Investment Week In Review - 29 March 2016

By Michelle Heffernan - March 29, 2016

As we reach the end of the first quarter of 2016, the Australian Share Market is down 4% since New Year’s Day

News in Review

  • As news broke of the horrific terrorist attacks in Belgium, equity indices began to slide as safe haven assets (treasuries, gold and the yen) were bid up.  All things considered, the impact on markets was quite muted.

  • The Eurozone economy regained some momentum at the end of the first quarter, expanding at the fastest rate since December. Flash Eurozone PMI rose from 53.0 in February to 53.7 in March.  The euro area manufacturing PMI edged up 0.2pts to 51.4 (see Figure 2), despite weaker readings in Germany (50.4) and France (49.6). Clearly conditions improved somewhat in the peripheral economies. Consumer confidence, however, fell 0.9 points to -9.7 in March, the third consecutive monthly decline and the index now at its lowest level since December 2014. 

  • India’s current account deficit (the excess of imports over exports) in fourth quarter 2015 improved to 1.3% of GDP from the previous reading of 1.7% of the GDP.  The economy has been benefiting from lower oil prices and rising foreign direct investment.

  • The Australian Bureau of Statistics (ABS) Residential Property Price Index indicated slower housing market activity towards the end of 2015. Across the eight capital cities, housing prices lifted just 0.2% over the final quarter of 2015, the weakest reading since 2012.  Strength however was seen in Canberra, where prices climbed 2.8% for the quarter. 

  • Housing prices in Sydney were down 1.6% over the quarter – the first quarterly decline since 2012 and the largest since 2008.  Melbourne on the other hand, registered a 1.6% rise in the last quarter of 2015. Sydney dwelling prices still outpaced Melbourne through to the end of 2015, with growth of 13.9% versus Melbourne’s 9.6%.

  • New house prices rose in 47 of 70 Chinese cities in February, pointing to a nationwide increase of 3.6% over the year.  In the key commercial hubs of Shanghai and Beijing, prices rose 20% and 13% over the year respectively.

     

Comment

As we reach the end of the first quarter of 2016, the Australian Share Market is down 4% since New Year’s Day.  While a negative return of any magnitude is disappointing (albeit expected when investing in growth assets) the total -4% return factors in a recovery from a much worse position in January.

The recovery in the market from the lows on January coincided with improving commodity prices, with oil and iron ore up 20% over the past month.  Given Australia is seen to many international investors as a purely resource driven economy, it is not surprising that the Australian dollar followed suit, up from US$0.69 to US $0.76 over the same period, during which time, there was no movement in Australian or US cash rates.  Both appear likely to remain volatile.

The Week Ahead

  • US:  Personal Consumption Expenditure Core, Consumer Confidence, Change in Non-farm Payrolls.
  • Australia: AiG Performance of Manufacturing Index, HIA New Home Sales.
  • Europe: Euro-Zone Consumer Price Index Estimate.
  • China: Manufacturing PMI, Non-manufacturing PMI.
  • Japan: Industrial Production, JPY Jobless Rate. 

Company News:

  • ANZ released an update raising the bank’s bad debt charge for the second time in two months, increasing the impairment balance by ‘at least $100 million’, to provide for bad debts in the iron ore and mining industry.  Westpac said they have worries about five large mining names they have lent to.

  • Online car seller Carsales has bought an 83% stake in Chile automotive classifieds website Chileautos for $US15 million ($A19.89 million).  The deal was funded from existing cash reserves and syndicated debt facilities

  • Hony Capital has announced it is exiting its stake in Santos, selling its 11.7% interest to Chinese LNG distributor ENN Group for US$750m.

  • Ardent Leisure has put its d’Albora Marinas business up for sale, moving to shore up its balance sheet and focus on its Main Event family entertainment division, as the firm also embarks on a review of its investor structure. Ardent Leisure, which operates theme parks, gyms and bowling centres, said it was looking to “maximise the potential” of its businesses in Australia and the US by selling d’Albora Marinas, the largest marina group in Australia.

  • TPG Telecom has reported a jump in first-half profit after its acquisition of rival telco iiNet, booking both a gain on its previously held stake in the target and a contribution from the iiNet business. Net profit for Australia’s second-biggest telco rose 90% to $202.5m in the six months to January 2016, compared with the same period a year earlier.

  • Virgin Australia has struck a debt deal with its four major shareholders for a year-long loan facility of $425m, giving the company extra short-term flexibility as it embarks on a balance sheet restructure. Air New Zealand, Etihad Airways, Singapore Airlines and Virgin Group are providing loan commitments proportional to their shareholding stakes in the company.

Markets in review

 

Capital Return

   
 

Weekly

CYTD

FYTD

S&P ASX 200

-1.9%

-4.0%

-6.9%

DOW JONES

-0.5%

0.5%

-0.6%

S&P 500

-0.7%

-0.4%

-1.3%

UK FTSE100

-1.3%

-2.2%

-6.4%

FRENCH CAC40

-3.0%

-6.6%

-9.6%

GERMAN DAX

-1.0%

-8.3%

-10.0%

JAPANESE NIKKEI

1.7%

-10.7%

-16.0%

SHANGHAI COMPOSITE INDEX

0.8%

-15.8%

-30.3%

$1 Australian buys you:

   $0.7504
£0.5320
¥4.8850
¥84.6440
€0.6717
$1.1206

Biggest winners and losers last week - by sector

sector performance chart

 

Biggest winners and losers last week - by company

Disclaimer

 
This material is intended for the use of the clients of Pitcher Partners Investment Services only.  It is current at the date of preparation, but may be subject to change.  This document does not constitute financial product advice.  It is of a general nature and has been prepared without taking into account any person’s objectives, financial situation or needs.  Before acting on the information you should consider the appropriateness of it having regard to your objectives, financial situation or needs and seek independent advice.  You should obtain and consider a Product Disclosure Statement in relation to any financial product before making any decision about acquiring the product.  To the maximum extent permitted by law, Pitcher Partners Investment Services Pty Ltd and its representatives will not be liable for any loss or damage incurred by any person directly or indirectly for any use or reliance on this document.

 


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