Interdum stultus opportuna loquitur...

Wednesday, September 14, 2005

OzRant: H5N1 - the 'New SARS'...

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

Maybe we've somehow magically been transported through the Chappa'Ai to a world in which equities never take a backward step worth mentioning. (Why is it that names in sci-fi languages always include loads of apostrophes, elisions and odd consonant combinations - yet everyone speaks with an American accent?  Note - I know that last criticism is not true... just joshin').

Anyhow - the point stands. It appears that we've been teleported to a new and strange world where the words 'investment' and 'speculation' are interchangeable, and where the observable equity risk premium is being driven to zero by people who are not taking 'primary agent' risk. In other words, the folks driving the bus get paid whether they make or lose money - because the bus they are driving is paid for by other people's money. Sure, part of their remuneration varies with performance - whether or not they perform might affect whether they earn $2 mill a year or $4 mill, but frankly the difference is irrelevant.

Now think about that Equity Risk Premium (ERP)for a minute: if the ERP was genuinely zero, then the forward expected yield for equities should be equal to risk-free bond yields. The only genuinely risk-free asset is a fully hedged zero-coupon-equivalent short-term government bond; the net yield on such an instrument is currently less than 1 percent. 

Furthermore, if equities genuinely held zero risk relative to risk-free bonds, then it follows also that corporate bonds hold zero risk relative to risk-free bonds (since equity shares are subordinate to bonds in terms of 'call' over distributable funds).

So logically, stocks are priced to deliver single-digit returns (inclusive of dividends) over any investment horizon longer than 3 months. 

People are buying equities as if they expect them to yield a much higher rate of return - but the logic is inescapable; you don't have to be Rodney McKay to work it out.

Bear that in mind the next time you read a piece of brokerage research. 

But the main point is this: we are within a hair's breadth of the best shorting opportunity since mid-2000. Trying to time the entry will be a good challenge; within six days the Rant's colours will be nailed to the mast. (That is, within six days the definitive top will be in, preparatory to a 500-point All Ords decline).

Major Market Indices

The broad market - the ASX All Ordinaries (XAO) - rose by 17.30 points (0.39%), finishing at 4473.60 points. The index hit an intraday high of 4479.30 (4475-ish) at about 3:20 p.m., after dipping to 4447.5 (4450-ish) about a half-hour after the open.

Total volume traded on the ASX was 1.10 billion units, 11.9% above its 10-day average. Of the 483 stocks in the index, 202 rose while 157 fell - although I notice that market-wide breath favoured the losers. All Ords Volume was tilted in favour of the gainers by a margin of 2.3:1, with 393.93million shares traded in gainers while 170.86million shares traded in the day's losers.

The Index that forms the cash basis for the SFE's Share Price Index Futures - the S&P/ASX 200 (XJO) - rose by 23.20 points (0.52%), finishing at 4518.30 points and hitting an intraday high of 4525.6 (4525-ish). Even Woodside had a bounce... that's pretty funny, really - people always think that they can trade the 'last big idea'. Watch them get creamed.

The "heavy hitters" of the Australian market - the ASX 20 Leaders (XTL) - rose by 14.90 points (0.63%), finishing at 2391.80 points. Within the index members, there were 14 that rose, and 6 losers. Total volume in rising issues within the ASX20 amounted to 121.94 while volume in the losers totalled 22.29m units.

The major winners in the "big guns" were -

  • Wesfarmers (WES), +$0.620 (1.61%) to $39.230 on volume of 821,000 shares;
  • Westpac Banking Corporation (WBC), +$0.290 (1.43%) to $20.600 on volume of 5.74m shares;
  • St George Bank (SGB), +$0.370 (1.35%) to $27.780 on volume of 1.19m shares;
  • Woodside Petroleum (WPL), +$0.420 (1.33%) to $32.100 on volume of 1.92m shares; and
  • Australia And New Zealand Banking Group (ANZ), +$0.240 (1.06%) to $22.890 on volume of 6.58m shares.

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

  • News Corporation (NWSLV), -$0.24 (1.14%) to $20.85 on volume of 3.8m shares;
  • AMP Limited (AMP), -$0.06 (0.8%) to $7.44 on volume of 6.57m shares; and
  • Rio Tinto (RIO), -$0.32 (0.62%) to $51.59 on volume of 2.53m shares; and
  • News Corporation (NWS), -$0.13 (0.58%) to $22.22 on volume of 2.58m shares; and
  • Coles Myer Ltd (CML), -$0.04 (0.39%) to $10.15 on volume of 3.41m shares.

At the smaller end of the market's capitalisation scale, the ASX Small Ordinaries Index (XSO) - the only place where underexploited value exists with any regularity - fell by 3.40 points (-0.13%), finishing at 2597.30 points. The major winners in the "pop-guns" were -

  • Sydney Gas Ltd (SGL), +$0.050 (9.35%) to $0.585 on volume of 5.61m shares;
  • Keycorp (KYC), +$0.120 (7.45%) to $1.730 on volume of 258,000 shares; and
  • Just Group (JST), +$0.160 (7.44%) to $2.310 on volume of 2.63m shares; and
  • Oceana Gold (OGD), +$0.035 (6.09%) to $0.610 on volume of 3.93m shares; and
  • Tower (TWR), +$0.110 (5.42%) to $2.140 on volume of 2.34m shares.

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

  • Genetic Technologies (GTG), -$0.025 (5.56%) to $0.425 on volume of 510,000 shares;
  • Multiemedia (MUL), -$0.001 (5.26%) to $0.018 on volume of 8.71m shares; and
  • Mcguigan Simeon Wines (MGW), -$0.230 (5.26%) to $4.140 on volume of 685,000 shares; and
  • Australian Worldwide Exploration (AWE), -$0.110 (5.07%) to $2.060 on volume of 4.99m shares; and
  • Great Southern Plantations (GTP), -$0.140 (4.86%) to $2.740 on volume of 1.67m shares.
Index Changes
XAOAll Ordinaries4473.617.30.39%664.85m
XTLS&P/ASX 202391.814.90.63%144.22m
XFLS&P/ASX 504414.827.40.62%313.22m
XTOS&P/ASX 1003660.720.70.57%468.83m
XJOS&P/ASX 2004518.323.20.52%562.11m
XKOS&P/ASX 3004511.922.50.5%0
XMDS&P/ASX Mid-Cap 504524.611.80.26%0
XSOS&P/ASX Small Ordinaries2597.3-3.4-0.13%152.93m

All Ordinaries Market Internals

Market Breadth
Advancing Volume121.94m318.3m349.91m393.9365.25565.75
Declining Volume22.29m92.34m129.14m170.8655.45353.36

S&P/ASX200 GICS Sector Indices

The top sector for the day was XHJ Healthcare which gained 0.89% to 5874.60 points. The sector was helped by that odious little religious whackball Tony Abbott who was out talking up CSL last night on Lateline in the ludicrous scare campaign over H5N1 (Avian flu) - which is this season's SARS. 

Anything to keep the public a little bit off-centre... anything to give them reason to want to be embraced by the death-grip of the State. I notice that one of the things that Abbott said loud and clear is that the government fully intends distorting the market for potential treatments to ensure that government employed folks are looked after.

Consider what a large-scale flu pandemic would actually mean for national output, productivity, and a host of other things that link into corporate profits. It would be a massive tax on global trade, and would be a huge economic shock. 

The fact is, the folks who own whores like Abbott aren't acting as if it's important. That is, they're still buying stocks hand over fist. That means that they know that it's all just bullshit, doubtless having been briefed to that effect in one of the Coalition's insider-dealing workshops.

Anyhow, the whole thing is yet another example of the government wasting tax dollars on an event with a potentiality equal to the entire Collingwood footy side being simultaneously struck by lightning. That is, and event which would be tragic if it happened, but the odds of which are vanishingly small.

  • Chemeq (CMQ), +$0.025 (2.15%) to $1.190 on volume of 105,000 shares;
  • Novogen (NRT), +$0.100 (2.04%) to $5.000 on volume of 238,000 shares;
  • CSL (CSL), +$0.620 (1.74%) to $36.160 on volume of 904,000 shares;
  • Sonic Healthcare (SHL), +$0.260 (1.67%) to $15.850 on volume of 708,000 shares; and
  • Sigma Company (SIG), +$0.150 (1.29%) to $11.800 on volume of 293,000 shares.

Second in the sector leadership stakes was XXJ ASX200 Financials ex Property Trusts which gained 0.68% to 5405.60 points. The sector leaders were -

  • Tower (TWR), +$0.110 (5.42%) to $2.140 on volume of 2.34m shares;
  • Axa Asia Pacific Holdings (AXA), +$0.090 (1.9%) to $4.820 on volume of 2.75m shares;
  • Westpac Banking Corporation (WBC), +$0.290 (1.43%) to $20.600 on volume of 5.74m shares;
  • St George Bank (SGB), +$0.370 (1.35%) to $27.780 on volume of 1.19m shares; and
  • FKP Property Group (FKP), +$0.050 (1.21%) to $4.180 on volume of 245,000 shares.

The bronze today went to XFJ Financials which gained 0.67% to 5303.50 points. The sector was led by

  • Tower (TWR), +$0.110 (5.42%) to $2.140 on volume of 2.34m shares;
  • Multiplex Group (MXG), +$0.080 (2.54%) to $3.230 on volume of 3.48m shares;
  • Axa Asia Pacific Holdings (AXA), +$0.090 (1.9%) to $4.820 on volume of 2.75m shares;
  • Macquarie Office Trust (MOF), +$0.020 (1.48%) to $1.370 on volume of 10.6m shares; and
  • Westpac Banking Corporation (WBC), +$0.290 (1.43%) to $20.600 on volume of 5.74m shares.

The only sector in negative territory today was XSJ Consumer Staples which lost 0.10% to 5867.50 points. The sector was dragged lower by

  • Mcguigan Simeon Wines (MGW), -$0.230 (5.26%) to $4.140 on volume of 685,000 shares;
  • Lion Nathan (LNN), -$0.150 (1.76%) to $8.350 on volume of 1.17m shares;
  • Foodland Associated (FOA), -$0.160 (0.59%) to $26.790 on volume of 270,000 shares;
  • Coles Myer Ltd (CML), -$0.040 (0.39%) to $10.150 on volume of 3.41m shares; and
  • Coca-Cola Amatil (CCL), -$0.010 (0.12%) to $8.330 on volume of 2.99m shares.

Sector Indices
CodeGICS SectorClose+/-%Volume
XXJASX200 Financials ex Property Trusts5405.636.40.68%113.48m
XPJProperty Trusts1888.912.20.65%117.57m
XDJConsumer Discretionary2356.62.20.09%46.01m
XIJInformation Technology434.50.10.02%5.99m
XSJConsumer Staples5867.5-5.8-0.1%36.76m

All Ordinaries Major Movers

All Ords Volume Leaders
TLSTelstra Corporation4.360.020.46%49.62m
PMNPromina Group4.86-0.06-1.22%38.79m
IAGInsurance Australia Group5.430.061.12%24.46m
DYLDeep Yellow0.150.0211.54%19.07m
ADYAdmiralty Resources.
VIRViridis Clean Energy Group1.060.021.92%17.34m
All Ords Percentage Gainers
BBBB Digital0.370.0515.63%365473
IHGIntellect Holdings0.0250.00313.64%3.84m
SGLSydney Gas Ltd0.590.059.35%5.61m
AJLAJ Lucas Group1.280.118.94%237226
CLTCellnet Group1.180.098.26%201988
All Ords Percentage Decliners
CAGCape Range Wireless0.025-0.003-10.71%3.44m
UNIUnilife Medical Solutions0.59-0.07-10.61%365350
IASInternational All Sports0.27-0.03-10%316617
TIRTitan Resources0.041-0.004-8.89%2.21m

Elsewhere in the Region...

Regional Indices
New ZealandNZSE503405.63532.770.97%34.08m
JapanNikkei 22512834.25-67.7-0.52%0
SingaporeStraits Times2316.145.790.25%0
Hong KongHang Seng15059.3-11.26-0.07%152.16m
MalaysiaKLSE Comp915.790.070.01%0