Investors shifted to defensive names as fears of interest rates strengthened and fund managers’ allocations to technology stand at the lowest level since 2008, BofA research showed.
BHP shareholders say yes to unification, Afterpay says goodbye to the ASX
After both sets of shareholders on Thursday voted in favour with more than 90% approval, Australia’s largest miner will unify its London and Sydney listings into one on the ASX. The move will increase BHP’s (BHP) weight to 10% of the benchmark ASX 200 index, continuing to cement the resource and banking duopoly on the local bourse. Also on Thursday, Block (SQ2) was listed for the first time on the ASX after taking over Afterpay. Stocks increased 0.3 percent in a subdued session.
Tech selloff causes collateral damage to thematic funds
Robotics, cybersecurity, cryptocurrency and clean energy have one thing in common: They’re all in a slide. Eight thematic exchange-traded funds (ETFs) on the ASX have plunged between 5% and 16% this year as investors flee speculative areas of the market that thrived during the pandemic. The falls came after many funds posted double digit gains in 2021. The ETFS Global Robotics and Automation ETF is 8.2% lower this year, paddling back some of the 22.3% in 2021.
Netflix stumbles as FANGs lose a tooth
In a painful surprise for tech investors, shares of Netflix (NFLX) tumbled 19 percent in after-hours trading Thursday after the streaming giant warned of a slowdown in the blockbuster subscriber growth it had achieved during the pandemic. Q4 saw a net increase of 8.3 subscribers, compared with an expected 8.5 million. The firm sees adding 2.5 million this quarter compared to 4 million a year ago. Netflix cited slowing subscriber growth due to Covid-19 and flagging economies in regions like Latin America. The drop comes after a 15% year-to-date decrease.
Beforepay plummets in market debut
Australia’s freshest listed disruptor in payments got off to a shaky start when its debut on the stock exchange got smashed on Monday. Beforepay (ASX: B4P) shares ended at $1.92, or 44 per cent lower than the price at which they were marketed to investors when it floated at $3.41. The company is one of the latest to put a digital spin on ancient financing arrangements, offering customers advances on their next payday. Creditors may have been discouraged by loan losses that outpaced interest income and regulatory risk.
Unemployment at lowest rate since mining boom, now Reserve Bank in spotlight
Australians flooded back to work in December lowering the unemployment rate to 4.2%, not seen since the mining boom of 2008. More than half of that gain came from those ages 15 to 24. Fewer had previously commented on the underemployment rate, a measure of people who are able and want to work more hours than they currently do, which fell 0.8% to 6.6%, a sign of a tightening labour market. With employment stuck near lows not seen since the 1970s, all eyes will be on the Reserve Bank meeting on 1 February for indications of when interest rates might be increased.
Oil is at a 7-year high, and that’s good for Woodside
Geopolitical tensions in Eastern Europe and the Middle East boosted oil prices to a seven year high on Tuesday. Brent crude oil, the global benchmark, edged above US$87 a barrel as Russian soldiers gathered on the Ukrainian border and Yemen’s Houthi rebels killed 3 with drone and missile attacks on oil and gas producer United Arab Emirates. Analysts at Goldman Sachs predict oil will reach US$100 later this year.
Woodside’s (ASX: WPL) top line is getting a boost from higher prices with the energy giant reporting on Thursday an 87% increase in Q4 revenue on the back of the solid oil and gas pricing. Shares rose 1.5% then retracted with a 2.4% decline on Friday.
Microsoft looks to gamers
The company that defined home computing is making a huge bet on gaming: a US$68.7 billion bid for video game maker Activision Blizzard. Microsoft (MSFT) swooped on the developer of big-selling titles including Call of Duty, Candy Crush and World of Warcraft, despite a series of sexual harassment scandals wiping nearly 40% off the share price. Dan Romanoff views the acquisition as a land grab for exclusive content and held his fair value for Microsoft steady. Analysts expect the bid for Activision Blizzard (ATVI) to face intense scrutiny from US regulators worried about competition in the technology sector.
Market wrap: Materials slump; ASX tumbles
Australian stocks ended the week with deep losses on a broad-based selloff. The benchmark S&P ASX 200 dropped 2.3% to 7175.8 Friday, with all 11 sectors in the red.
Materials were the hardest hit, closing down 3.5%, dragged mostly by losses at BHP and Rio Tinto, which fell 4.8% and 4.1%, respectively. Whitehaven Coal slumped 6.1% after it said it will probably produce less coal than previously forecast this fiscal year.
Energy fell 3% as Woodside lost 2.4% after posting record Q4 revenue. Santos was down 2.6%.
The heavyweight financial sector fell 1.8%, while the so-called big four banks lost between 0.6% and 1.6%. Z1P, fell 7.8% after analysts pointed to further delays to profitability.
Shares finished the week 3% down, their biggest weekly fall in about 14 months.
Three reads for a lazy Saturday
Ben Johnson unravels what to know investing in China, one of the world’s remaining places where active managers most often regularly beat the benchmark.
When should investors sell? How large a position should one maintain? Oaktree Capital’s co-chairman Howard Marks writes about these questions and others in his must-read January 2022 memo.
And Larry Fink’s annual letter to chiefs executives arrived on Tuesday. Matt Levine of Bloomberg cranks up his sardonic wit on the ramblings of the world’s largest shareholder.
