Evening Wrap: Real estate and tech stocks rally + How does the ASX 200 perform in August?

The S&P/ASX 200 closed 54 points higher, up 0.73%. 

The ASX 200 rallied for a third consecutive session with gains from all sectors except mining and energy, Megaport shares rallied more than 10% after posting strong preliminary results, small-cap nickel miner Panoramic taps investors for $40 million at a 45% discount and a glance at how the ASX 200 performs in August (from a historical perspective).

Let's dive in.

ASX 200 Session Chart

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

Markets

The Index is making a break for it, up for a third straight session and 1.4% away from year-to-date highs. Participation was broad-based, with a mix of growth and defensive sectors leading to the upside. Materials and Energy took a breather after rallying rather strongly in the past few sessions. The market is trending higher (albeit still lagging behind how US markets are performing). Let's see how we go as we push year-to-date highs.

Economy

No major economic announcements.

Latest news

What happened today?

REITs experienced a broad-based rally as bond yields eased. In the Aussie 3-year yield has slipped to an near two-month low of 3.86% from 4.0% two sessions ago. Goodman Group (ASX: GMG) pushed out and marked its highest close since May 2022.

Goodman Group weekly chart (Source: TradingView)

Tech continues to rally thanks to solid earnings from Microsoft and Alphabet. Most large cap tech names finished the session 1-3% higher. Megaport (ASX: MP1) surged 14.0% after its preliminary full year EBITDA came in at $25.2 million vs. prior guidance of $24-26 million. It also reaffirmed its FY24 EBITDA guidance to be above $41-46 million.

Nickel producer Panoramic Resources (ASX: PAN) tumbled 40% after being forced to raise $40 million at a 45.7% discount to its last close. Management said "the short-term pressure put on our balance sheet after recent operational setbacks has triggered the need for new funding ...". I guess that's what happens when you're a single asset company operating a small mine with no cash buffer.

What about an interesting chart? Sure thing. Australian Finance (ASX: AFG) is starting to set some high highs and high lowers. There's also a lot of finance-related stocks posting some strong gains and announcements in the past few sessions such as Australian Ethical (ASX: AEF) and Insignia Financial (ASX: IFL).

Australian Finance daily chart (Source: TradingView)

ASX 200 Seasonality Update

July started off a little shaky (remember that almost 4% selloff between 4-10 July) but made up for lost time rather quickly. (If anything this is becoming a lockout rally)

The ASX 200 is so far up 3.5% in July vs. its seasonal average of 2.2%.

August tends to be a little choppy, with a historical gain of 0.19%. While September has historically been the worst performing month of the year, with an average fall of 1.20%.

So from a seasonality perspective, the market tends to plateau for a few months through to the Christmas rally.

ASX 200 annual seasonal performance from June 1992 to March 2023 (Source: Market Index)

Interesting news and movers

Trading higher

• +32.2% Pacific Current Group (PAC) – GQG plans bid

• +18.6% Australian Strategic Metals (ASM) – Three-way MoU (Wed)

• +14.4% Megaport (MP1) – Preliminary earnings

• +6.9% Insignia Financial (IFL) – Q4 FUMA

• +4.4% 29Metals (29M) – Bounce after down 11% in last three

• +1.5% Pro Medicus (PME) – Contract win

• REITs sector move:

• Retail sector move:

• Travel sector move:

• Tech sector move: 

Trading lower

• -40.2% Panoramic Resources (PAN) – Placement

• -13.0% Bubs Australia (BUB) – Board spill unsuccessful

• -10.8% Regis Resources (RRL) – Q4 production and FY guidance

• -5.8% Resolute Mining (RSG) – Q2 production

• -7.2% Next Science (NXS) – Earnings

• -4.4% Macquarie (MQG) – Guidance

• -4.4% Iluka Resources (ILU) – Downgraded by Cannacord

• -1.3% Austal (ASB) – Downgraded by JPMorgan

Broker notes

A few Citi notes of interest:

Beach Energy (BPT) – Downgrade to Neutral with $1.65 target price ($1.63 at 26 Jul close)

• “FY24 production guidance should be wide on schedule uncertainty, and when including sharper WF oil declines, we sit ~10% below VA consensus.”

• “Despite Citi’s house view on the oil price appreciating further in SepQ, and BPT’s strong 4Q gas price now reflected in our future period forecasts, the recent share price rally sees much of the value in BPT now captured and we downgrade to Neutral.”

Corporate Travel (CTD) – Buy with $23.80 target price ($19.92 at 26 Jul close)

• “CTD provided FY23 EBITDA guidance of ~$165-170 million, which was in line with consensus expectations.”

• “Looking at 4Q23 revenue >90%, we estimate CTD may already be doing enough volumes to achieve the proforma $810 million revenue run rate. While a mean reversion of overrides in line with capacity may drive revenue above.”

Iluka Resources (ILU) – Neutral with $11.80 ($10.99 at 26 Jul close)

• “ILU's market commentary on Z has turned more cautious but still expecting Q3 Z prices to be flat on Q2.”

• “ILU noted demand from the pigment market remains soft but does expect feedstock pricing in 2H CY23 to be remain stable.”

Scans