The market bounce from recent lows has been fairly impressive, with the ASX 200 adding +260 points. This large rebound from the lows of 10th February of 4,730 points, saw the ASX 200 finish at 4,992 (+5.5%) yesterday. The turnaround in oil, commodity stocks and the reengagement of the yield trade in banks has driven this in the short term. Yesterday’s negative unemployment data moving back up is probably just the start of the trend that will extend through this year, This means the RBA will likely use further rate cuts this year. With Bank stocks like ANZ & NAB trading on single PEs and grossed up yields of over 7-8%, this data saw the yield trade (buy banks) reengage, driving the index higher. Our short term index valuation zone remains firm at 4,750 points bottom end, and ~5,150 points the higher end. At the stock level Magellan reported well yesterday. Magellan just keeps on doing what they set out to achieve, which has now seen the company deliver 44% growth in funds under management in 12 months. MFG has also grown earnings per share by 41%, and remains a growth portfolio accumulate below $21.00. ASX Limited also delivered a strong result recently, with an increase of 8% over the prior period, to $376m (vs averaging just 3% a year for the past five years), it was particularly pleasing to see the top line moving. However what we found very interesting about the interim was the forward looking statement of this company. Funke Kupper spent much of the presentation explaining the company’s decision to invest in a trial of distributed ledger ( ‘block chain’) technology, and how that could collapse the value chain ‘as we move to real-time settlements’, and obviate the need for clearing, which is only necessary to cover the period of risk between trade and settlement. The plan is to effectively build a beta version of the product so the company can take a view on it when it decides on a replacement for CHESS. This could have major ramification for many of the existing industry players in stock clearing administration, registry management and the wealth industry itself, we will be watching this very carefully. Remember it wasn’t that long ago people were trying to work out if Uber could affect Cabcharge….the rest is history. Today we have moved Wesfarmers into reduce on valuations grounds above $43.00, we are suggesting a reduction of around 25%. Australian Market- Buying the dips continues to work. |
