The Match Out: The ASX opens the week on the front foot, Retailers bounce back

James Gerrish

Market Matters

A positive session for local stocks to kick off the week with a muted start before the market pushed higher into the afternoon session – a bounce back in the retailers after a period of weakness led the market today while Energy was again supportive.

  • The S&P/ASX 200 added +23 points / +0.32% to close at 7417.
  • Consumer Discretionary stocks (+2.19%) led the line, Energy (+1.39%) also strong while Materials (-0.96%) gave back some recent gains.
  • Interesting to see the commodity stocks struggle today despite China unexpectedly cutting interest rates on some loans, plus we also had a raft of Chinese economic data out today headlined by GDP which printed above expectations.
  • Morgan Stanley released an interesting/comprehensive note today on local manufacturing stocks, in essence concluding that making things locally will be supported by recent supply chains issues.
  • They sighted Incitec Pivot (ASX:IPL) and Orica (ASX:ORI) as “chemicals winners”, among building materials stocks. Companies and products that compete against imports should benefit, along with names that compete against products with more challenging supply chain such as Adbri (ASX:ABC) and Boral (ASX:BLD) – while they downgraded CSR (ASX:CSR) which is a stock we own.
  • In transport, they described Qantas as “the classic reopening trade” that should reflect virus disruptions and a return to normal while in domestic packaging they like Amcor (ASX:AMC) and Orora (ASX:ORA) which offer defensive qualities and attractive yield.
  • They went on to upgrade a bunch of them (outlined below) while Adbri also benefitted from Alcoa extending a lime supply agreement.
  • It was a relevant report given our comments in this morning’s Market Matters 2022 Outlook piece around a likely transition into more defensive style stocks with the paring back of outright growth bets as the year progresses.
  • A few other things catching the eye today included JB Hi-Fi (ASX:JBH) +3.37% bouncing from the bottom of its range, a big divi due end of next month, Coal prices moving higher supporting Whitehaven Coal (ASX:WHC) +4.29%, Virgin Money (ASX:VUK) which is the stock that typifies the ‘value trade’ hitting a $3.80 high this AM having been sub $3.00 mid-December.
  • We also saw a positive update from Mineral Sands hopeful Strandline (ASX:STA) +12.96% today which sits in the Emerging Companies Portfolio while the most recent addition to that portfolio, namely Whisper (ASX:WSP) +5.56%, rallied again as the market wakes up to the building momentum in their business.
  • All in all, a positive day both in relative and absolute returns for the MM Portfolio’s.
  • Iron Ore was down -2% in Asia which didn’t help the miners, Fortescue (ASX:FMG) -2.81%
  • Gold was flat at US$1819 at our close.
  • Asian markets were mixed, Japan +0.5%, Hong Kong -0.85% & China +0.82%.
  • US Futures are pricing a weaker open down between -0.13% (Dow) and -0.40% (Nasdaq).

ASX 200 Chart

Broker moves

  • CSR Cut to Equal-Weight at Morgan Stanley; PT A$6.60
  • Boral Raised to Equal-Weight at Morgan Stanley; PT A$6.10
  • Adbri Raised to Overweight at Morgan Stanley; PT A$3.30
  • Allkem Raised to Outperform at Credit Suisse; PT A$13.20
  • Pilbara Minerals Raised to Neutral at Credit Suisse; PT A$3.95
  • Cleanaway Raised to Overweight at Morgan Stanley; PT A$3.30
  • JB Hi-Fi Raised to Add at Morgans Financial Limited; PT A$54
  • Santos Raised to Positive at Evans & Partners Pty Ltd; PT A$7.90

Major movers today

Enjoy your 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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