  • Some of the IT names continued to bounce, a few having caught my eye including HUB 24 (ASX: HUB), which gained 6% after a very tough week for the platform provider.

  • Magellan (ASX: MFG) rallied around 5%, the fund manager very oversold and if you believe in Hamish Douglass, surely it’s a buy here? I was reading the monthly performance update from L1 Capital today, which has had a phenomenal period and another great month in September, but it has also been through tough times. This reminded me that backing a good manager after a tough period often bears fruit, although don’t expected MFG to do an LSF because they’re very different portfolios – but the lesson stands.

  • Gold continues to hang around US$1,760

  • Asian markets were mostly higher today – China +0.90%, Hong Kong -0.30% and Japan +1.75%
  • US Futures are trading flat ahead of employment data tonight

ASX 200 chart

EML Payments (ASX: EML) $3.16

EML -14.59%: The card and payments company struggled today after the Central Bank of Ireland responded to their remediation and growth plans. Issues with the PFS Card Services business came to light earlier in the year, a business EML only acquired back in late 2019. 

Following the CBI concerns, EML presented a remediation and business proposal to CBI, which has now raised concerns with the extent of the remediation and the company's push to continue growing in the face of further regulation. EML has managed to save a few pennies on the way – around $100 million in payments related to the performance of PFS after the purchase. The market cap of EML has almost halved since the initial announcement, with the impact looking to add up to less than 20% of revenue for the business, we think the sell-off is overdone.

MM remains long EML


Sectors this week (Source: Bloomberg)

Stocks this week (Source: Bloomberg)

Broker moves

  • Rated New Underweight at Jarden Securities

  • EML Payments Cut to Sector Perform at RBC; PT A$3.90

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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