Afternoon Report / Resources lead ASX down the chute (SUL, BHP)

By Market Matters 26 November 18

Resources lead ASX down the chute (SUL, BHP)

Market Matters Afternoon Report 26th November 2018

WHAT MATTERED TODAY

A choppy session for Aussie stocks today , the banks again doing their best to support the index however it wasn’t enough to offset the big sell off amongst the resource names - Iron Ore traded limit down during the Asian session. Iron Ore stocks the worst hit – RIO down 3.56% at $74.05, Fortescue (FMG) fell nearly 4% to $3.85 while BHP ended the session down 3.55% at $30.43 and now looks odds on to trade down below our $30 price target. 

Clearly, resource stocks are momentum plays and as momentum has come out of global growth expectations resources (as a proxy for growth) have been steamrolled. Interesting to look around Asia today with the emerging markets actually doing well. If we see continued divergence between emerging markets and our resource stocks, we’ll likely sell our Emerging Markets ETF to fund buying into the resource names…BHP ~$29.50 would look interesting…

Overall, the ASX 200 closed down -44 points or -0.78% to 5671. Dow Futures are currently up  +120 points or +0.49%.

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Broker Moves;  Super Retail Group (SUL) saw some love today after a UBS upgrade – the bank calling it a BUY with a $8.65 price target versus todays $7.52 close…$9.16 is the average 12 month PT on the stock.

ELSEWHERE

·         Accent Group Upgraded to Add at Morgans Financial; PT A$1.46

·         Bluescope Upgraded to Neutral at Citi; PT A$14

·         Bapcor Upgraded to Buy at UBS; PT A$7.05

·         Breville Downgraded to Sell at UBS; PT A$11.20

·         Premier Investments Upgraded to Buy at UBS; PT A$19.80

·         Woolworths Group Upgraded to Buy at UBS; PT A$31.25

·         Super Retail Upgraded to Buy at UBS; PT A$8.65

·         Myer Downgraded to Sell at UBS; PT A$0.38

·         Ainsworth Game Cut to Underperform at Macquarie; PT A$0.75

·         Vocus Upgraded to Hold at Morningstar

·         Cochlear Downgraded to Hold at Morningstar

·         Janus Henderson GDRs Cut to Equal-weight at Morgan Stanley

Commodities; As touched on above, commodities were hit hard today with BHP now trading down ~14% from its recent highs…We’re looking at BHP as a BUY around $29.50 – the chart highlights how out of favour the commodity trade is at the moment.

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.

Disclaimer

All figures contained from sources believed to be accurate.  Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy.  Prices as at 26/11/2018

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