Evening Wrap: ASX 200 extends gains, Boral tumbles on $50m block trade, Aussie inflation cools

The Index rallies for a third consecutive session led by Defensives, Tech and Resources, Australia's monthly CPI indicators cools to 4.9% in July, Hansen Technologies and Boral experience two sizeable block trades and Chalice Mining's scoping study makes some outlandish commodity price assumptions.

Let's dive in.

ASX 200 Session Chart

ASX 200 higher and finishes near session highs (Source: Market Index)

Markets

The ASX 200 finished higher and near best levels on Wednesday. Most sectors finished higher as risk appetite improved thanks to falling bond yields and a weaker US dollar (which gave the resource sector a boost).

The more informal version: Ah here we go again. A week ago, the market was feeling incredibly bearish and on the verge of re-testing July lows. We've now forgotten about China, the US job market is cooling and taking heat out of bond yields, and I suppose we're back to being bullish again. The problem with such Index strength is that investors often feel locked out of the rally. The ASX 200 is on a three-day winning streak, up 2.56%. Let's see if we can get a strong finish towards the end of the week.

Economy

Australia’s monthly CPI indicator eased to 4.9% in July from 5.4% in June.

• Beat economist expectations of a fall to 5.2%

• “The most significant contributors to the July annual increase were Housing (+7.3%) and Food and non-alcoholic beverages (+5.6%).” – ABS 

• “Reducing the July increase were price falls for Automotive fuel (-7.6%) and Fruit and vegetables (-5.4%).”

• “Electricity prices rose 15.7 per cent in the 12 months to July and increased 6.0 per cent in the month of July,” if you remove the Energy Bill Relief Fund rebates, electricity prices would have increased 19.2%

• Core annual inflation rose 5.8% in July from 6.1% in the previous month

Latest news

Big Block Trades

Two notably block trades took place today:

Hansen Technologies (ASX: HSN) Managing Director Andrew Hansen sold 7.0 million shares or 3.4% of the company's issued capital at $5.40 (stock finished 1.5% lower at $5.39 on Wednesday).

The reason: “The share sale was decided in response to strong investor demand received following the release of the Company’s FY23 Results on 23 August 2023 and enables supportive investors to establish a sizeable position in Hansen in addition to enhancing the stock’s liquidity and free float," said Mr Hansen.

Boral (ASX: BLD) shares tumbled 7.95% to $4.63 after Seven Group (ASX: SVW) sold a 1.0% stake or 11.1 million shares at an average price of $4.90.

The reason: “The share sale was decided in response to strong investor demand received following the release of the Company’s FY23 Results on 23 August 2023 and enables supportive investors to establish a sizeable position in Hansen in addition to enhancing the stock’s liquidity and free float," the company said in a statement.

Is a block trade bad: Not necessarily, but a sizeable sell can often place downward pressure on the stock and weigh on sentiment. If you look at Seven, they acquired 3% of Boral in October 2022 at $2.90 per share. They're taking profits and share price weakness is just a part of the game.

Chalice Mining's Scoping Study Blowup

Chalice Mining (ASX: CHN) shares nosedived 25% on Wednesday following the release of its highly anticipated Gonneville deposit scoping study. You can ready the full summary here.

The main reason for the share price drop was due to:

• Study economic assumed palladium prices of US$2,000 an ounce vs. current spot prices of US$1,250 (palladium will account for 55% of mine revenues)

• Assumed weighted average cost of capital (WACC) of 6.5%

This serves as a reminder to be weary of study economic assumptions and do not take the study results at face value!

Interesting news and movers

Trading higher

• +23.6% Motorcycle Holdings (MTO) – Earnings

• +20.2% Count (CUP) – Earnings

• +9.7% EML Payments (EML) – Upgraded by Wilsons

• +8.5% Tyro Payments (TYR) – Upgraded by Wilsons

• +7.8% Healius (HLS) – Earnings

• +7.1% Brambles (BXB) – Earnings

• +6.7% Southern Cross Electrical (SXE) – Earnings

• +6.5% Aurelia Metals (AMI) – Earnings

• +5.2% Star Entertainment (SGR) – Upgraded by multiple brokers

• +4.5% APM Human Services (APM) – Upgraded by Bell Potter

• +1.3% Kina Securities (KSL) – Earnings

• Iron ore sector move: Grange Resources (+8.4%), Fortescue Metals (+4.5%), Champion Iron (+3.3%), Rio Tinto (+2.1%), BHP (+1.5%)

Trading lower

• -25.2% Chalice Mining (CHN) – Scoping study

• -7.95% Boral (BLD) – Seven block sale of 11.1m shares

• -6.0% Adbri (ABC) – Downgraded by multiple brokers

• -5.6% Ansarada Group (AND) – Earnings

• -4.8% City Chic Collective (CCX) – Earnings

• -3.0% Northern Minerals (NTU) – Placement

• -2.8% Flight Centre (FLT) – Earnings

• -2.0% Kelsian (KLS) – Earnings

Broker notes

UBS take on Brambles (BXB)

• Buy with $15.90 target ($14.15 at 29 Aug close)

• “Overall this looks like a positive announcement with FY23 P&L delivered at the top of the guidance (and FCF after divs comfortably within the 'positive' guidance).”

• “The outlook is also supportive, proving continued operating leverage and FCF conversion in FY24 although the FCF before dividends sounds a bit weaker than we had expected.”

Morgan Stanley’s take on Mineral Resources (MIN) 

• Equal-weight with $70.00 target ($69.48 at 29 Aug close)

• “Despite MIN's growing Li footprint, the company's revenue remains largely driven by its iron ore business, with Mining Services and iron ore mining accounting for 17% and 41% of FY24e revenue, respectively.”

• “This, combined with the aforementioned challenges around the earnings/profitability of the iron ore business given our cost and iron ore price forecasts into FY24 and beyond, largely keeps us on the sidelines for now.”

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