AUSTRALIAN MARKET WRAP
In Australian news, there was discussion in The Australian Financial Review about the risks that the current weakness in the Chinese real estate market could pose to economic activity in Australia. It was suggested that the Australian economy needs the ‘cushion’ of strength in the Chinese economy, in the face of a wider global slow down, to ensure a ‘soft landing’ here. It was said that recent falls in property markets, and concerns about property developers, could mean that our growth outcomes fall below forecasts.
Bolstering this discussion on Monday was reporting that key economic indicators had seen weak outturns for China this month, and that the central bank has unexpectedly dropped official lending rates in response, to ‘revive’ demand.
In other news, data from Bank of America apparently show record inflows (since 2008) into tech stocks over the past week. This meant a sixth consecutive week of net inflows into the sector, supporting a rally in US equity markets.
US inflation came in softer than expected, 8.5 per cent in the year to end-July compared with record high of 9.1 per cent in June. This outturn gave markets around the world a boost. However, there was discussion about the importance of the ‘persistence’ of inflation, not just the peak rate, to economic trajectory and monetary policy.
Alongside this, and in the context of the current strong Australian corporate earnings season, there was a question about whether the economic ‘worst’ might be behind us. It was mooted that if we are at the economic turning point then there is a possibility that markets have bottomed. This scenario was considered a possibility, but with an associated good chance that this is just a pause in a process that still has some time to play out in markets.
Other data this week show a 25 per cent increase in the number of international trips in June, which the Australian Bureau of Statistics said was as a consequence of Australians taking short term holidays, for the first time since the pandemic started.
Australian indices
ASX 200: Rose 1.08% this week to 7105.4 points at the close on Tuesday.
All Ordinaries: Rose 1.14% in the past week to 7361.9 points at the close on Tuesday.
Currencies
As at the close on 16 August, the AUD/USD was up 0.90% on last week, at 0.7038. The AUD/RMB was also up, 1.45%, in the week to 4.7774.
Commodities
As part of the Australian earnings season, BHP reported that it will pay a record dividend, after the second-biggest profit in the company’s history enabled it to return $23.2 billion of dividends to shareholders for the year to June.
The surprise rate cut by the People’s Bank of China on Monday was reported to be weighing on commodity prices, because of concerns that the policy action signals further weakness in the Chinese economy.
Government Bonds
Government Bond Yields (Source: Bloomberg)
|
NAME |
COUPON |
PRICE |
YIELD |
1 DAY |
1 MONTH |
1 YEAR |
|
GTAUD2Y:GOV Australia Bond 2 Year Yield |
2.75
|
100.04 |
2.69% |
-12 |
+14 |
+269 |
|
GTAUD5Y:GOV Australia Bond 5 Year Yield |
4.75 |
107.49 |
3.01% |
-14 |
-12 |
+243 |
|
GTAUD10Y:GOV Australia Bond 10 Year Yield |
1.25 |
83.59 |
3.22% |
-14 |
-18 |
+207 |
|
GTAUD15Y:GOV Australia Bond 15 Year Yield |
3.75 |
103.46 |
3.43% |
-13 |
-13 |
+187 |
Reserve Bank of Australia Rates (Source:RBA)
|
RBA CASH RATE TARGET (RBATCTR:IND) CURRENT (per cent) |
MOST RECENT DECISION (percentage points) |
MOST RECENT CHANGE (percentage points) |
1 YEAR PRIOR (per cent) |
|
1.85 |
+0.50 (2 August 22) |
+0.50 (2 August 22) |
0.10 |
Property
Elanor Commercial Property Fund
Stoic investment partner Elanor Investors Group published a leasing update for its commercial property fund, announcing the successful execution of a further strategic leasing initiative. The Australian subsidiary of a global television production company, ITV Studios Australia, has executed a new five-year lease over approximately 2,000m2 in Pyrmont, Sydney. The completion of this strategic leasing initiative was said to demonstrate the strong demand for commercial office properties that have high-quality tenant accommodation, extensive precinct amenity, and best-in-class ESG credentials.
Venture capital
Stoic Venture Capital discussed the role that the significant weight of money is superfunds could play in supporting venture capital investment in deeptech research.
It also considered how venture capital funds might be incentivised to support research and innovation in key ‘worthy’ areas such as climate change and healthcare, rather than fintech.
In another suggestion of emerging mergers and acquisition activity, it was reported that microcap firm iSelect have accepted an acquisition deal with the owner of its main competitor Compare the Market. Related to this, there was discussion about the change in the funding environment for startups to ‘sweat the cash’. This was in-line with recent analysis by Stoic Venture Capital.
Company Updates
Morse Micro
Stoic investee Morse Micro was named one of the Electronic Engineering Times’ ‘100 startups to watch’.
Forcite
Stoic investee Forcite’s Founder and CEO, Alfred Boyadgis, talked to The Small Business Big Marketing Podcast about how to building a cult-like following for your product.
