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The ASX200 closed down a little over 30 points on Thursday, finishing the five days down over 1%. International markets are digesting the change in tone from the US Federal Reserve, with Chair Jerome Powell flagging a more rapid tapering of asset purchases and an accelerated rate of interest rate increases than the market had previously expected, as inflation is proving persistent. Meanwhile Covid cases are spiking, with the UK suffering nearly 79,000 new cases in a single day. Despite the headwinds, the ASX200 has returned 10% year to date, with a yield of over 5% - an incredible outcome for investors who can generally expect a long term average return of less than 10% inclusive of dividends.
The big news on Thursday was CSL’s (CSL) exit from a trading halt, following a $6.3billion institutional capital raising to fund its purchase of Swiss pharmaceuticals firm Vifor. Vifor specialises in treatment for chronic kidney disease, a growing condition linked to obesity and an ageing global population. In addition to the capital raising, CSL will also undertake substantial borrowings to fund the purchase; S&P has placed the company on ‘CreditWatch’, flagging a potential downgrade of the company’s A grade credit rating. CSL’s bookbuild started at $273, well below its recent closing price above $290; it dropped over 8% on resuming trade. Nabtrade investors were hugely enthusiastic buyers, snapping up the stock at nearly three times the value of the next most traded.
Fortescue Metals Group (FMG) remains a traders’ favourite, as the iron ore price, while well off its extraordinary highs of $US220 a tonne, has recently spiked and is currently trading at $109/t – nearly double its long term average of $60/t. Fortescue’s share price has also rallied, now trading above $18 after falling to below $14 when the iron ore price started collapsing. Nabtrade traders are entirely neutral on the stock, turning over huge volumes at almost exactly 50% buy value and 50% sell. Rio Tinto (RIO) shares have also been traded in huge volumes, and are also very mixed. BHP (BHP) is less popular this week.
Woolworth’s (WOW) downgrade on Tuesday surprised many investors, and saw the share price down 8%. CEO Bradford Banducci flagged $220m of unexpected costs as a result of Covid related safety measures, as well as supply chain pressures that have been widely flagged at a global level. Nabtrade investors were hugely enthusiastic buyers, with a 90% buy by value.
Afterpay (APT) shares have offered little of interest to investors since Square (SQ.US) – now Block – made its all-scrip offer for the stock earlier this year. Initially the takeover was expected to be priced around $AUD130, however volatility in the Square share price has seen APT shares drift downward, and they currently trade below $90. At this price, some investors are willing to dip their toes in again. Zip Co (Z1P), the only buy now pay later option still attracting interest, is seeing modest volumes and is very mixed.
On international markets, Tesla (TSLA.US) remains the most traded stock by number of trades – and given its popularity, is still a strong buy. The most stock with the highest average trade size, however, was Avalara (AVLR.US), a cloud-based technology for tax preparation. While it sounds like a commodity, the US system of state-based taxes can be a nightmare for online businesses (that sell products and services in multiple states and jurisdictions) makes Avalara’s product immensely valuable. The company’s share price is down 20% year on year, but it was recently upgraded to overweight by JPMorgan, sparking the interest of some wealthy investors.
Analysis as at 16 December 2021. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. This article does not reflect the views of WealthHub Securities Limited.