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The ASX200 closed up just 0.12%, or 9pts, on Thursday, despite weak leads from Wall Street. This put the benchmark up 1.88% over five days, all in the green, an incredible feat given the threats on the horizon, including rising interest rates, runaway inflation and rising oil prices. More experienced investors will have memories of what soaring interest rates did to economic growth in the late 1980s, and how oil price shocks reverberated through all sectors of society in the 1970s, however younger investors may only learned these lessons in textbooks. As a result, many less experienced investors are staying on the sidelines in this market; there has been a clear trend toward larger trade sizes and more experienced investors placing their bets in recent months.
A rising interest rate environment is likely to favour the nation’s banks, as it allows them to increase net interest margins that have been crunched in recent years as rates have neared their lower bound. At more than $107, Commonwealth Bank of Australia (CBA) is nearing its highs, and investors enthusiastically taking profits, with over 95% of trades on the sell side. It is National Australia Bank (NAB), however, that has really captured investors’ attention – at over $31.50 it is currently at a four year high; on Wednesday it was 98% sell by value; more than 50% more value was traded in nab than in Fortescue. Having just completed a $2.5bn share buyback, a further $2.5bn buyback was announced on Thursday. Nab was one of the top three most bought stocks during the Covid crash, when it fell to around $15; for those who bought it, it has been an exceptional trade.
Shares in Uniti Group (UWL) fell less than 1% after the company confirmed that it was considering a $5 a share offer from a consortium led by Macquarie, following Morrison and Co’s $4.50 offer last week. UWL shares have spiked 25% in the last month given the potential for a takeover; it has been heavily sold into strength.
Sleep apnoea treatment manufacturer ResMed shares (RMD) fell 4.5% on Thursday after a heavy fall in its US-listed shares overnight when the broader market was sold off. Investors fear the impact of supply shortages on the company. Despite the usual trend of nabtraders buying quality stocks on weakness, Resmed was trimmed. Resmed shares are down 16% over six months, but it is still trading on a price earnings (PE) ratio of 75x.
The enthusiasm for commodities related stocks continues unabated, and nabtraders are participating actively. Core Lithium (CXO) remains a market darling after pencilling a deal with electric vehicle leader Tesla (TSLA.US) and joining the ASX300; the stock is now up over 450% over twelve months. Pilbara Minerals (PLS) is up over 250% over a year, while AVZ Minerals (AVZ) added 8.5% in a single day after joining the ASX200. Investors are continuing to pick up exposure to battery metals on pullbacks, while existing holders are trimming on strength.
On international markets, the announcement of a deal to establish capability in Australia for the manufacture of up to 100million Moderna (MRNA) vaccines didn’t endear the company to local investors; they have been selling the stock. Despite the extraordinary success of Moderna’s Covid vaccine product, the company’s shares have given back most of their gains over the last twelve months. Long term holders, however, have been happy beneficiaries of the company’s success.
Analysis as at 24 March 2022. 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.