Evening Wrap: ASX 200 tumbles, BHP trades ex-dividend + Goldman Sachs' mid cap picks

The Index marked its worst day in three weeks, all 11 sectors closed in negative territory, Australia's trade surplus narrows to $8.0 billion in July, Audinate CEO offloads shares right before a capital raise and Goldman's review of Small & Mid Cap performance during reporting season (and where to from here).

Let's dive in.

ASX 200 Session Chart

ASX 200 falls intraday and finishes near worst levels (Source: Market Index)

Markets

The ASX 200 finished lower and near worst levels. It was another heavy session with broad-based weakness. Resources sold off after the recent run and amid renewed US dollar strength.

The fall for Materials was exaggerated by BHP (-5.2%) trading ex-dividend. But even then, names like South32 (-3.1%), Rio Tinto (-2.4%) and Fortescue (-2.0%) all pulled back sharply.

As we noted on Wednesday, such market-wide weakness and an uptick in volatility is not the best look. But that's what continued to unravel today. This serves as a reminder of current choppy market conditions – Where things are running hard one moment and then nosediving the next.

Economy

Australia’s trade surplus eased to $8.0bn in July, down from $10.3bn in June.

• Goods and services exports fell 2.0%, driven by gold

• Goods and services imports rose 2.5% driven by non-industrial transport equipment

China’s trade surplus fell to $68.4bn in August from $80.6bn in July. 

• Imports slipped 7.3% year-on-year, less than the 9% drop expected by analysts

• Exports fell 8.8% year-on-year, less than the 9.2% drop expected by analysts

Latest news

Keeping an Eye Out for Insider Trades

It's always worth keeping an eye out for insider moves, especially if its from the C-Suite.

Audinate (ASX: AD8) has been a massive runner, up 52% since the start of August. A 'Change of Director's Interest Notice' on Wednesday flagged that co-founder and CEO Aidan Williams had sold 51,702 shares at $13.66 per share ($706,250) on 28 August, near recent record highs of $14.49.

On Thursday, the company went into a trading halt to raise $50 million (approximately 4.9% of existing issue capital) at a 9.0% discount to its last traded price.

Audinate 12-month price chart (Source: Market Index)

Interesting news and movers

Trading higher

• +9.0% Liontown Resources (LTR)

• +7.9% Chalice Mining (CHN) – Upgraded by UBS

• +3.2% Austal (ASB) – Awarded $91.5m US Navy Contract

• +3.0% EML Payments (EML)

• +2.6% Strike Energy (STX) – Lawyering on track to startup

Trading lower

• -10.5% Arafura Rare Earths (ARU) – Pullback after +16% in last three

• -5.9% McMillan Shakespeare (MMS) – Ex-dividend

• -4.7% Accent Group (AX1)

• -5.4% 29Metals (29M) – Continuation selloff

• -5.0% Neometals (NMT) 

• -3.5% Australian Strategic Metals (ASM)

• -4.4% Allkem (AKE)

• Coal sector move: Coronado Global (-5.7%), Terracom (-3.8%), Whitehaven Coal (-3.0%), Stanmore (-2.9%), New Hope (-1.5%)

• Uranium sector move: Terra Uranium (-33.3%), 92Energy (-6.7%), Deep Yellow (-6.4%), Bannerman Energy (-6.1%), Elevate Uranium (-5.8%), Paladin Energy (-3.8%)

Broker notes

Goldman’s review of Small & Mid Cap reporting season:

• “FY23 earnings – better than feared. In general, management teams called out relatively strong demand backdrops despite rising interest rates and concerns regarding a potential economic slowdown.”

• “Technology companies highlighted that the buoyant conditions seen across FY23 have continued into FY24 (DTL, RDY, HSN), while the wave of artificial intelligence (AI) has started to have a tangible impact on upstream data centre operators (MAQ) and distributors (DDR).”

• “Residential real estate is also showing some stabilisation after a tough FY23 (LIC, INA, MGH).”

• Where to from here: “While we did not anticipate the short-term re-rating of a number of more cyclically exposed names, our preference remains companies with a clear medium-term growth runway, trading on reasonable valuations.”

• These picks include: Macquarie Telecom (MAQ), Lifestyle Communities (LIC), ReadyTech (RDY), IDP Education (IEL), Life360 (360) and TechnologyOne (TNE)

Macquarie on Australian coal miners:

• “New South Wales has announced a 2.6% increase in coal royalties from 1 July 2024 … The royalty increase (while expected by the market) was lower than anticipated and not as draconian as those imposed in Queensland.”

• “We make modest decreases to EPS forecasts on the royalty increase impact. We prefer exposure to BHP given growth in iron ore and copper.”

Scans