Afternoon Report / The ASX suffers it’s fourth biggest fall of 2018

By Market Matters 10 December 18

The ASX suffers it’s fourth biggest fall of 2018

Market Matters Afternoon Report 10th December 2018

WHAT MATTERED TODAY

The market opened reasonably well this morning considering the soft  leads overseas plus net negative news flow out over the weekend – a drop of 40pts early felt optimistic and that proved correct as stocks were sold down hard throughout the day, led lower by weakness across Asia along with US Futures which opened lower and stayed that way through our time zone.  Banks have been relative ‘outperformers’ in recent times however today they copped one on the chin, the big four accounting for 37points of the ASX 200’s decline – ANZ the worst down -4.16% while NAB was the best of a bad bunch down ‘just’ 2.54%. CSL was also weak down ~4% and that took another 11points from the index.  There were very few places to hide today with Golds the only obvious exception, Regis Resources (ASX: RRL) the standout adding +5.21% while Newcrest (ASX:NCM) put on +1.57%.

From a portfolio positioning perspective, we’re now fully invested in the Platinum Portfolio taking that more aggressive stance into the October weakness, however clearly that view seems to be premature.  Keeping with our mantra to ‘remain open minded’ we now must stand back and question whether or not the 2018 trends around seasonality, which have proven elusive this year will stay true to recent form and the Christmas rally with fail to eventuate. Today we felt more like being on the sell side than the buy side and looking at the grind lower throughout the day, we weren’t alone.  We’ll re-visit our thinking around portfolio positioning in the AM report tomorrow.

Overall, the ASX 200 closed down -129 points or -2.27% to 5552. Dow Futures are currently trading down -194 points or -0.79%

ASX 200 Chart

ASX 200 Chart

CATCHING OUR EYE;

Broker Moves;  Brokers moved on the embattled IOOF (ASX: IFL) today – according to the analysts neither of the O’s in the name stands for Opportunity… yet. The analysts took the cautious route, with a number of downgrades factoring the risk of the ANZ deal falling over among other potential issues. Today it was announced both the Chairman and the CEO would be stepping down immediately as a result of APRA’s pursuit of the executive team announced on Friday, although the company plans to fight the allegations. The stock took another tumble today, falling -6.96% to $4.28, taking the losses in 2018 to -60%.

IOOF Holdings (ASX: IFL) Chart

ELSEWHERE:

  • IOOF Holdings Downgraded to Neutral at Citi; PT A$4.50
  • IOOF Holdings Downgraded to Neutral at Macquarie; PT A$5.10
  • IOOF Holdings Cut to Equal-weight at Morgan Stanley; PT A$5
  • IOOF Holdings Downgraded to Neutral at Credit Suisse; PT A$4.60
  • Meridian Energy Cut to Underperform at Forsyth Barr; PT NZ$3.09
  • Mercury NZ Downgraded to Neutral at Forsyth Barr; PT NZ$3.56
  • AMP Upgraded to Buy at Morningstar
  • Charter Hall Downgraded to Sell at Morningstar
  • Newcrest Reinstated at BMO With Market Perform; PT A$23
  • Event Hospitality Rated New Overweight at JPMorgan; PT A$15.41

Telcos; The teclos were mixed today following the 5G spectrum auction which was held over the weekend. Much has been made of the new network availability that will see mobile speeds rival that of the NBN. The auction saw Telstra (ASX: TLS) buy the most of any competitor, spending $386m across 143 of the 350 available ‘lots.’ Somewhat of a surprise was Vodafone & TPG (ASX: TPM) teaming up to buy 131 lots ahead of the merger, spending a total of $263m. This highlights the desire of the combined group to become a major player in the Australian telecommunications market, gaining almost 3x the amount of spectrum to rival Optus. Still though, Telstra remains the top telco in the country, and the new 5G network will give it yet another chance to stay at the helm. We own Telstra in the Platinum Portfolio – it fell -1.3% today to $3.04.

Telstra (ASX: TLS) 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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