Weekly Market Update – 05 Mar 2021

Dividend season, rates on hold and post reporting season wrap up.

A slightly earlier edition of the Weekly Market Update this week with the Labour Day public holiday in Victoria next Monday.

The ASX200 outperformed global equities to the close of trade on Thursday rising +1.3% compared to the MSCI World Index which fell -0.2% in AUD terms.  

Having been on track to return an impressive +2% gain for the week the ASX slipped -0.8% on Thursday as another rise in global bond yields saw growth stocks, in particular tech stocks fall further.

It is worth mentioning Thursday’s negative return of -0.8% occurred on the same day that many of the market’s largest companies went ex-dividend.

Given shares typically fall by the value of the dividend when they trade ex-dividend, the ASX200 return is actually more favourable than this number suggests.

For context, the ASX200 Accumulation Index which assumes dividends are reinvested (thereby negating the impact of a company going ex-dividend) fell -0.5% on Thursday.

Some of the bigger names to go ex-dividend this week were BHP Group (BHP), CSL (CSL), Rio Tinto (RIO) and Woolworths (WOW) which together account for 17.6% of the ASX200 benchmark – hardly an immaterial amount.

Investors can expect receipt of these dividends in the next 3 – 6 weeks.

RBA

If you ever needed more confirmation that central banks are here to help just look at the RBAs commitment to its bond purchasing program.

As global bond yields continue to spike the RBA stepped in as a natural buyer whilst offering to buy up to $4bn of government securities ranging from 2024 through to 2028.

Given all the talk about rising bond yields and near-term inflationary shock this is hardly the reaction of a central bank that is about to cut back on its accommodative monetary policy and hike rates.

The RBA kept rates at 0.1% when it met on Tuesday and whilst it maintained the overall size of its $200b QE bond purchasing program it did state, “the bank is prepared to make further adjustments to its purchases in response to market conditions.”

The RBA also reiterated its expectation that the cash rate was unlikely to rise until 2024 “at the earliest”.

We remain firm believers that core inflation data and employment data are still significantly below the level required for the RBA to commence winding back its accommodative monetary policy stance.

Post Reporting Season Review

On Thursday PRIME hosted its first webinar for 2021 diving through some of the major themes that emerged post reporting season.

All members of the PRIME Investment Committee were in attendance and the discussion was driven by Marcus Bogdan – our Australian Equities specialist.

It is a very concise summary of where we are at in the cycle, what performed, what was disappointing and what the current outlook is.

Highlights from the webinar include:

  • ASX 200 now trades only 5% lower than its pre-covid peak as the V-shaped recovery has been driven by material increases to earnings per share (EPS) expectations of around +16%.
  • The unprecedented response from accommodative monetary policy and fiscal support has and continues to insulate economies from the impacts of COVID-19.  
  • Economic data at global and domestic level has been better than expected. GDP data and unemployment rates both locally and abroad continue to trend in the right direction.
  • The rollout of a vaccine has so far been a success, particularly in the northern hemisphere where immunisations are rising and infections falling.
  • The ASX200 is currently trading on a 12-month forward price-to-earnings multiple of 20x – well above its long-term average. The primary driver of this has been a low interest rate environment.
  • The banks delivered results well above expectations leading the wider market in upgrades to earnings forecasts. Strong capital positions, greater credit growth and stabilisation of net interest margins were the major drivers.
  • The rally in iron ore has underpinned strength and earnings upgrades across the commodities sector.
  • The PRIME Australian Equity Growth SMA has actively reduced its exposure to growth stocks as the economic recovery continues to play out rotating more towards value stocks.
  • We believe cyclical stocks are best suited to a prolonged recovery and will outperform growth with Commonwealth Bank (CBA) and Westpac Bank (WBC) our preferred exposures.
  • Health care stocks on a longer-term view will continue to benefit from an aging demographic with CSL (CSL) and Ramsay Healthcare (RHC) well placed to deliver future growth

Looking ahead

Monday 8th March 2021 – Friday 12th March 2021

  • Monday: CN House Price Index (FEB), Retail Sales (FEB)
  • Tuesday: AU RBA Meeting Minutes, US Retail Sales (FEB)
  • Wednesday: AU House Price Index Q4, Westpac Leading Index (FEB)
  • Thursday: AU Unemployment Rate (FEB), US Fed Interest Rate Decision, UK BoE Interest Rate Decision
  • Friday: US Weekly Jobless Claims

Thursday 4th March, 5pm values

 IndexChange%
All Ordinaries 7001+60+0.9%
S&P / ASX 2006761+88+1.3%
Property Trust Index1388+48+3.6%
Utilities Index5844+9+0.2%
Financials Index6084+274+4.7%
Materials Index16476-131-0.8%

Thursday 4th March, closing values

 IndexChange%
U.S. S&P 5003768-43-1.1%
London’s FTSE6651+168+2.6%
Japan’s Nikkei28930-36-0.1%
Hang Seng29237+257+0.9%
China’s Shanghai3503-6-0.2%

Key dividends

Monday 8th March 2021 – Friday 12th March 2021

  • Monday: Div Ex-Date – Kogan.com (KGN), NABPF (NABPF), NABPH (NABPH), Nick Scali (NCK), Northern Star Resources (NST), REA Group (REA), Ramsay Healthcare (RHC)
    Div Pay-Date – Metrics Master Income Trust (MST), Metrics Income Opportunities trust (MOT
  • Tuesday: Div Ex-Date – Qube Holdings (QUB), Sonic Healthcare (SHL), WBCPI (WBCPI)
    Div Pay-Date – Mineral Resources (MIN)
  • Wednesday: Div Ex-Date – Brambles Limited (BXB), Costa Group (CGC), Regis Healthcare (REG), Reliance Worldwide (RWC)
    Div Pay-Date – Ansell Limited (ANN)
  • Thursday: Div Ex-Date – ANZPG (ANZPG), ANZPH (ANZPH), NABPE (NABPE), South32 (S32), WBCPF (WBCPF), WBCPH (WBCPH), WBCPJ (WBCPJ)
    Div Pay-Date – Domino’s Pizza Limited (DMP), VGI Partners Limited (VGI)
  • Friday: Div Ex-Date – Tassal Group (TGR), WBCPE (WBCPE), WiseTech Global (WTC)
    Div Ex-Date – Tassal Group (TGR), WBCPE (WBCPE), WiseTech Global (WTC)

Contact

Mark Johnson – Chairman of Investment Committee(03) 8825 4738
Guy Silbert – Investment Manager(03) 8825 4750

If you would like to discuss your situation, please speak to your adviser or email clientservices@primefinancial.com.au

Mark JohnsonT: (03) 8825 4738Cameron MorcherT: (03) 8825 4737
Livio Caiolfa T: (03) 8825 4748Michelle BromleyT: (03) 8825 4751
Marcus AingerT: (02) 9134 6292Nicole LewisT: (03) 8825 4734
Dylan CresswellT: (03) 8825 4707 Nicholas Miller T: (03) 8825 4722
Jarrod Rodda T: (03) 8825 4729

The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

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