Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.
This is starting to get interesting. The Australian funds management industry has frittered away a large slice of the fortunes and retirement nest eggs of Australia's battlers in recent quarters. The damage is so pervasive that there is now widespread grumbling about changing the Super Guarantee levy - the government stupidity that forces wage-earners to set aside funds rather than letting them decide for themselves. Being forced to give money to the financial services industry has done nothing positive - except for paying the mortgage on some deplorable tasteless 'Sydney Chic' digs at potts Point.
Interestingly, there are some bright spots which appeal to my prejudices (at times) - market neutral funds, for instance.
A market neutral fund is a bit like the MarketMentat Model Portfolios, with the exception that a market neutral fund is hedged almost all of the time whereas the MMMPs (M3P, for short) are only hedged when we feel that the market lacks both investment merit and speculative merit (as was the case from November 2007 onwards, with the last initiation of hedges being on February 1). So a market neutral fund seeks to add value by capturing the gap between a well-selected group of stocks (hopefully) and the broad market - hedging away market-wide risk. The M3P seeks to retain exposure to market risk when it is justified, and only hedge when we think the market has lost either speculative or investment merit: only then are we satisfied to capture the gap.
AS you all know, it is still my central thesis that the bottom is not in. Valuations relative to historical peak earnings are relatively modest, but recent peak earnings reflect a situation which will not hold in the future: easy credit, a distorted share of profits to GDP, and slow but inexorable deterioration of balance sheet quality.
For example - as I have previously written, Banks have much more volatile earnings than is normally assumed: approximated 1 year in 6, the entire banking sector has negative earnings in aggregate. Since the late 90s, and the rise of securitisation as a means of income generation, banks earnings have appeared smooth, but in fact the quality of those earnings has deteriorated as banks slid further and further down the lender ladder until they were lending to anyone with a pulse.
You can't grow earnings from a situation in which you are already lending to anybody who walks in the door: as such the recent earnings peak for banks will not be exceeded for several years.
Resource stocks are slightly more interesting - on the one hand the weakness in $A will help them no end (for output generated in Australia, and for overall EPS when restated into $A) as the weak $A will help offset (in value terms) the fall in volume due to weakening global demand.
On the downside though, their high capital intensivity and the import-intensivity of that capital means that the infrastructure builds that they have undertaken recently will be (a) much more costly than was planned; and (b) will probably sit idle. I note that places like Karratha and other outposts in WA - which were absorbing excess labour from the Eastern states - have slowed and the men have been sent home on 'idle'... it remains to be seen if they are called back.
Major Market Indices
The broad market - the All Ordinaries (XAO) - dipped reasonably hard, registering a loss of 39.1 points (1.09%), finishing at 3534.2 points. The index hit an intraday high of 3574.8 at 10:01 am, while the low for the day was 3492.7 - set at 12:11 pm Sydney time. Yet again, the market will not stay down when it gets decked - it must think it is Jake La Motta or Rocky. Today it was a weaker-than-usual attempt, but it was still worth 40 points - half the day's peak decline.
Here's a hint - pretty soon the US is going to fail to rally on one of its afternoon bouts of stupidity, and the Australian market will fall apart. Our target (sub-3000 on XAO) is still in force.
Total volume traded on the ASX was 1.08bn units, 3% below its 10-day average of 1.11bn shares.The ASX's daily listing of all stocks included 1026 different 3-letter FPO's which traded (i.e., had non-zero trade volume). Of these, 306 issues rose, with volume in rising issues totalling 321.7m units; there were 504 declining stocks, which traded aggregate declining volume of 671.1m shares.
Of the 488 All Ordinaries components, 125 rose while 272 fell. Volume was tilted in favour of the losers by a margin of 2.3:1, with 253.83m shares traded in gainers while 588.03m shares traded in the day's losers.
The Index that forms the cash basis for the SPI Futures - the S&P/ASX 200 (XJO) - registered a loss of 42.7 points (1.17%), closing out the session at 3598 points.
| Name | Close | +/-(%) |
|---|---|---|
| All Ordinaries | 3534.20 | -39.10 (1.1%) |
| ASX 20 | 2166.30 | -21.70 (1.0%) |
| ASX 50 | 3644.00 | -37.00 (1.0%) |
| ASX 100 | 2969.30 | -33.80 (1.1%) |
| ASX 200 | 3598.00 | -42.70 (1.2%) |
| ASX 300 | 3576.50 | -41.80 (1.2%) |
| ASX Mid-Cap 50 | 3243.50 | -68.30 (2.1%) |
| ASX Small Ordinaries | 1619.10 | -24.60 (1.5%) |
The "heavy hitters" of the Australian market - the ASX 20 Leaders (XTL) - slid modestly, falling 21.7 points (0.99%), closing out the session at 2166.3 points.
Among the 20 big guns, 4 index components finished to the upside, and 17 lost ground. The stocks which make up the index traded a total of 159.85m units; 4 index components rose, with rising volume amounting to 37.76m shares, while the 17 decliners had volume traded totalling 122.09m units. The major percentage gainers within the index were
- RIO Tinto (RIO), +$2.60 (6.95%) to $40.00 on volume of 10.8 million shares;
- Westfield Group (WDC), +$0.56 (4.15%) to $14.05 on volume of 5 million shares;
- ANZ Banking Group (ANZ), +$0.27 (1.91%) to $14.42 on volume of 7.6 million shares; and
- Westpac Banking Corporation (WBC), +$0.18 (1.1%) to $16.55 on volume of 14.2 million shares.
On the less salubrious side of the big-cap fence, the following stocks were the worst-performed within the index:
- CSL (CSL), -$1.5 (4.56%) to $31.40 on volume of 3.5 million shares;
- Newcrest Mining (NCM), -$1.28 (4.48%) to $27.31 on volume of 2.3 million shares;
- Suncorp-Metway. (SUN), -$0.31 (3.88%) to $7.69 on volume of 2.7 million shares;
- Wesfarmers (WES), -$0.58 (3.55%) to $15.77 on volume of 2.8 million shares; and
- Foster's Group (FGL), -$0.2 (3.51%) to $5.50 on volume of 8.1 million shares.
The ASX Small Ordinaries (XSO) The small end of the market had significantly worse day than its large-cap counterpart. The Small Ords registered a loss of 24.6 points (1.5%), closing out the session at 1619.1 points.
Among the stocks that make up the Small Caps index, 52 index components finished to the upside, and of the rest, 128 closed lower for the session.
The 208 stocks which make up the index traded a total of 267.11m units: volume in the 52 gainers totalling 51.2m shares, with trade totalling 189.59m units in the index's 128 declining components. The major percentage gainers within the index were- Coeur D'Alene Mines Corporation (CXC), +$0.17 (19.43%) to $1.05 on volume of 229.3 thousand shares;
- Australian Education Trust (AEU), +$0.03 (13.89%) to $0.21 on volume of 1.6 million shares;
- Cape Lambert Iron Ore Ltd (CFE), +$0.03 (13.51%) to $0.21 on volume of 1.7 million shares;
- Marion Energy (MAE), +$0.03 (12.82%) to $0.22 on volume of 886.7 thousand shares; and
- Equinox Minerals (EQN), +$0.17 (12.69%) to $1.51 on volume of 1.3 million shares.
In the red-zone of the little-stock index, the following list represents the biggest downers (in terms of percentage decline):
- Compass Resources (CMR), -$0.03 (17.14%) to $0.15 on volume of 1.1 million shares;
- Mintails (MLI), -$0.01 (15.62%) to $0.03 on volume of 35.2 million shares;
- Alesco Corporation (ALS), -$0.53 (14.8%) to $3.05 on volume of 556.5 thousand shares;
- Galileo Japan Trust (GJT), -$0.01 (13.79%) to $0.05 on volume of 3.5 million shares; and
- APN European Retail Property Group (AEZ), -$0.01 (12%) to $0.07 on volume of 777.8 thousand shares.
Index Changes
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XAO | All Ordinaries | 3534.2 | -39.1 | -1.09 | 882.3m |
| XFL | ASX 50 | 3644 | -37 | -1.01 | 344.3m |
| XJO | ASX 200 | 3598 | -42.7 | -1.17 | 762.7m |
| XKO | ASX 300 | 3576.5 | -41.8 | -1.16 | 853.1m |
| XMD | ASX Mid-Cap 50 | 3243.5 | -68.3 | -2.06 | 251.7m |
| XSO | ASX Small Ordinaries | 1619.1 | -24.6 | -1.5 | 257.1m |
| XTL | ASX 20 | 2166.3 | -21.7 | -0.99 | 150.4m |
| XTO | ASX 100 | 2969.3 | -33.8 | -1.13 | 596m |
Market Breadth
| ASX20 | XTO | XJO | XAO | XSO | Market | |
|---|---|---|---|---|---|---|
| Advances | 4 | 28 | 49 | 125 | 52 | 306 |
| Declines | 17 | 70 | 145 | 272 | 128 | 504 |
| Advancing Volume | 37.8m | 198.4m | 230.5m | 253.8m | 51.2m | 321.7m |
| Declining Volume | 122.1m | 388.8m | 512.2m | 588m | 189.6m | 671.1m |
GICS Industry Indices
Among the 11 industry indices, 2 registered an advance for the session, the remaining 9 lost ground.
The best performing index was Property Trusts (XPJ), which added 6.7 points (0.73%) to 923.7 points. The 21 stocks which make up the index traded a total of 201.42m units; 5 index components rose, with rising volume amounting to 61.12m shares, while the 15 decliners had volume traded totalling 131.34m units. The major percentage gainers within the index were
- Centro Properties Group (CNP), +$0.01 (7.14%) to $0.08 on volume of 6.2 million shares;
- Dexus Property Group (DXS), +$0.05 (5%) to $0.95 on volume of 31.7 million shares;
- Westfield Group (WDC), +$0.56 (4.15%) to $14.05 on volume of 5 million shares;
- Valad Property Group (VPG), +$0.00 (2.17%) to $0.05 on volume of 8.1 million shares; and
- CFS Retail Property Trust (CFX), +$0.02 (0.77%) to $1.97 on volume of 10.1 million shares.
Second in the index leadership stakes was Energy (XEJ), which gained 19.5 points (0.16%) to 12094.2 points. The 19 stocks which make up the index traded a total of 41.99m units; 6 index components rose, with rising volume amounting to 20.67m shares, while the 12 decliners had volume traded totalling 19.92m units. The major percentage gainers within the index were
- Paladin Energy (PDN), +$0.29 (11.84%) to $2.74 on volume of 9.8 million shares;
- Nexus Energy (NXS), +$0.03 (6.67%) to $0.48 on volume of 2.4 million shares;
- Santos (STO), +$0.90 (6.47%) to $14.80 on volume of 4 million shares;
- Riversdale Mining (RIV), +$0.12 (5.74%) to $2.21 on volume of 515.5 thousand shares; and
- Worleyparsons (WOR), +$0.41 (3.14%) to $13.46 on volume of 1 million shares.
The worst-performed index for the session was Healthcare (XHJ), which dipped 319.1 points (3.81%) to 8065.5 points. The 9 stocks which make up the index traded a total of 11.45m units; The 8 decliners had volume traded totalling 10.12m units - none of the index components ended with a gain. The major percentage decliners within the index were
- Cochlear (COH), -$3.75 (6.64%) to $52.74 on volume of 252.9 thousand shares;
- CSL (CSL), -$1.5 (4.56%) to $31.40 on volume of 3.5 million shares;
- Ramsay Health Care (RHC), -$0.36 (3.67%) to $9.44 on volume of 142.3 thousand shares;
- Ansell (ANN), -$0.34 (2.62%) to $12.66 on volume of 694.8 thousand shares; and
- Sonic Healthcare (SHL), -$0.27 (2.03%) to $13.03 on volume of 777.9 thousand shares.
Just missing out on the wooden spoon was Consumer Staples (XSJ), which slid 189.3 points (3.07%) to 5975.7 points. The 13 stocks which make up the index traded a total of 32.24m units; The 11 decliners had volume traded totalling 31.07m units, and volume in the lone rising index component was 0.3m shares, The major percentage decliners within the index were
- Lion Nathan (LNN), -$0.41 (4.65%) to $8.41 on volume of 1.2 million shares;
- Australian Agricultural Company. (AAC), -$0.06 (4.17%) to $1.38 on volume of 815.5 thousand shares;
- Wesfarmers (WES), -$0.58 (3.55%) to $15.77 on volume of 2.8 million shares;
- Foster's Group (FGL), -$0.2 (3.51%) to $5.50 on volume of 8.1 million shares; and
- Woolworths (WOW), -$0.89 (3.29%) to $26.19 on volume of 3.4 million shares.
Third-to-last amongst the sector indices was Telecommunications (XTJ), which slid 39.7 points (2.78%) to 1389.3 points. The 3 stocks which make up the index traded a total of 41.98m units; The 2 decliners had volume traded totalling 39.48m units, and volume in the lone rising index component was 2.49m shares, The major percentage decliners within the index were
- Telstra Corporation. (TLS), -$0.13 (3.04%) to $4.14 on volume of 36 million shares; and
- Telecom Corporation Of New Zealand (TEL), -$0.02 (0.76%) to $1.97 on volume of 3.5 million shares.
Sector Indices
| Code | GICS Sector | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| XPJ | Property Trusts | 923.7 | 6.7 | 0.73 | 201m |
| XEJ | Energy | 12094.2 | 19.5 | 0.16 | 42m |
| XXJ | Financials ex Property Trusts | 3773.4 | -19 | -0.5 | 74m |
| XMJ | Materials | 8409.7 | -70.8 | -0.83 | 192m |
| XDJ | Consumer Discretionary | 1112.1 | -9.5 | -0.85 | 39m |
| XIJ | Information Technology | 399.7 | -6.3 | -1.55 | 2m |
| XNJ | Industrials | 3082.7 | -74.9 | -2.37 | 92m |
| XUJ | Utilities | 4168.2 | -105.7 | -2.47 | 42m |
| XTJ | Telecommunications | 1389.3 | -39.7 | -2.78 | 42m |
| XSJ | Consumer Staples | 5975.7 | -189.3 | -3.07 | 32m |
| XHJ | Healthcare | 8065.5 | -319.1 | -3.81 | 11m |
All Ordinaries Major Movers
All Ords Volume Leaders
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| TLS | Telstra Corporation. | 4.14 | -0.13 | -3.04 | 36m |
| MLI | Mintails | 0.03 | -0.01 | -15.62 | 35.2m |
| IIF | ING Industrial Fund | 0.19 | -0.21 | -52.5 | 33m |
| DXS | Dexus Property Group | 0.95 | 0.05 | 5 | 31.7m |
| BSL | Bluescope Steel | 2.98 | -1.05 | -26.05 | 26.5m |
All Ords Percentage Gainers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| CPR | Clive Peeters | 0.17 | 0.04 | 30.77 | 674k |
| KBC | KeyBridge Capital | 0.16 | 0.04 | 28 | 637.7k |
| IEF | ING Real Estate Entertainment Fund | 0.23 | 0.05 | 27.78 | 287.2k |
| ACR | Acrux | 0.56 | 0.10 | 20.43 | 114k |
| CXC | Coeur D'Alene Mines Corporation | 1.05 | 0.17 | 19.43 | 229.3k |
All Ords Percentage Losers
| Code | Name | Close | +/- | % | Volume |
|---|---|---|---|---|---|
| IIF | ING Industrial Fund | 0.19 | -0.21 | -52.5 | 33m |
| BSL | Bluescope Steel | 2.98 | -1.05 | -26.05 | 26.5m |
| ARR | Arasor International | 0.03 | -0.01 | -18.75 | 165k |
| CRE | Crescent Gold | 0.07 | -0.01 | -17.72 | 100k |
| CMR | Compass Resources | 0.15 | -0.03 | -17.14 | 1.1m |
