Market Wraps

Evening Wrap: ASX 200 extends decline ahead of Fed decision, energy stocks lose steam

Wed 20 Sep 23, 5:18pm (AEDT)

The S&P/ASX 200 closed 33 points lower, down -0.46%. 

The Index fell for a third straight day and close to recent lows, energy stocks underperformed and pulled back sharply after the recent run, German producer prices fall the most on record, UK's inflation unexpectedly declines and revisiting one of the strongest performing sectors from earlier this year (building materials).

Let's dive in.


Today in Review

Wed 20 Sep 23, 4:27pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,163.3 -0.46%
All Ords 7,361.9 -0.45%
Small Ords 2,752.1 -0.46%
All Tech 2,501.5 -0.13%
Emerging Companies 1,963.4 -1.25%
Currency
AUD/USD 0.6451 -0.04%
US Futures
S&P 500 $4,491.25 +0.03%
Dow Jones $34,830.0 +0.04%
Nasdaq $15,376.0 +0.00%
Name Value % Chg
Sector
Consumer Discretionary 3,128.5 +0.39%
Industrials 6,646.8 +0.27%
Consumer Staples 12,358.2 +0.26%
Financials 6,398.1 +0.03%
Communication Services 1,498.0 -0.10%
Health Care 38,435.3 -0.50%
Utilities 8,475.7 -0.63%
Real Estate 3,036.8 -0.82%
Materials 17,508.4 -1.17%
Information Technology 1,759.4 -1.27%
Energy 11,617.6 -1.82%

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ASX 200 Session Chart

ASX 200 daily chart
ASX 200 falls intraday to finish near worst levels (Source: Market Index)

Markets

  • ASX 200 finished lower and near worst levels on Wednesday

  • ASX 200 fell for a third consecutive session, down 1.6%

  • Energy continued to pullback sharply, with Woodside (-2.1%) near a 2-month low

  • Tech stocks dragged lower by Iress (-4.1%), Life360 (-2.9%) and Xero (-2.8%)

  • Iron ore fell across the board: Fortescue (-1.7%), Rio Tinto (-1.3%) and BHP (-1.0%)

  • Uranium stocks pulled back after the recent run, led by Alligator Energy (-20.6%), Lotus Resources (-8.8%), Bannerman Energy (-4.7%) and Paladin Energy (-4.5%)

Economy

  • Argentina’s economy shrinks for the first time in nearly three years (Reuters)

  • Korea producer prices up 0.9% in August amid higher oil prices (Korea Times)

  • Japan exports fall for second month as global demand weakens (Bloomberg)

  • China keeps benchmarks rates unchanged as economy finds footing (Reuters)

  • German producer prices post biggest decline on record (Reuters)

  • UK inflation unexpectedly falls despite increase in fuel prices (Bloomberg)


Latest news


Retail Pains

KMD Brands (ASX: KMD) (aka Rip Curl, Kathmandu and Oboz) posted some fairly sold FY23 results on Wednesday.

  • Sales growth of 12.6% to $1.1bn

  • Gross margins up 20 bps to 59.1%

  • Underlying net profit up 8.6% to $43.3m

But its FY24 outlook flagged yet another retailer with negative sales growth, with Group sales for August 2023 down 6.4% compared to the prior period.

So what'll happen to retails when February and August reporting season comes around in 2024? (Assuming sales don't dramatically improve)

The Trend is Your Friend (Until It Isn't)

The building materials sector rallied in unison back in late May, with names like James Hardie (ASX: JHX), CSR (ASX: CSR) and Boral (ASX: BLD) all breaking out to 52-week highs around the same time.

They also happened to be some of the best performing stocks in August reporting season. But now we're beginning to witness a sector wide decline.

A name like Boral rallied as much as 16% post earnings. It then traded sideways for about three weeks before a sharp drop (one of its major shareholders sold down its stake).

While others like James Hardie and CSR sliced through key areas (e.g. such as the 20-day moving average (red) with relative ease.

The bottom line: Even the strongest performing sectors can cave in (especially in this kind of choppy market). If the pullback is not well supported, things can turn sour pretty quick.

JHX
James Hardie daily chart (Source: TradingView)
BLD
Boral daily chart (Source: TradingView)
CSR
CSR daily chart (Source: TradingView)

Interesting news and movers

Trading higher

  • +20.8% Sezzle (SZL) – Business update

  • +4.2% Infomedia (IFM) – Block trade (Tue)

  • +2.9% Aristocrat Leisure (ALL) – Launches new arcade game in Europe

  • +1.3% Magnetic Resources (MAU) – Placement at 72 cents per share

Trading lower

  • -21.1% Blue Energy (BLU) – Queensland gov’t declines application

  • -5.1% Melbana Energy (MAY) – Appraisal well update

  • -4.6% KMD Brands (KMD) – $2.4%

  • -2.4% Aeris Resources (AIS) – Drilling update


Broker notes

A few standalone Macquarie notes of interest:

Abacus Group (ABG) – Outperform with $1.35 target ($1.04 at 19 Sep close)

  • “ABG completed the de- stapling of its self storage portfolio earlier in FY24, and we now forecast FFO of 9.3cps which is toward the midpoint of the guidance range.”

  • “ABG is currently trading at a ~50% discount to NTAps, which is the steepest discount across our coverage.”

  • “In our view, valuation is overly pessimistic despite concerns in the office portfolio and with pro forma gearing now at ~28%.”

New Hope (NHC) – Underperform with $4.20 target ($6.17 at 19 Sep close)

  • “The FY23 result was largely as expected with Ebitda of A$1.7b and the cash position of A$731m pre-reported. The final dividend was below expectations”

  • “We see dividend headwind into FY24 and FY25 with yields decreasing to ~5%. Guidance also highlighted a slower ramp-up at New Acland and we note that inflationary pressures remain.”

Transurban (TCL) – Outperform with $13.97 target ($13.18 at 19 Sep close)

  • “NSW tolling policy shifts from paying 40% of the toll above $1,608 pa to capping costs at $60/week and lowering truck multiplier to 2x on M5E & M8.”

  • “TCL remains a high-quality defensive benefiting from population growth (1.5-2.0%) and has the road capacity to capture that growth.”

  • “Combined with the openings, cashflow would grow at ~6.6% pa and dividend at 4.3% pa for the next five years.”


Scans 

Top Gainers

Code Company Last % Chg
AL8 Alderan Resources... $0.013 +62.50%
MKL Mighty Kingdom Ltd $0.013 +30.00%
OZM Ozaurum Resources... $0.115 +27.78%
OSM Osmond Resources Ltd $0.125 +25.00%
RBX Resource Base Ltd $0.175 +25.00%
View all top gainers

Top Fallers

Code Company Last % Chg
ERG Eneco Refresh Ltd $0.014 -26.32%
WEC White Energy Comp... $0.06 -25.00%
BBX BBX Minerals Ltd $0.031 -22.50%
BLU Blue Energy Ltd $0.015 -21.05%
AGE Alligator Energy Ltd $0.054 -20.59%
View all top fallers

52 Week Highs

Code Company Last % Chg
AL8 Alderan Resources... $0.013 +62.50%
NTD National Tyre & W... $0.855 +20.42%
FRM Farm Pride Foods Ltd $0.14 +16.67%
OEL Otto Energy Ltd $0.02 +5.26%
ABB Aussie Broadband Ltd $4.08 +5.16%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
WEC White Energy Comp... $0.06 -25.00%
BBX BBX Minerals Ltd $0.031 -22.50%
BLU Blue Energy Ltd $0.015 -21.05%
HFY Hubify Ltd $0.015 -16.67%
ICG Inca Minerals Ltd $0.015 -16.67%
View all 52 week lows

Near Highs

Code Company Last % Chg
USD Betashares U.S. D... $14.99 -0.27%
PCI Perpetual Credit ... $1.04 +0.48%
MKAX Montaka Global Ex... $2.88 0.00%
IKO Ishares MSCI Sout... $98.59 -0.36%
WVOL Ishares Edge MSCI... $36.72 -0.49%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
PGC Paragon Care Ltd $0.165 0.00%
OBL Omni Bridgeway Ltd $1.955 +2.63%
SQ2 Block Inc $76.825 -2.68%
FAR FAR Ltd $0.385 -2.53%
CUV Clinuvel Pharmace... $15.45 -1.22%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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