Stocks trail as energy prices surge
A succession of blockbuster profit reports this week have done little to dent the fortunes of Australia’s energy sector. Local producers Woodside, Santos and Beach Energy showed profits up 66% to 262% against record oil and gas prices. Investment bank UBS increased price targets for all three companies. Markets were lukewarm. Beach and Woodside are both 2% and 3.1% up, respectively, since reporting. Santos is down 5.9%. Investors might have anticipated the positive numbers and be cautious about the energy stocks for ESG reasons, senior equity analysts said.
Ukraine weighs on markets
World markets shuddered this week as Russia and the West leveled accusations, denials and veiled threats over the some 150,000 Russian troops deployed along Ukraine’s borders. Reports of troop withdrawals bolstered markets from Tuesday through Wednesday, before traders piled into safe-haven assets on Thursday following warnings from President Biden that the threat of invasion was “very high.” Gold is trading at its highest level since last June.
That volatility is a gilded opportunity for those watching on to snap up assets reverting away from their underlying value amid a panic in the market, according to Dan Kemp, chief investment officer at Investment Management.
You live by the ore, you die by the ore
This week in the resources sector the benefits of diversification were on show. BHP which also sells copper, coal and oil in addition to iron ore paid out $1.50 to its shareholders, the highest interim dividend on record. Over in Perth, iron ore miner Fortescue cut its dividend by 60% to 0.86 cents after prices for its lower-quality iron tumbled while labour and diesel costs surged. The world’s biggest iron ore producer rode big gains in coal and oil to offset lower iron ore prices. Aggrieved Fortescue investors can take comfort that Wednesday’s dividend was the fourth biggest ever.
Crypto inches closer to the mainstream
Cryptocurrency got a couple institutional ticks of approval from both sides of the Pacific this week. Sequoia Capital, one of the most powerful venture capital groups in Silicon Valley, said on Thursday that it plans to create a dedicated $500 million to $600 million cryptocurrency fund. And just the previous day, local broker SelfWealth signed a trading agreement with digital currency exchange BTC Markets for five tokens in the second quarter. It is poised to beat the Commonwealth Bank of Australia to market. Australia’s largest bank revealed in November it would offer crypto trading and is currently in a pilot phase. And Bitcoin and Ethereum, two of the major coins, are down 7.1% and 6% respectively in the past 24 hours, as of 3pm Sydney.
ASX haunted by Ukraine spectre: Markets wrap
Australian shares had a choppy week, alternating between gains and losses as markets reacted to shifting views of the prospect of war in Ukraine.
In intra-day trading Thursday, the benchmark S&P/ASX 200 hit a 1.8% weekly gain. A sharp sell-off early on Friday gave back some of those gains, with the index finishing the week flat.
Markets are reacting to changes in the geopolitical tensions in Eastern Europe, according to Jun Bei Liu, a portfolio manager at Tribeca.
“The market was so volatile because of the escalation and de-escalation in the geopolitical tensions in Russia,” she says.
“For a couple of days markets were fine with putting on risk, and today we saw people take risk off the table again.”
Australian shares surged on Wednesday after overnight reports said some Russian troops had been sent back to bases after exercises. The selling picked up early Friday after overnight comments from President Biden describing the threat of invasion as “very high.”
Reporting season rolled on with some of Australia's biggest names on the investor front foot. Healthcare was the strongest sector on the ASX this week, assisted by a 7.7% rise from biotechnology giant CSL, the ASX's fifth-largest stock by-market capitalisation. The company said profit dropped less than analysts forecast. The sector rose 4% for the week.
Australia’s real estate investment trusts, meanwhile, talked up a return to offices, malls and industrial parks this week in a slew of reports. The top performer in the sector, Vicinity Centres, which owns Sydney’s Queen Victoria Building, soared 12.8% after posting a solid better-than-expected result as mall traffic rebounded.
Energy wrapped the week with a 0.5 per cent loss over the period despite double-digit profit leaps at Woodside, Santos and Beach. Shares of the latter two companies ended the week down 7.9% and 1.8%, respectively. For the week, Woodside is up 1.7%.
Shares in Magellan Financial Group gained 18.5% on Friday after the company reported a 24% increase in net profit after tax, and plans for a 1-for-8 bonus issue of options to shareholders. The company is also considering a buyback.
The heavyweight materials sector also closed down 1.4%, and was dragged down by a 11.6% slump in Fortescue Metals on slashed dividends and a 32% drop in profit on the back of weaker iron ore prices. BHP shares finished the week down 0.6% as the company unveiled record interim dividend payouts on soaring profits from its coal, oil and copper businesses. Rio Tinto was down 0.2% for the week.
