Interdum stultus opportuna loquitur...

Wednesday, March 02, 2005

OzRant: Rising Rates? No Problem! (Yet)...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

Another day where the high was made at or near the open, with the rest of the session spent trying to hold on to the first hour's gains. These are not sweet bodements. Sure, the All Ords finished the session with a gain, but the intraday action is nowhere near as salubrious as the headline indicates.

The behaviour of our market is developing some very American characteristics; it reminds me of 1999 and 2000, when stocks that were absolute investment flotsam would levitate. Back then, there was argument after argument as DavNet approached $2, where some folks insisted it was worthless... and DVT holders insisted I was a knucklehead. Ditto NCP at $20, CSL at $46, MST at over $1, and so on (even QAN at $3.58 wasn't too bad). At least NCP, CSL and MST actually have products and businesses - it's just the stock that was overpriced (and still is, for NCP and CSL).

I haven't bothered calculating the PE of the entire market lately (I'm lazy, and technicals work - so why bother?), but would be very surprised if it's under about 19x. Stocks valued that richly (in aggregate) require falling interest rates to have any chance of providing palatable long-term returns.

The major banks are trading above historical earnings and dividend multiples - despite the fact that they have loads of soon-to-be-toxic mortgagees on their balance sheets, belonging to overcommitted real estate speculators. And if you think "real estate speculators are concentrated in the apartment market - house prices won't be affected", you've read one too many handouts from the Real Estate Institute (which has the intellectual prowess of the Ponds Institute). Add to that the fact that banks are always the last on a bandwagon, and you have a recipe for balance-sheet disaster. Recall how sentiment towards NAB changed after its Homeside and "Rogue Trader" debacles? There's more to come for all the majors and half the minors.

The latest flag is the RBA's view of the requirement to tighten money. That will flow through to mortgage service requirements far more quickly than historical precedent suggests, because more of the loans being drawn are variable-rate (and home equity lines of credit can become floating rate as a result of a unilateral decision by the bank). Furthermore, the fact that home buying has remained buoyant in the face of the recent (modest) uptick in rates, is the "nuffie's last gasp" effect, whereby nuffnuffs think "If I don't buy now, I will have to pay higher interest rates"... not thinking that every other nuffnuff is thinking the same thing. The result? A nuffie stampede into the housing market - at precisely the wrong time.

Anyhow - as Brennus famously said ... "Vae Victus." Woe to the Vanquished. If nuffnuffs "invest" as if their discount rate is 1%, but you consume as if there's no tomorrow (i.e., have a high discount rate on deferred consumption), the market eventually gives them a lesson about time-consistent expectations... the hard way.

Major Market Indices

The broad market - the ASX All Ordinaries - rose by 7.90 points (0.19%), finishing at 4172.20 points. The index hit an intraday high of 4180.60 and its low was 4158.6.

The Index that forms the cash basis for the SFE's Share Price Index Futures - the S&P/ASX 200 - rose by 6.60 points (0.16%), finishing at 4191.50 points.

The "heavy hitters" of the Australian market - the ASX 20 Leaders - rose by 1.90 points (0.08%), finishing at 2264.60 points. Within the index members, there were 9 that rose, and 11 losers. Total volume in rising issues within the ASX20 amounted to 51.01 while volume in the losers totalled 43.3m units.

The major winners in the "big guns" were -

  • News Corporation (NWSLV), +$0.49 (2.36%) to $21.28 on volume of 2.64m shares;
  • News Corporation (NWS), +$0.48 (2.23%) to $21.98 on volume of 4.3m shares;
  • Foster's Group (FGL), +$0.11 (2.17%) to $5.18 on volume of 5.7m shares;
  • Telstra Corporation. (TLS), +$0.09 (1.69%) to $5.43 on volume of 19.43m shares; and
  • National Australia Bank (NAB), +$0.29 (0.99%) to $29.50 on volume of 5.54m shares.

The following stocks made up the biggest percentage losers in the big-guns:

  • Alumina (AWC), -$0.13 (2.16%) to $5.90 on volume of 5.13m shares;
  • Rio Tinto (RIO), -$0.76 (1.6%) to $46.81 on volume of 3.93m shares;
  • BHP Billiton (BHP), -$0.25 (1.3%) to $18.95 on volume of 17.15m shares;
  • Westpac Banking Corporation (WBC), -$0.15 (0.78%) to $19.07 on volume of 3.23m shares; and
  • St George Bank (SGB), -$0.19 (0.77%) to $24.48 on volume of 1.04m shares.

At the smaller end of the market's capitalisation scale, the ASX Small Ordinaries Index - the only place where underexploited value exists with any regularity - rose by 0.90 points (0.04%), finishing at 2375.30 points. The major winners in the "pop-guns" were -

  • Sydney Gas Ltd (SGL), +$0.06 (8.82%) to $0.74 on volume of 1.29m shares;
  • Just Group (JST), +$0.15 (5.64%) to $2.81 on volume of 1.73m shares;
  • Keycorp (KYC), +$0.09 (5.33%) to $1.78 on volume of 90,000 shares;
  • Chemeq (CMQ), +$0.06 (5.17%) to $1.22 on volume of 476,000 shares; and
  • Energy Developments (ENE), +$0.15 (3.96%) to $3.94 on volume of 293,000 shares.

The losingest-little-guys for the session were (in order of decline):

  • Housewares International (HWI), -$0.18 (8.11%) to $2.04 on volume of 226,000 shares;
  • Dragon Mining (DRA), -$0.02 (7.55%) to $0.25 on volume of 406,000 shares; and
  • Virotec International (VTI), -$0.05 (7.25%) to $0.64 on volume of 343,000 shares;
  • Multiemedia (MUL), -$0.00 (6.9%) to $0.03 on volume of 10.23m shares; and
  • Bendigo Mining (BDG), -$0.07 (6.36%) to $1.03 on volume of 965,000 shares.
CodeNameClose+/-%Volume
XAOAll Ordinaries4172.27.90.19%571.76m
XTLS&P/ASX 202264.61.90.08%94.31m
XFLS&P/ASX 504142.37.10.17%0
XTOS&P/ASX 1003408.95.60.16%0
XJOS&P/ASX 2004191.56.60.16%435.99m
XKOS&P/ASX 3004195.86.40.15%0
XMDS&P/ASX Mid-Cap 504036.24.90.12%0
XSOS&P/ASX Small Ordinaries2375.30.90.04%199.28m

All Ordinaries Market Internals

XAOXJOXSOASX20Market
Advances18993759807
Declines188837911773
Advancing Volume240.48m210.71m77.9m51.01592.32
Declining Volume245.14m178.42m96.68m43.3394.73

S&P/ASX200 GICS Sector Indices

The top sector for the day was the 2-stock wonder-sector (as in "I wonder why the hell they call it a sector) Telecommunications which gained 1.53% to 1925.40 points. Both stocks in the sector rose - but Telstra was the biggest contributor...

  • Telstra Corporation. (TLS), +$0.09 (1.69%) to $5.43 on volume of 19.43m shares;
  • Telecom Corporation Of New Zealand (TEL), +$0.04 (0.68%) to $5.94 on volume of 1.83m shares.

Second in the sector leadership stakes was Healthcare which gained 1.14% to 4885.30 points. The sector leaders were -

  • Chemeq (CMQ), +$0.06 (5.17%) to $1.22 on volume of 476,000 shares;
  • Peptech (PTD), +$0.06 (3.75%) to $1.66 on volume of 444,000 shares;
  • Ventracor (VCR), +$0.04 (3.74%) to $1.11 on volume of 1.82m shares;
  • CSL (CSL), +$1.19 (3.59%) to $34.30 on volume of 1.99m shares; and
  • Invocare (IVC), +$0.09 (2.43%) to $3.80 on volume of 337,000 shares.

The bronze today went to Consumer Discretionary which gained 1.11% to 2270.50 points. The sector was led by

  • Just Group (JST), +$0.15 (5.64%) to $2.81 on volume of 1.73m shares;
  • G.U.D. Holdings (GUD), +$0.26 (3.93%) to $6.88 on volume of 1.2m shares;
  • Village Roadshow (VRLPA), +$0.05 (2.56%) to $2.00 on volume of 49,000 shares;
  • Ten Network Holdings (TEN), +$0.09 (2.4%) to $3.84 on volume of 2.1m shares; and
  • News Corporation (NWSLV), +$0.49 (2.36%) to $21.28 on volume of 2.64m shares.

The worst-performed sector today was the fluff-laden Information Technology which lost 1.65% to 375.90 points. The sector was dragged lower by

  • Vision Systems (VSL), -$0.04 (3.57%) to $1.08 on volume of 990,000 shares;
  • Baycorp Advantage (BCA), -$0.06 (2.08%) to $2.82 on volume of 319,000 shares;
  • Computershare (CPU), -$0.09 (1.56%) to $5.67 on volume of 1.71m shares;
  • ERG (ERG), -$0.01 (1.37%) to $0.36 on volume of 17.98m shares; and
  • IRESS Market Technology (IRE), -$0.04 (0.94%) to $4.20 on volume of 387,000 shares.

Just in front of last place on the sector table was Materials which lost 0.84% to 7438.30 points. The sector was pulled down by

  • Jubilee Mines (JBM), -$0.14 (2.5%) to $5.45 on volume of 746,000 shares;
  • Alumina (AWC), -$0.13 (2.16%) to $5.90 on volume of 5.13m shares; and
  • Bluescope Steel (BSL), -$0.20 (2.05%) to $9.55 on volume of 3.24m shares;
  • Great Southern Plantations (GTP), -$0.09 (2%) to $4.40 on volume of 1.45m shares; and
  • Croesus Mining (CRS), -$0.01 (2%) to $0.49 on volume of 1.46m shares.
CodeGICS SectorClose+/-%Volume
XTJTelecommunications1925.429.11.53%21.25m
XHJHealthcare4885.3551.14%11.21m
XDJConsumer Discretionary2270.5251.11%44.89m
XSJConsumer Staples557439.40.71%43.34m
XPJProperty Trusts1794.312.60.71%114.02m
XUJUtilities4736.822.40.48%4.82m
XFJFinancials4915.9100.2%157.07m
XNJIndustrials5040.67.90.16%33.05m
XXJASX200 Financials ex Property Trusts4976.23.20.06%48.1m
XEJEnergy7706.7-57.3-0.74%19.77m
XMJMaterials7438.3-62.9-0.84%102.56m
XIJInformation Technology375.9-6.3-1.65%22.22m

All Ordinaries Volume Leaders

CodeNameClose+/-%Volume
CSECopper Strike0.370.1897.3%71.37m
AIEA.I.0.20.0211.43%22.1m
TLSTelstra Corporation.5.430.091.69%19.43m
ERGERG0.36-0.01-1.37%17.98m
BHPBHP Billiton18.95-0.25-1.3%17.15m
MCWMacquarie Countrywide Trust1.86-0.01-0.53%16.03m

All Ordinaries Top Gainers

CodeNameClose+/-%Volume
NVENovera Energy0.320.0516.67%330700
GDMGoldstream Mining0.530.0612.77%1.49m
DOMDominion Mining0.310.0412.73%652198
ABIAmbri0.110.0111.11%3.66m
SGLSydney Gas Ltd0.730.057.35%1.22m

All Ordinaries Top Losers

CodeNameClose+/-%Volume
UNIUnilife Medical Solutions0.72-0.08-10%304690
LOKLooksmart1.25-0.13-9.42%52850
SRISipa Resources0.11-0.01-8.33%1.28m
HWIHousewares International2.04-0.18-8.11%225538
DRADragon Mining0.25-0.02-7.55%406071

Elsewhere in the Region...

Japan's Nikkei 225 rose 19.18 points (0.16%) to close at 11799.71 points.

The Kiwi Market advanced a meagre 3.18 points (0.10%). A total of 23 stocks within the NZSE50 rose, with volume in advancers totalling 7.5million units. Decliners numbered 16, and total volume traded in losers was 5.6million shares. Individual stocks that performed well included...

  • Restaurant Brands (RBD), +$0.04 (3.08%) to $1.34 on volume of 24,000 shares;
  • Steel & Tube Holdings (STU), +$0.15 (2.78%) to $5.55 on volume of 25,000 shares;
  • Fisher & Paykel H (FPH), +$0.05 (1.61%) to $3.15 on volume of 305,000 shares;
  • Sky City Entertainment (SKC), +$0.07 (1.35%) to $5.27 on volume of 755,000 shares;
  • Feltex Carpets (FTX), +$0.02 (1.25%) to $1.62 on volume of 109,000 shares; and
  • Lion Nathan (LNN), +$0.10 (1.24%) to $8.15 on volume of 4,000 shares.

Hong Kong's Hang Seng index declined 64.20 points (-0.46%). Within the Hang Seng, 11 index components rose, while 17 stocks fell. Volume in the gainers in Hong Kong's big-cap index totalled 29.3million units, and total volume traded in losers was 96million shares. Individual stocks that contributed to the decline included...

  • CNOOC (0883), -$0.13 (2.75%) to $4.43 on volume of 17.36m shares;
  • Denway Motors (0203), -$0.05 (1.71%) to $2.88 on volume of 13.07m shares;
  • Yue Yuen Industries (0551), -$0.30 (1.32%) to $22.50 on volume of 1.38m shares;
  • HSBC Holdings (0005), -$1.50 (1.15%) to $129.00 on volume of 19.29m shares;
  • Citic Pacific (0267), -$0.25 (1.11%) to $22.25 on volume of 1.85m shares; and
  • PCCW (0008), -$0.05 (1.09%) to $4.55 on volume of 5.67m shares.
CountryNameClose+/-%Volume
New ZealandNZSE503199.2023.180.1%24.94m
JapanNikkei 22511799.7119.180.16%81168
KoreaKOSPI1003.6-7.76-0.77%643839
SingaporeStraits Times2135.8610.750.51%0
Hong KongHang Seng13996.95-64.2-0.46%143.37m
MalaysiaKLSE Comp895.35-3.14-0.35%0