Market Wraps

Evening Wrap: ASX 200 hits 5-day win streak, BOQ shares hit 16-month low + CSL's lackluster AGM

Wed 11 Oct 23, 5:06pm (AEDT)

The S&P/ASX 200 closed 48 points higher, up 0.68%. 

The Index is up for a fifth consecutive session amid a risk-on session led by technology and retail stocks, Bank of Queensland shares tumble on a worse-than-expected FY23 result (and we break down everything you need to know), CSL shares finish flat on a rather lacklustre AGM, two brokers give their take on lithium and eyes on US PPI and FOMC tonight.

Let's dive in.


Today in Review

Wed 11 Oct 23, 4:17pm (AEDT)

Name Value % Chg
Major Indices
ASX 200 7,088.4 +0.68%
All Ords 7,281.2 +0.69%
Small Ords 2,705.5 +0.76%
All Tech 2,521.3 +1.29%
Emerging Companies 1,902.0 +0.81%
Currency
AUD/USD 0.642 -0.18%
US Futures
S&P 500 $4,392.75 +0.03%
Dow Jones $33,930.0 -0.02%
Nasdaq $15,293.5 +0.15%
Name Value % Chg
Sector
Information Technology 1,768.9 +1.70%
Consumer Discretionary 3,077.5 +1.23%
Industrials 6,515.2 +1.12%
Materials 17,322.4 +0.97%
Communication Services 1,520.2 +0.90%
Real Estate 2,966.4 +0.71%
Energy 11,428.4 +0.68%
Financials 6,333.6 +0.40%
Consumer Staples 12,400.6 +0.17%
Utilities 8,661.9 +0.14%
Health Care 37,859.9 +0.00%

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ASX 200 Session Chart

Asx 200 intraday
ASX 200 rallied intraday to finish at best levels (Source: Market Index)

Markets

The ASX 200 extends its win streak to five, up 2.9% from the 4 October low. The market continues to make V-shaped rallies off of extreme oversold levels – Like it has been all year. It's been able to muster up strength from levels where investors begin to think 'oh my god is something about to break,' to which nothing has yet to break. The Index is rallying into some key overhead resistance levels like 7,100 and the 50-day moving average, so let's how it behaves around these key areas.

Sector performance was very risk-on as Technology and Discretionary led to the upside. We'll talk more about underperforming sectors in the form of Healthcare (CSL's AGM) and Financials (Bank of Queensland FY23 results) below.

Economy

No major economic announcements. US PPI data is due tonight at 10:30 pm AEDT followed by FOMC minutes at 4:00 am.


Latest news


CSL: Forget Vifor and Look At Our Track Record

CSL (ASX: CSL) finished 0.3% lower on Tuesday, reflecting a rather lacklustre AGM.

  • Reiterated FY24 guidance: Which was revenue growth of 9-11% and NPATA growth between 13-17%

  • A brief note on Vifor: Not much to be said about the $18bn kidney care business that was bought last October. The company said "our focus is on unlocking the value and the growth within this business – a business we are yet to fully leverage the value of the broader CSL network."

  • The three decade track record: CSL flexed its track record. All respect to this market darling.

CSL
Source: CSL

Bank of Queensland: Takeaways and Learnings

Bank of Queensland (ASX: BOQ) dropped its not-so-great-but-widely-expected FY23 results today. I'll be breaking down a few things including: How it fared against broker expectations, short interest and intraday price action.

By the numbers:

  • Cash earnings of $450 million, down 8% from FY22

    • Below consensus expectations of $470 million (-4.3%)

  • Net interest margin of 1.69%, down 2 bps

    • Missed consensus expectations of 1.71%

  • Housing loan growth of -$0.7 billion, down 1%

  • Cash earnings per share of 68.4 cents, down 10%

    • Missed consensus expectations by 2-7%

  • Cash operating expenses of $1.0 billion, up 8%

  • FY24 dividend forecast of 67.5 cents per share

    • Missed consensus expectations by 5-9.5%

The results flagged some rather well-documented headwinds as banks must offer more attractive rates to bolster deposits while offering greater discounts to those seeking loans amid still-sticky inflation.

The outlook was rather dire:

  • "Slower credit growth whilst BOQ continues to prioritise economic return over volume growth in a highly competitive environment."

  • "We anticipate mortgage pricing will need to adjust to provide returns above banks cost of capital."

  • "Deposit competition to remain intense as industry Term Funding Facility refinancing continues."

But everyone was already bullish: All major brokers including Citi, Morgan Stanley, Macquarie, Goldman Sachs and JPMorgan were all Sell-rated on BOQ with price targets ranging from $5.0 to $5.60.

Why short interest is key: So everyone is bearish heading into the result (which came out a little worse than expected). But the other thing to note is how BOQ short interest has climbed from around 6% in July to 7.6% in October.

2023-10-11 16 08 04-ShortMan - Short position graph for BOQ
Source: Shortman

Why this matters: Stocks that have a high short interest tend to trade in a rather volatile fashion when such announcements drop. Some general examples include:

  • High short interest but results were better-than-expected: A major squeeze like Domino's Pizza during its FY23 results (opened -5.3% lower but finished that session 11.8% higher)

  • High short interest and results were bad: A gap down, followed by a brief short squeeze. The market will then decide on a direction.

Bank of Queensland was a good example of the latter.

  • Open: Gapped down around 2.0%. The candle charts show a brief spike to breakeven in the second minute of trade

  • The chop: The stock would chop around the $5.55 level for a long while. Though to around noon. The order book was extremely thick around $5.50 to $5.55

  • The break: It would finally give up this $5.50 level and close near worst levels of $5.35

BOQ
Bank of Queensland intraday chart (Source: TradingView)

Interesting news and movers

Trading higher

  • +5.6% SRG Global (SRG) – Contract award

  • +3.1% Syrah Resources (SYR) – Solar & Battery Update for Balama

  • +2.9% Argosy Minerals (AGY) – Rincon Project Update

  • +2.6% Lynas (LYC) – Goldman Sachs upgrade

Trading lower

  • -37.5% Kazia Therapeutics (KZA) – ASX delisting

  • -7.4% Bank of Queensland (BOQ) – Earnings


Broker notes

Morgan Stanley on lithium:

  • “We stay bearish on lithium here, forecasting China lithium carbonate price to fall to US$22,000 a tonne by 1Q24 and US$20,000 by 4Q24.”

  • “Upside risks: Outperforming EV volumes and underperforming supply on weakening margins would tighten the balance.. An El Nino event could cause heavy rainfall in the Atacama Desert , reducing output.”

UBS on lithium:

  • “With Chinese lithium carbonate futures prices now at ~RMB150,000/t, spodumene prices from the various PRA continue to fall.”

  • “We recently downgraded our average forecast for the remainder of FY24 to US$2,500/t, but note market consensus appears too high for PLS's 1H FY24 realised price.”

  • “Until the pricing cycle turns we continue to prefer IGO, with its low cost, high grade product and lagged contract structure offering some ST protection.”


Scans 

Top Gainers

Code Company Last % Chg
ZAG Zuleika Gold Ltd $0.017 +54.55%
KP2 Kore Potash Plc $0.011 +37.50%
5EA 5E Advanced Mater... $0.48 +29.73%
DXB Dimerix Ltd $0.205 +28.13%
BEZ Besra Gold Inc $0.165 +22.22%
View all top gainers

Top Fallers

Code Company Last % Chg
KZA KAZIA Therapeutic... $0.10 -37.50%
BCT Bluechiip Ltd $0.026 -23.53%
CR1 Constellation Res... $0.12 -20.00%
SRJ SRJ Technologies ... $0.082 -18.00%
VN8 VONEX Ltd $0.02 -16.67%
View all top fallers

52 Week Highs

Code Company Last % Chg
KRR King River Resour... $0.017 +13.33%
STK Strickland Metals... $0.088 +7.32%
3DA Amaero Internatio... $0.31 +6.90%
SNZ Summerset Group H... $9.75 +5.75%
FFI FFI Holdings Ltd $4.99 +5.72%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
IAM Income Asset Mana... $0.10 -13.04%
RHY RHYTHM Bioscience... $0.27 -11.48%
WC1 West Cobar Metals... $0.068 -9.33%
AQD Ausquest Ltd $0.012 -7.69%
BAT Battery Minerals Ltd $0.026 -7.14%
View all 52 week lows

Near Highs

Code Company Last % Chg
VLUE Vaneck MSCI Inter... $23.99 +0.67%
WHF Whitefield Indust... $5.20 -0.95%
SLA Silk Laser Austra... $3.32 0.00%
IIND Betashares India ... $10.90 +0.65%
XARO Activex Ardea Rea... $24.40 -0.61%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
OBL Omni Bridgeway Ltd $1.645 +3.46%
IXI Ishares Global Co... $87.56 +0.88%
SQ2 Block Inc $71.55 +3.95%
WAX Wam Research Ltd $1.04 0.00%
NPR Newmark Property ... $0.98 +0.51%
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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