Australia | Dec 05 2012
By Max Ludowici, Equities & Derivatives Advisor, 708 Capital
The scoreboard:
– The ASX200 closed up 17 points or 0.37% to 4520
– The AUD was flat during the session after gaining 0.5% overnight. Currently reading 1.0478 vs the USD
– Total volume for the day was $3.5B
Shares on the ASX were mostly higher after a quiet night offshore. Widespread gains on Asian markets during the session helped move our market higher after weak domestic data failed to lead stocks.
Australia’s Q3 GDP growth figure released early in the session was the main data point for the day. Australia’s economy grew at just 0.5% for the quarter, well below the consensus of forecast for an increase of 0.7% and the slowest rate since the QLD floods, and outside of that, since the GFC. The softer figure can be mostly attributed to lower household consumption which increased just 0.3% q/q which suggests consumers remain cautious and are not responding to the lower rate environment.
The market took badly to the news, trading lower by 10 points before finding support on the back of strength of other Asian indexes.
We are struggling to work out why, but the Shanghai index surged more than 3% intraday. The Chinese index had been seriously underperforming the rest of the globe but the move today injected a lot of confidence into other Asian indexes. Hong Kong’s Hang Seng was up a solid 1.3%.
The yield plays continued to march higher following yesterday’s interest rate cut as investors try to look for some return on their money. The big 4 banks all looked better with Commonwealth ((CBA)) and ANZ Bank ((ANZ)) the standouts, up 0.96% and 0.73% respectively. Another cause for strength in the banking sector may be a quarterly report by the FDIC (Federal Deposit Insurance Corporation – a US government agency monitoring the financial sector) out last night which showed the US banking industry’s third-quarter earnings were the highest for any quarter since 2006, up 6.6% y/y. Banks in the US are in a stronger position thanks to a recovering housing sector and as regular readers will know, I believe a recovery in housing always leads a broader economic recovery.
QBE ((QBE)) took a pounding today following market speculation that a capital raising may be in the wings. QBE’s gearing is well above their average and lower interest rates domestically will likely mean less return on their ‘float’ (large swag of funds held (premiums) to payout claims as necessary). QBE closed the day down a shocking 4.72% or 50 cents to $10.10
A large ‘crossing’ (change in beneficial owner) of stock in Seven West Media ((SWM)) changed hands today worth approximately $20m. This line of stock represents around 1.2% of the issued capital in SWM and changed hands at $1.66, 4.5c above yesterday’s closing price of $1.61. SWM closed up 1 cent to $162.5
It is worth noting how much of the 25 point cut the banks have passed down to customers:
ING – 25 points
BOQ – 20 points
NAB – 20 points
CBA – 20 points
DOW futures are pointing to a strong opening, currently up 40 points
(For a more comprehensive summary of last night’s market action see FNArena’s Overnight Report.)
This article produced at the request of and is published by FNArena with the expressed permission of 708 Capital.
708 Capital is a full service stockbroking and investment advisory firm. 708 offers investment and market advice to high-net-worth Private and Institutional clients in Australia and across the globe. 708's extensive network of contacts gives its clients exclusive access to ground-level fundraising opportunities and new company listings in a variety of small and large cap ASX listed companies. 708 has a longstanding track record of generating exceptional returns for its clients. Click here 708capital.com.au/contact-us/ for a no costconsultation and portfolioreview or to learn more visit www.708capital.com.au. Note: 708 Capital offers wealth management services for Sophisticated and Wholesale Investors only. We can only assist investors who are classified as Sophisticated Investors or have verified assets over AUD$2.5m.
708capital is a holder of AFSL. No. 386279
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