Jul.26 — The Trump administration’s decision to shutter the Chinese consulate in Houston followed years of frustration about what it says were criminal and covert activity directed by Beijing to steal trade secrets and carry out malign influence operations across the U.S. Tom Mackenzie reports on “Bloomberg Daybreak: Australia.”
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The Perpetual Limited (ASX: PPT) share price won’t be going anywhere today after the fund manager requested a trading halt.
Perpetual requested a trading halt this morning while it undertakes an equity raising to fund a major acquisition.
According to the release, Perpetual has entered into an agreement with BrightSphere Investment Group to acquire its 75% interest in Barrow Hanley for US$319 million (A$465 million).
Barrow Hanley is a diversified investment manager based in Dallas, Texas with funds under management (FUM) of approximately US$44.1 billion (A$63.9 billion) across 21 key strategies.
Its team invests with a value orientation across US equities, global equities, global emerging markets equities, and fixed income strategies.
Management notes that the acquisition is consistent with its strategy to build world-class investment and distribution capability and brings together two complementary investment management brands.
It is expected to more than triple Perpetual’s FUM from A$28.4 billion to A$92.3 billion and add 21 key new strategies across asset classes, strategies, and geographies.
On a pro forma basis, post the acquisitions of Barrow Hanley and Trillium (which completed on 30 June), Perpetual’s FUM will be comprised of 14% Australian equities, 48% US equities, 11% global equities, and 27% cash & fixed income.
Perpetual Chief Executive Officer and Managing Director, Rob Adams, commented: “This is a compelling acquisition. It provides Perpetual with world-class investment teams, diversifies our client base by sector and geography, and presents us with significant growth opportunities in the Australian market and a formidable platform to scale our business internationally.”
To fund the acquisition, Perpetual is launching a fully underwritten institutional placement of A$225 million at a fixed price of A$30.30 per share. This represents a 9.8% discount to its last close price.
It is also aiming to raise a further $40 million via an underwritten share purchase plan and has agreed a new debt facility of A$284 million (US$195 million) to cover the balance.
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Australia’s leading gold miners such as Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) will be on watch on Monday after the gold price raced to a record high on Friday evening.
According to CNBC, the precious metal’s August futures contract rose 0.4% to settle at US$1,897.50 per ounce. This was the sixth day in a row of gains and means the gold price has now also recorded a seven-week winning streak.
Since then, according to Bloomberg, the gold price has continued to rise and is now trading comfortably above US$1,900 an ounce at a lofty US$1,929.70.
Traders have been buying gold this year due to the coronavirus pandemic, interest rate cuts, and, most recently, increasing tensions between the United States and China.
It was the latter that sent the gold price beyond the US$1,900 an ounce mark, much to the delight of shareholders of Evolution Mining Ltd (ASX: EVN), Resolute Mining Limited (ASX: RSG), and Saracen Mineral Holdings Limited (ASX: SAR).
Their shares could be on the rise today after the elevated gold price boosted profit margins even further.
CNBC reports that tensions between the two superpowers rose last week after China ordered the U.S. to close its Chengdu-based consulate. This was in response to the U.S. closing the Houston-based Chinese consulate earlier in the week.
UBS analyst Mark Haefele, commented: “US-China tensions continue to escalate, which prompted a risk-off move in markets on Thursday and Friday.”
But he doesn’t expect it to stop there and has suggested that the political uncertainty could take the gold price beyond US$2,000 an ounce this year.
This is likely to be supported by a weakening U.S. dollar, which fell 1% last week and has now recorded declines for five straight weeks.
“While we think gold will continue to be supported by rising geopolitical tensions, in our view the primary drivers of the gold price are its negative correlation to real interest rates and the dollar,” Haefele added.
I wouldn’t necessarily go piling into all of the gold miners as I feel a lot of the gold price strength is already priced in, however I still see value in some gold miners.
The one I would buy is Newcrest. I think it is the best in the industry and could still go higher from here.
UBS certainly believes this is the case. Last week it slapped a buy rating and $38.40 price target on its shares.
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The Australian share market ended last week lower with the S&P/ASX 200 (ASX:XJO) falling 0.2%. After hitting a four-month high on Tuesday, the market slid lower over the remainder of the week. News around a potential COVID-19 vaccine buoyed the market early, but economic data dampened spirits towards the end of the week. The government announced the extension of its stimulus program which gave investors some comfort, but continuing high numbers of COVID-19 cases in Victoria is blunting optimism.
The information technology sector finished the week marginally higher with the S&P/ASX All Technology Index (ASX: XTX) up just under 2%. The healthcare sector, however, was down, as were industrials. A number of blue chip shares dropped last week, including both Coles Group Ltd (ASX: COL), which fell 2% and Woolworths Group Ltd (ASX: WOW), which fell 0.6%. Miners and telecommunications shares were also weak with Telstra Corporation Ltd (ASX: TLS) falling 3.8% and BHP Group Ltd (ASX: BHP) down 2.2%. On that note, let’s take a look at the ASX 200’s biggest share price fallers last week.
The Alumina share price fell 7.2% last week to finish the week at $1.67. There was no news out of the aluminium and bauxite miner to prompt the fall in the share price, however the price had risen strongly the previous week. The previous share price rise was prompted by the announcement Alumina had received more cash than expected from its aluminium joint venture.
Alumina owns 40% of Alcoa World Alumina & Chemicals (AWAC), the western world’s largest alumina business. AWAC achieved record quarterly daily production despite the challenges of the COVID-19 pandemic and Alumina received $58.6 million of net cash distributions. The price of alumina has decreased since the start of 2020, but has risen from a low of $225 per tonne in April to $284 per tonne as at 16 July. Escalating political tensions between the United States and China do not bode well for the price, however, as these tensions hurt demand last year.
The Cooper Energy share price fell 7.1% last week to close the week at 39 cents. Cooper Energy is an oil and gas company supplying customers including AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG). Cooper Energy dropped its June quarterly report on Thursday which showed record quarterly production and revenue. But the share price dropped sharply on Friday regardless, with the figures disappointing investors given the share’s 16% price rise over the preceding month.
Cooper Energy reported a 118% increase in quarterly production and 61% increase in quarterly revenue, which reached $24.1 million, up from $15 million the previous quarter. This increase was primarily due to higher gas sales thanks to the first full quarter’s supply from the Sole gas field which commenced production in March 2020. Full year production increased 19% and full year sales revenue 3% to $78.1 million. Cash at the end of the quarter was $131.2 million, down from $143.3 million at the beginning of the quarter. Net debt was $98.2 million at 30 June, up from $53.9 million at 30 June 2019.
The Western Areas share price dropped 6.6% last week to finish the week at $2.53. Western areas is a nickel producer with two high-grade nickel mines located in Western Australia and also has a third mine in development. Western Areas released its quarterly activities report last week which showed the company produced 20,926 nickel tonnes in concentrate, 99.7% of guidance. Unplanned downtime in June relating to power supply interruptions caused the variance.
The nickel price is well down from highs seen a year ago but has gained ground from its low in March. The average nickel price in the June quarter was $8.50 per pound, slightly up on the March quarter’s $8.40 per pound. Western Areas reports that it finished the FY20 financial year with $144.8 million cash at bank and no debt. The most significant cash flow item for the quarter was the $28.6 million paid for its 19.9% investment in Panoramic Resources Ltd (ASX: PAN).
The TPG share price fell 6.1% last week to close the week at $8.02. The share price fell as low $7.50 on Friday but then bounced back somewhat, perhaps on speculation it had been oversold. There was no news out of the telecommunications provider to prompt the price fall. But the telecommunications sector on the whole was out of favour last week, with the S&P/ASX 200 Communication Index (ASX: XTJ) falling 2.3%.
TPG is the result of the $15 billion merger with Vodafone, a deal that was first announced in August 2018. It took nearly two years to implement the deal after the ACCC opposed the merger. Approval from the Federal Court in February allowed the two to join forces. Previously, TPG was missing a proper mobile arm and Vodafone missing a fixed line footprint. The merger allows them both to fulfil their ambitions.
The Unibail share price dropped 6% last week to finish the week at $3.89. There was no news out of the shopping centre operator to prompt the fall in the share price, however investor concerns around the role of its commercial properties in a post-COVID-19 world may have prompted the sell off. Unibail runs retail properties, convention centres, and office buildings in Europe and North America. The Unibail share price is now down 61% over the past year.
The fall in Unibail’s share price means it was removed from the S&P/ASX 100 (ASX: XTO) in the most recent quarterly rebalance. Although the majority of the company’s shopping centres have reopened, performance has been mixed across jurisdictions. With 86% of Unibail’s portfolio in retail assets, the ongoing economic downturn is likely to have a significant impact on its tenants.
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Journal Editorial Report: The week’s best and worst from Jason Riley, Mary O’Grady and Dan Henninger. Image: Associated Press
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The S&P/ASX 200 Index (ASX: XJO) has endured one of its more volatile weeks in recent months last week as ASX 200 bulls and bears struggled for control. The ASX 200 remains above the psychologically-important 6,000 point threshold, but only just — closing at 6,024 points last Friday. That was despite the ASX 200 touching a low 0f 5,991 points on Monday, and a high of 6,156 points on Wednesday.
The latter represents the highest point the index has touched since the coronavirus pandemic smashed global markets back in March, giving you some idea of how wildly the markets were swinging last week. Between Monday afternoon and Wednesday morning, ASX 200 shares gained more than 2.7%. Conversely, between Wednesday morning and Thursday afternoon, the markets gave back around 1.5% of those gains.
By market close on Friday, the ASX 200 ‘only’ lost 0.16% for the week. But it was open warfare between ASX bulls and bears in the meantime.
Sentiment surrounding possible developments of a coronavirus treatment or vaccine, as well as an extension of government stimulus programs, were the primary positive influences for the ASX last week. We heard from both the United Kingdom-based company AstraZeneca and the United States-based Moderna that progress is being made on a potential treatment or vaccination for the coronavirus, which is of course extremely exciting news.
On the other hand, coronavirus cases in Victoria continue to be at highly concerning levels, and the situation in New South Wales also remains fluid. This put a dampener on the vaccine excitement from earlier in the week and was the main factor pulling the ASX 200 back to Earth from Wednesday onwards.
We also got a sobering fiscal update from the Treasurer last Thursday. Markets initially applauded the government’s decision on Tuesday to extend its JobKeeper and coronavirus supplement safety net payments until at least March 2021 (albeit with reduced and tiered payment rates and tightened eligibility). But the reality of an almost-unfathomable $85.8 billion budget deficit for the 2020 financial year (and a projected deficit of $184.5 billion in FY21) also began to sink in.
All in all, it was a week of high drama in multiple arenas last week, and the market responded with some drama of its own in turn.
As I flagged earlier, the ASX 200 ended the week 0.16% in the red after starting out at 6,033.6 points and closing on Friday at 6,024 points. Monday saw a 0.5% slump, whereas Tuesday brought the punch back to the party with a 2.6% gain. But Wednesday saw the bears regain control with a 1.3% slide. Thursday saw a modest 0.3% gain, but Friday sealed the week’s red fate with another 1.1% loss.
Meanwhile, the All Ordinaries (INDEXASX: XAO) also had a flat week, starting at 6,144.9 points and finishing at 6,148 points for a week-to-week gain of 0.05%.
Time for things to get interesting with our weekly winners and losers. As per usual, we shall start with the losers:
Worst ASX 200 losers |
% loss for the week
|
| Alumina Limited (ASX: AWC) |
(7.2%) |
| Cooper Energy Ltd (ASX: COE) |
(7.1%) |
| Western Areas Ltd (ASX: WSA) |
(6.6%) |
| TPG Telecom Ltd (ASX: TPG) |
(6.1%) |
Well, today we have 2 ‘hero-to-zero’ shares (not literally zero) in Alumina and Cooper Energy, who both made the previous week’s winners list. There appeared to be no major news out of either company last week, so we can probably put these large losses down to investors taking some profits off the table after strong gains the week prior.
Western Areas is a nickel producer who gave a disappointing market update on Friday.
The newly merged TPG was also on investors’ hit list. Perhaps, with nothing to look forward to (specifically in the mergers and special dividends department), investors have gotten bored of the newly-wed telco.
Now let’s take a look at the winners from last week:
Best ASX 200 gainers |
% gain for the week
|
| Resolute Mining Limited (ASX: RSG) |
17.2% |
| AP Eagers Ltd (ASX: APE) |
16.8% |
| Orocobre Limited (ASX: ORE) |
13.2% |
| QBE Insurance Group Ltd (ASX: QBE) |
11% |
ASX gold miner Resolute takes out last week’s crown with a hefty gain. Investors were keen to get hold of Resolute shares after the company reported a positive quarterly update with increased gold production. A near-record high gold price wouldn’t have hurt either.
Car dealership owner AP Eagers was also in favour after some positive brokering coverage.
Lithium miner Orocobre was also a buyer target, despite this company’s volatile performance in 2020 so far and no real news being released last week. Orocobre shares are now up more than 70% since May, so perhaps this is a case of investors jumping on an accelerating train here.
It continues to be a moving arena for ASX shares, so (frankly) who knows what twists and turns this week will bring. For a start, all eyes will continue to be on coronavirus case levels in Australia (and particularly Victoria) as we start a new week.
The Aussie dollar also continues to shine, so it will be noteworthy to see whether it climbs above its current ~71 US cents level this week.
Turning to ASX 200 shares, we saw some fairly heavy selling of ASX bank shares like Commonwealth Bank of Australia (ASX: CBA) on Friday, so it will be interesting to see how the banks open this week. Insurance giant Insurance Australia Group Ltd (ASX: IAG) announced it would be the latest ASX 200 share to cancel its dividend on Friday – highlighting what a perilous year 2020 has been for dividend investors so far.
And I’ll personally be keeping an eye on the gold price as it approaches the all-time high of US$1,920 per ounce it hit back in 2011.
Before we go, here is a look at how the major ASX 200 blue chip shares are looking as we prepare for the new week:
ASX 200 company |
Trailing P/E ratio |
Last share price |
52-week high |
52-week low |
| CSL Limited (ASX: CSL) |
44.65 |
$277.02 |
$342.75 |
$215.24 |
| Commonwealth Bank of Australia (ASX: CBA) |
13.22 |
$72.86 |
$91.05 |
$53.44 |
| Westpac Banking Corp (ASX: WBC) |
13.33 |
$17.76 |
$30.05 |
$13.47 |
| National Australia Bank Ltd. (ASX: NAB) |
16.14 |
$17.98 |
$30.00 |
$13.20 |
| Australia and New Zealand Banking Group Limited (ASX: ANZ) |
12.45 |
$18.29 |
$28.79 |
$14.10 |
| Woolworths Group Ltd (ASX: WOW) |
19.23 |
$38.63 |
$43.96 |
$32.12 |
| Wesfarmers Ltd (ASX: WES) |
24.04 |
$46.36 |
$47.42 |
$29.75 |
| BHP Group Ltd (ASX: BHP) | 14.24 |
$37.08 |
$41.98 |
$24.05 |
| Rio Tinto Limited (ASX: RIO) |
15.06 |
$102.92 |
$107.79 |
$72.77 |
| Coles Group Ltd (ASX: COL) |
20.00 |
$17.78 |
$18.32 |
$13.10 |
| Telstra Corporation Ltd (ASX: TLS) |
19.21 |
$3.33 |
$4.01 |
$2.87 |
| Transurban Group (ASX: TCL) |
162.03 |
$13.70 |
$16.44 |
$9.10 |
| Sydney Airport Holdings Pty Ltd (ASX: SYD) |
30.18 |
$5.40 |
$9.30 |
$4.37 |
| Newcrest Mining Limited (ASX: NCM) |
33.98 |
$34.60 |
$38.87 |
$20.70 |
| Woodside Petroleum Limited (ASX: WPL) |
40.82 |
$20.99 |
$36.28 |
$14.93 |
| Macquarie Group Ltd (ASX: MQG) |
14.80 |
$125.79 |
$152.35 |
$70.45 |
And finally, here is the lay of the land for some leading market indicators:
After last week’s swings, I’m reminded how much short-term sentiment can sway the ASX 200 sharemarket — and equally how little these short-term swings really matter in the long-run. So don’t let volatility get you down Fools! It’s our constant reminder that the share market is a place where cool heads always prevail in the end. So, as always, stay safe out there, stay rational and stay Foolish!
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Sebastian Bowen owns shares of National Australia Bank Limited, Newcrest Mining Limited, and Telstra Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Transurban Group, Wesfarmers Limited, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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On Friday the S&P/ASX 200 Index (ASX: XJO) finished the week on a disappointing note. The benchmark index fell 1.15% to 6,024 points.
Will the market be able to bounce back from this on Monday? Here are five things to watch:
The ASX 200 looks set to drop lower this morning after a poor finish to the week on Wall Street. According to the latest SPI futures, the benchmark index is expected to open the week 27 points or 0.45% lower. On Wall Street the Dow Jones fell 0.7%, the S&P 500 dropped 0.6%, and the Nasdaq fell 0.9%.
Energy producers such as Santos Ltd (ASX: STO) and Woodside Petroleum Limited (ASX: WPL) could start the week with a small gain. According to Bloomberg, the WTI crude oil price climbed 0.55% to US$41.29 a barrel and the Brent crude oil price rose 0.1% to US$43.34 a barrel. This was the third week out of four that oil prices have recorded weekly gains.
Gold miners including Newcrest Mining Limited (ASX: NCM) and Northern Star Resources Ltd (ASX: NST) could be on the rise on Monday after the gold price strengthened further. According to CNBC, the spot gold price rose 0.4% to US$1,925.20 an ounce. The gold price closed at a record high amid rising tensions between the U.S. and China.
Analysts at Goldman Sachs have been looking through non-bank financial shares ahead of earnings season and are recommending which ones to buy and which ones to sell. Top of the buy list is the QBE Insurance Group Ltd (ASX: QBE) share price with a conviction buy rating and an $11.52 price target. This price target implies potential upside of 11% excluding dividends. It believes QBE is well positioned to capitalise on the hardening cycle.
At the bottom of Goldman Sachs’ list among the non-bank financials is the ASX Ltd (ASX: ASX) share price. It has a sell rating and $70.29 price target on the stock exchange operator’s shares. This price target implies potential downside of 16% for its shares. It is bearish on ASX Ltd due to emerging rates business headwinds and its peak valuation belief.
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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