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When you consider that the news from ANZ (regarding a $200 million provision due to exposure to the US insurance market) the market held up pretty well today.
The ANZ news is almost certainly the tip of the iceberg;taking 4% out of the market cap of the major banks is a light penalty - and one that makes it clear that market participants still don't know the extent to which the global financial markets are in trouble. Nobody has yet started to make plans for the next round of disasters, which will likely emerge in credit default swaps. Already, dislocations in municipal bond markets have seen some US authorities facing penalty interest rates of 20% - and that has nothing whatever to do with default swaps.
Seems like the financial wizardry that was sold to bank managements was just so much fluff - and bank managements, which are made up mostly of smartass lawyers who can't do sums, took the bait to the tune of hundred of billions of dollars. They wanted to believe that some smart cookie who could bamboozle them with algebra, could also make risk disappear into thin, profit-laden air.
It all goes back to a rising problem - the idea that is the model is mathematically complex (as viewed by a glorified accounts clerk) then it will be immune to forecast error. But the problem is that no economist has been within a bull's roar of these models - if someone like Steven Roach (or me) was put in front of the people who create the models in question (all of whom have PhD's in engineering, physics or maths) we would be able to point out that human behaviour has a horrible tendency to make a mockery of fixed-coefficients functionals.
It took an economist to point out (to a bunch of engineers) that making seat belts compulsory would result in... more death of bicyclists and pedestrians - as people felt safer they would increase the level of risk they assumed in their driving.
This sort of feedback is well-understood in physical systems, and you can model it reasonably easy. But if your entire career to date was spent thinking that feedback can be modelled as something that just appears out of this air (or water for the hydrodynamically-oriented) then you tend to not be able to think through what behaviours - in actual people - would also cause feedback (of either type - damping or augmenting).
It's a bit like folks who learn about a 2-asset model (stocks and bonds) in undergraduate courses, who then spend their entire careers comparing returns on stocks (US stocks, in US dollars) to the return on bonds (US bonds, in US dollars, of course). No other asset class exists, because although they learn the models they are taught, they have no clear idea that a model is supposed to be a pedagogic tool that informs a smart kiddie and helps them think through larger problems BY EXTENSION.
Me - I can do maths until your nose bleeds. Difference between me and, say, the whole of Wall Street: for me the maths is only useful to the extent that it enables behaviour to be expressed as shorthand (and solved for, using a computer). IF the results make no sense, then thy ought to be discarded and the model rebuilt. For example, be very suspicious if you see any piece of analysis that assumes a long term rate of revenue growth for a company that is greater than the growth in nominal GDP... eventually that company would be bigger than the entire universe. Likewise, discount rates for stock returns that are lower than the interest rate payable on the same company's debt... can't happen over any investment horizon worth a damn.
There are valuation models - like Bakshi/Chen, which is widely used by Wall Street - which assume that earnings will never be negative (for one stock); the assumption is not made explicitly, but it comes out in the maths (it exhibits wild behaviour if earnings are around zero, and produces whackery if earnings are negative)... which is why I would never use such a model. Others - from Black Scholes option pricing to Markowitz EV - assume a load of things which make the mathematics tractable, but which have no bearing whatsoever on real life (symmetry, continuity, normal tails... the list is endless).
I would prefer to have to solve unattractive but realistic PDE's numerically, than to have a closed form solution to a model that produces stupid results.
Major Market Indices
The broad market - the All Ordinaries (XAO) - declined gently, dropping 45.8 points (0.81%), finishing at 5634 points. The index hit an intraday high of 5662.3 at 10:19 am, while the low for the day was 5628.1 - set at 10:53 am Sydney time.
Total volume traded on the ASX was 1.11 billion units, 15% below its 10-day average. The ASX's daily listing of all stocks included 1351 different 3-letter FPO's which traded (i.e., had non-zero trade volume). Of these, 397 issues rose, with volume in rising issues totalling 539.7 million units. Conversely (or even contrariwise), 682 stocks were dragged below the Plimsoll line, with aggregate volume traded of 406.6 million shares.
Of the 478 All Ordinaries components, 159 rose while 252 fell. Despite the overall decline in the market, volume was tilted in favour of the gainers by a margin of 1.4:1, with 388.88 million shares traded in gainers while 284.43 million 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) - fell mildly, losing 48.2 points (0.86%), closing out the session at 5558.4 points.
| Name | Close | +/-(%) |
|---|---|---|
| All Ordinaries | 5634.00 | -45.80 (0.8%) |
| ASX 50 | 5366.50 | -68.10 (1.3%) |
| ASX 200 | 5558.40 | -48.20 (0.9%) |
| ASX 300 | 5564.70 | -48.50 (0.9%) |
| ASX Mid-Cap 50 | 5848.00 | 39.00 (0.7%) |
| ASX Small Ordinaries | 3344.10 | -3.50 (0.1%) |
| ASX 20 | 3032.50 | -50.40 (1.6%) |
| ASX 100 | 4490.30 | -43.40 (1.0%) |
The "heavy hitters" of the Australian market - the ASX 20 Leaders (XTL) - registered a loss of 50.4 points (1.63%), closing out the session at 3032.5 points.
Among the 20 big guns, 9 index components finished to the upside, and of the rest, 12 closed lower for the session. The 21 stocks which make up the index traded a total of 166.12 million units; 9 index components rose, with rising volume amounting to 103.39 million shares, while the 12 decliners had volume traded totalling 62.73 million units. The major percentage gainers within the index were
- Stockland (SGP), +$0.14 (1.93%) to $7.40 on volume of 5.5 million shares;
- AMP Limited (AMP), +$0.14 (1.85%) to $7.72 on volume of 8.7 million shares;
- Woodside Petroleum Limited (WPL), +$0.89 (1.79%) to $50.74 on volume of 3 million shares;
- Foster's Group Limited (FGL), +$0.07 (1.21%) to $5.86 on volume of 5.2 million shares; and
- Telstra (Installment Receipts) (TLSCA), +$0.03 (0.96%) to $3.17 on volume of 26.9 million shares.
On the less salubrious side of the big-cap fence,banks got smacked upside the head:
- Australia And New Zealand Banking Group Limited (ANZ), -$1.46 (6.11%) to $22.45 on volume of 11 million shares;
- Commonwealth Bank Of Australia (CBA), -$2.34 (5.05%) to $44.04 on volume of 4.8 million shares;
- National Australia Bank Limited (NAB), -$1.12 (3.66%) to $29.52 on volume of 9.3 million shares;
- Westpac Banking Corporation (WBC), -$0.8 (3.42%) to $22.56 on volume of 10.2 million shares; and
- St George Bank Limited (SGB), -$0.7 (2.75%) to $24.80 on volume of 2.4 million shares.
At the other end of the market-cap spectrum lie the denizens of the ASX Small Ordinaries (XSO) - the place where non-mania excess returns lie. The small end of the market , while still dropping overall, did significantly better than its large-cap counterpart. The Small Ords slid modestly, falling 3.5 points (0.1%), closing out the session at 3344.1 points.
Among the stocks that make up the Small Caps index, 69 index components finished to the upside, and of the rest, 103 closed lower for the session.
The 192 stocks which make up the index traded a total of 264.95 million units: volume in the 69 gainers totalling 102.61 million shares, with trade totalling 115.97 million units in the index's 103 declining components. The major percentage gainers within the index were- Rubicon Europe Trust Group (REU), +$0.03 (14.63%) to $0.24 on volume of 5.6 million shares;
- Rubicon America Trust (RAT), +$0.03 (12.5%) to $0.23 on volume of 4.1 million shares;
- TAP OIL Limited (TAP), +$0.17 (9.82%) to $1.85 on volume of 1.2 million shares;
- Funtastic Limited (FUN), +$0.04 (8.6%) to $0.51 on volume of 651.4 thousand shares; and
- Sundance Resources Limited (SDL), +$0.02 (8.51%) to $0.26 on volume of 20 million shares.
In the red-zone of the little-stock index, the following list represents the biggest downers (in terms of percentage decline):
- Record Realty (RRT), -$0.05 (13.64%) to $0.29 on volume of 2.2 million shares;
- Flexigroup Limited (FXL), -$0.15 (12.55%) to $1.01 on volume of 223.8 thousand shares;
- Customers Limited (CUS), -$0.01 (9.47%) to $0.09 on volume of 1.5 million shares;
- Apn/Uka European Retail Property Group (AEZ), -$0.07 (8.5%) to $0.70 on volume of 586 thousand shares; and
- Rubicon Japan Trust (RJT), -$0.04 (8%) to $0.46 on volume of 8.4 million shares.
Index Changes
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XAO | All Ordinaries | 5634 | -45.8 | -0.81 | 733m |
| XFL | ASX 50 | 5366.5 | -68.1 | -1.25 | 292.1m |
| XJO | ASX 200 | 5558.4 | -48.2 | -0.86 | 584.4m |
| XKO | ASX 300 | 5564.7 | -48.5 | -0.86 | 690.8m |
| XMD | ASX Mid-Cap 50 | 5848 | 39 | 0.67 | 133.7m |
| XSO | ASX Small Ordinaries | 3344.1 | -3.5 | -0.1 | 264.9m |
| XTL | ASX 20 | 3032.5 | -50.4 | -1.63 | 166.1m |
| XTO | ASX 100 | 4490.3 | -43.4 | -0.96 | 425.9m |
Market Breadth
| ASX20 | XTO | XJO | XAO | XSO | Market | |
|---|---|---|---|---|---|---|
| Advances | 9 | 52 | 52 | 158 | 69 | 397 |
| Declines | 12 | 45 | 46 | 252 | 103 | 682 |
| Advancing Volume | 103.4m | 267.7m | 267.7m | 385.8m | 102.6m | 539.7 million |
| Declining Volume | 62.7m | 149m | 149.7m | 284.4m | 116m | 406.6 million |
GICS Industry Indices
Among the 11 industry indices, 7 registered an advance for the session, the remaining 4 lost ground.
The best performing index was Energy (XEJ), which added 163.4 points (1.13%) to 14654.3 points. The 18 stocks which make up the index traded a total of 38.74 million units; 10 index components rose, with rising volume amounting to 16.7 million shares, while the 7 decliners had volume traded totalling 21.35 million units. The major percentage gainers within the index were
- Santos Limited (STO), +$0.56 (4.1%) to $14.21 on volume of 1.9 million shares;
- Woodside Petroleum Limited (WPL), +$0.89 (1.79%) to $50.74 on volume of 3 million shares;
- Caltex Australia Limited (CTX), +$0.20 (1.24%) to $16.35 on volume of 319.3 thousand shares;
- Oil Search Limited (OSH), +$0.05 (1.18%) to $4.29 on volume of 5.5 million shares; and
- Australian Worldwide Exploration Limited (AWE), +$0.04 (1.17%) to $3.47 on volume of 1.2 million shares.
Second in the index leadership stakes was Telecommunications (XTJ), which gained 13.7 points (0.82%) to 1681 points. The 4 stocks which make up the index traded a total of 76.48 million units; 3 index components rose, with rising volume amounting to 70.66 million shares, while sole declining stock traded 5.82 million units. The major percentage gainers within the index were
- Telstra (Installment Receipts) (TLSCA), +$0.03 (0.96%) to $3.17 on volume of 26.9 million shares;
- Telstra Corporation Limited. (TLS), +$0.03 (0.64%) to $4.75 on volume of 42 million shares; and
- Singapore Telecommunications Limited. (SGT), +$0.01 (0.33%) to $3.07 on volume of 1.8 million shares.
The bronze medal for today goes to Utilities (XUJ), which climbed 44.4 points (0.75%) to 5996.5 points. The 11 stocks which make up the index traded a total of 16.33 million units; 5 index components rose, with rising volume amounting to 4.74 million shares, while the 5 decliners had volume traded totalling 11.13 million units. The major percentage gainers within the index were
- APA Group (APA), +$0.11 (3.46%) to $3.29 on volume of 578 thousand shares;
- Duet Group (DUE), +$0.10 (3.33%) to $3.10 on volume of 1.3 million shares;
- Spark Infrastructure Group (SKI), +$0.06 (3.24%) to $1.91 on volume of 1.1 million shares;
- Babcock & Brown Wind Partners Group (BBW), +$0.04 (2.61%) to $1.38 on volume of 1.4 million shares; and
- Hastings Diversified Utilities Fund (HDF), +$0.01 (0.37%) to $2.73 on volume of 355.5 thousand shares.
The worst-performed index for the session was ASX200 Financials ex Property Trusts (XXJ), which dipped 177 points (3.08%) to 5575.1 points. The 28 stocks which make up the index traded a total of 89.73 million units; The 18 decliners had volume traded totalling 56.63 million units, and 9 index components rose, with rising volume amounting to 33.07 million shares, The major percentage decliners within the index were
- Australia And New Zealand Banking Group Limited (ANZ), -$1.46 (6.11%) to $22.45 on volume of 11 million shares;
- Babcock & Brown Limited (BNB), -$1.02 (5.92%) to $16.22 on volume of 2.2 million shares;
- Commonwealth Bank Of Australia (CBA), -$2.34 (5.05%) to $44.04 on volume of 4.8 million shares;
- City Pacific Limited (CIY), -$0.14 (4.83%) to $2.76 on volume of 362.1 thousand shares; and
- National Australia Bank Limited (NAB), -$1.12 (3.66%) to $29.52 on volume of 9.3 million shares.
Just missing out on the wooden spoon was Industrials (XNJ), which slid 41.9 points (0.74%) to 5622.9 points. The 30 stocks which make up the index traded a total of 54.39 million units; The 18 decliners had volume traded totalling 32.69 million units, and 10 index components rose, with rising volume amounting to 20.38 million shares, The major percentage decliners within the index were
- Toll Holdings Limited (TOL), -$0.44 (4.27%) to $9.86 on volume of 2.5 million shares;
- United Group Limited. (UGL), -$0.52 (4%) to $12.48 on volume of 1.3 million shares;
- Leighton Holdings Limited (LEI), -$1.42 (3.04%) to $45.36 on volume of 898 thousand shares;
- Australian Infrastructure Fund (AIX), -$0.07 (2.64%) to $2.58 on volume of 837.5 thousand shares; and
- Qantas Airways Limited (QAN), -$0.11 (2.38%) to $4.52 on volume of 5.5 million shares.
Third-to-last amongst the sector indices was Healthcare (XHJ), which slid 30 points (0.35%) to 8499.9 points. The 9 stocks which make up the index traded a total of 12.75 million units; The 3 decliners had volume traded totalling 6.2 million units, and 6 index components rose, with rising volume amounting to 6.55 million shares, The major percentage decliners within the index were
- ResMed Inc. (RMD), -$0.08 (1.72%) to $4.57 on volume of 2 million shares;
- CSL Limited (CSL), -$0.55 (1.72%) to $31.50 on volume of 1.8 million shares; and
- Healthscope Limited (HSP), -$0.07 (1.32%) to $5.23 on volume of 2.4 million shares.
Sector Indices
| Code | GICS Sector | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XEJ | Energy | 14654.3 | 163.4 | 1.13 | 39m |
| XTJ | Telecommunications | 1681 | 13.7 | 0.82 | 76m |
| XUJ | Utilities | 5996.5 | 44.4 | 0.75 | 16m |
| XDJ | Consumer Discretionary | 2327.7 | 9.3 | 0.4 | 25m |
| XPJ | Property Trusts | 1810.8 | 6 | 0.33 | 120m |
| XSJ | Consumer Staples | 7855.9 | 22.7 | 0.29 | 23m |
| XIJ | Information Technology | 495.9 | 1.4 | 0.28 | 3m |
| XMJ | Materials | 14834.9 | -38.4 | -0.26 | 125m |
| XHJ | Healthcare | 8499.9 | -30 | -0.35 | 13m |
| XNJ | Industrials | 5622.9 | -41.9 | -0.74 | 54m |
| XXJ | ASX200 Financials ex Property Trusts | 5575.1 | -177 | -3.08 | 90m |
All Ordinaries Major Movers
All Ords Volume Leaders
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| TLS | Telstra Corporation Limited. | 4.75 | 0.03 | 0.64 | 42m |
| CNP | Centro Properties Group | 0.63 | 0.02 | 2.46 | 39.7m |
| RSP | Resource Pacific Holdings Limited | 3.20 | 0.00 | 0 | 39.5m |
| TLSCA | Telstra (Installment Receipts) | 3.17 | 0.03 | 0.96 | 26.9m |
| CER | Centro Retail | 0.35 | -0.02 | -5.41 | 22.8m |
All Ords Percentage Gainers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| AIM | Aim Resources Limited | 0.12 | 0.02 | 18.56 | 7.8m |
| CPK | CP1 Limited | 0.44 | 0.06 | 15.79 | 6.1k |
| REU | Rubicon Europe Trust Group | 0.24 | 0.03 | 14.63 | 5.6m |
| RAT | Rubicon America Trust | 0.23 | 0.03 | 12.5 | 4.1m |
| CGF | Challenger Financial Services Group Limited | 2.81 | 0.26 | 10.2 | 5.4m |
All Ords Percentage Losers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| PRY | Primary Health Care Limited | 6.64 | -3.58 | -35.03 | 347.9k |
| NCK | Nick Scali Limited | 1.50 | -0.30 | -16.67 | 0.1k |
| RCR | RCR Tomlinson Limited | 1.32 | -0.22 | -14.29 | 1.1m |
| RRT | Record Realty | 0.29 | -0.05 | -13.64 | 2.2m |
| FXL | Flexigroup Limited | 1.01 | -0.15 | -12.55 | 223.8k |
