Afternoon Report / ASX bucks overseas weakness adding 1% (BHP)

By Market Matters 17 December 18

ASX bucks overseas weakness adding 1% (BHP)

Market Matters Afternoon Report 17th December 2018

WHAT MATTERED TODAY

With the US market down ~500pts on Friday night our market was set for a test early on today and once again we’ve seen strong buying from the ~5600 area on the ASX 200, today it was the resource stocks that did the heavy lifting while the banks were mixed, ANZ the worst of them thanks to news on Friday of increasing capital requirements in New Zealand  - more on that below. BHP was the biggest contributor on the upside today after they announced  the special dividend amount of $1.02 to be paid in January, while we also saw strong buying for TPG Telecom (ASX: TPM) following ACCC induced weakness last week, while both Vocus (ASX: VOC) & Telstra (ASX:TLS) also enjoyed a more positive mood in the sector today putting on 5.35% and 1.05% respectively.

Technically, the market still looks positive for the Christmas rally to commence at a time when a lot seem to be losing conviction. As we wrote this morning, markets are all about probabilities rather than certainties. Simple statistics tell us that in the last 30 December’s, 25 of those have  been positive while if we have a negative November, 27 out of the last 30 Decembers have been positive, implying a very good chance December should be positive. Experience tells me not to trade against such a strong seasonal trend, similar to our general caution towards the back end of May / April each year.

While local optimism in recent weeks has generally been dealt a blow from weakness overseas, it still seems like our market wants to move higher, we simply need some clear air internationally.

Overall today, the ASX 200 closed up +56 points or +1.00% to 5658. Dow Futures are currently trading up 87 points or +0.36%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Broker Moves; Bells have cooled on ANZ in the last day or so as the New Zealand Central bank proposes to increase the amount of capital required for banks operating in the country. As a consequence Bells is suggesting that ANZ may need NZ$5b capital to adjust to the increased Tier 1 capital requirement to 16% from the prev. 8.5%; NAB may need NZ$3.4b, CBA NZ$2.9b and Westpac ~NZ$2b ANZ is the most exposed bank to the change given it has a higher proportion of earnings from NZ.  

ANZ has been under pressure since the news broke on Friday afternoon – a little Christmas cheer from across the ditch for our already beaten up banking sector… We’ll look at the sector in more detail on Wednesday.

ANZ Bank (ASX:ANZ) Chart

 

ELSEWHERE:

·         Panoramic Resources Rated New Outperform at Macquarie; PT A$0.70

·         GWA Group Upgraded to Buy at Citi; PT A$3.69

·         Inghams Downgraded to Sell at Citi; PT A$3.85

·         ANZ Bank Downgraded to Hold at Bell Potter; PT A$26.80

·         Vocus Upgraded to Hold at Morningstar

·         Sonic Healthcare Downgraded to Hold at Morningstar

·         Australian Pharma Downgraded to Hold at Morningstar

·         oOh!media Upgraded to Buy at Morningstar

BHP Billiton (ASX:BHP) $33.53 / +3.49%:  BHP went from strength to strength today, rallying throughout the session after completing the off market buyback on Friday. The buyback was well oversubscribed at the deepest discount of 14%, with shares to be bought back at $27.64/share after a 58%  scale back is applied. Along with the buy-back announcement, BHP also announced a $US 1.02/share special dividend will be paid in January, however shares tendered will obviously not be eligible for the special dividend.

BHP (ASX:BHP) Chart

 

OUR CALLS

No changes today.

Have a great night

James, Harry & the Market Matters Team

Disclosure

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.

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