A very choppy day, particularly in early trade by the ASX with the market sold on open only to rally +35points in short order before dropping the (exact) same amount with the futures hitting a low of 5777 twice. A gradual grind higher followed with the market eventually finishing down -13pts at 5815 – the banks on the nose again offset by strength in the retailers, energy and material stocks. Calls from Donald Trump on military action against Syria said to be the catalyst of the overnight weakness which hit our market today – however on the desk this morning, it seemed like an overseas selling reducing exposure to Australia with the FUTURES market very much leading stocks.
A bit of a sad day really and a poor representation of the times, however below is the list of Tweets from Trump in the last 24 hours – I \now have a screen on my Bloomberg that tracks his account – the phrase ‘give yourself an upper cut’ comes to mind however its market moving stuff – so best to know rather than not!!
Trumps Tweets - last day or so
ASX 200 Chart
ASX 200 Chart
CATCHING OUR EYE
Broker Moves; We were including this sporadically in the past however the feedback has been good here so I’ll continue to include broker moves. While we’re often on the other side of the crowd, we see the value in tracking what the crowd is doing and broker moves are important considering – so, we’ll continue to add to the afternoon reports …
* South32 Upgraded to Hold at Morgans Financial; PT A$3.72 - Stock up 1.76% to $3.46
* Origin Energy Upgraded to Buy at Citi; PT A$10.06 – Stock up 1.47% to $8.99
* AGL Energy Upgraded to Neutral at Citi; PT A$21.28 – Stock down -0.19% to $20.92
* AMP Upgraded to Buy at Morningstar – stock up 1.69% to $4.80
* BT Investment Upgraded to Buy at Morningstar – Stocks down -1.57% $9.41
* Rio Tinto Upgraded to Add at Morgans Financial; PT A$81.51 – Stock up 0.26% to $76.70
* Rio Tinto Downgraded to Sell at Morningstar - Stock up 0.26% to $76.70
* Rio Tinto Upgraded to Buy at CLSA – Stock up 0.26% to $76.70
* Sims Metal Upgraded to Overweight at JPMorgan; PT A$17.20 – stock up 1.02% to $14.80
BlueSky (BLA) $5.37 / +1.13% ; A very interesting interview from Alan Kohler with the CEO of BLA today which is getting some airtime –and putting more pressure on the CEO and the business model generally. Now we see comparisons being made to Babcock and Brown which is never good however that’s probably a sign that the vortex of most pain is close. The alternative asset manager performed reasonably well today and is now up +20% from the intra-day low last week however seemingly well short of what the stock should have produced given the short cover that’s started to occur.
At the time of the initial Glaucus attack about 5% of the shares on issue were shorted, this had fallen to 3.3% (or 2.6Mil shares) at the latest update 3 days ago. To put this in context, that average daily volume of the company is around 400,000 shares (much more recently), and shorts had covered 3 times this amount in under a week. This suggests that although there is a large amount of stock to be bought back, natural selling continues and I dare say that the short view hasn’t fully played out yet - the question being whether or not the sellers will outlast the buyers here. This is fast becoming a big media story and the negativity is rife – Kohler posing the Q today of whether or not BLA can survive the shorts? The simple answer, yes, we think they will and the short covering in the last few days has highlighted that. Although we have no interest in the stock, remember that negativity is at its extreme at the bottom.
I would think the short term bounce we’ve seen play out in recent days, will be met with another wave of selling before an eventual low is formed – the stock will then likely chop around in the doldrums for months / if not years.
Shorts on BLA
BlueSky (BLA) Chart
Market Matters Video Update; I spoke with Harry Watt about our market views. Click here to see today’s video.
Have a great night
Harry and the Market Matters Team
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
James is a Portfolio Manager within Shaw and Partners heading up a team that manages direct equity and option portfolios. He is also the Primary Contributor to Market Matters, a daily investment report that offers real market insight.