110722-Market Bulletin FINAL

8/6/2019 110722-Market Bulletin FINAL

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22 July 2011

Top 200: Movers and Shakers

Bottom 5

Produced by Commonwealth Research based on information available at the time of publishing. We believe that the information in this report is correct and any opinions, conclusions orrecommendations are reasonably held or made as at the time of its compilation, but no warranty is made as to accuracy, reliability or completeness. To the extent permitted by law, neitherCommonwealth Bank of Australia ABN 48 123 123 124 nor any of its subsidiaries accept liability to any person for loss or damage arising from the use of this report.The report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on theinformation in this report, consider the appropriateness of the information, having regard to the individual's objectives, financial situation and needs and, if necessary, seek appropriate professionaladvice. In the case of certain securities CBA is or may be the only market maker.This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399 a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia.This report is approved and distributed in the UK by Commonwealth Bank of Australia incorporated in Australia with limited liability. Registered in England No. BR250 and regula ted in the UK by theFinancial Services Authority (FSA). This report does not purport to be a complete statement or summary. For the purpose of the FSA rules, this report and related services are not intended forprivate customers and are not available to them. Commonwealth Bank of Australia and its subsidiaries have effected or may effect transactions for their own account in any investments or relatedinvestments referred to in this report.

commsec.com.au 13 15 19

What’s inside?

1 Point of View

Top 200: Movers and Shakers

2 Economic Signposts

3 Australian Market Wrap

Corporate and Economic Calendar

4 What’s New at CommSec?

Top 5

Point of View: Consumer gloom

The Roy Morgan weekly consumer confidence rating fell by 2.3% in the week to July 16 & 17 after rising by 2.6% in the previous week. It was the first reading on consumer confidence since the carbon tax was announced. The consumer confidence rating stands at 108.0, just above the two year low of 107.7 set on July 2 & 3.

It seems that Aussie consumers still aren’t in the mood tospend, suggesting that more difficult times lie ahead forretailers and small businesses more generally. Only 31% ofpeople believe that their finances are going to be in better

shape in a year’s time. Certainly optimists still outnumberpessimists – 25% expect their finances to be worse off.However that is nearly always the case – optimists generallyoutnumber pessimists. But the key point is that the proportion ofpeople in the optimistic camp is the lowest recorded in threeyears.

While the bad news is that consumers have become lessoptimistic about their future finances, it is also the case thatfewer people are saying that they are currently better off thanthey were a year ago. Only 24% of people reckon that theirfinances are in stronger shape than a year ago – the lowestreading in two years – that is, since the global financial crisis.

Clearly if people believe that they are worse off than a year ago

and they don’t expect the situation to improve, then theycertainly wouldn’t be in the mood to spend. While this is badnews for retailers, more Aussies will be keeping their money inthe bank, boosting the retail funding base for financialinstitutions.

When it comes to assessing the economic outlook, pessimistsoutnumber optimists. Overall 6% more Aussies believe theeconomy will weaken over the coming year. While the latestconsumer confidence figures represent bad news for retailers,they are hardly encouraging for a government trying to sell thevirtues of a new tax.

What does this mean?

Interest rates are solidly on hold. Even if inflation figures nextweek are printed at the top end of market expectations, theReserve Bank is unlikely to even consider hiking rates in thecurrent gloomy environment.

It seems that saving is “in”, spending is “out”. Overall theenvironment represents positive news for banks and otherdeposit taking institutions. Aussies are in no mood to put theirsavings in seemingly ‘risky’ ventures, whether it is thesharemarket, the property market or other more esoteric assetclasses.

ASXCode

Company MarketCap ($m)

Lastweek’sprice ($)

This week’sprice ($)

Change(%)

ESG Eastern Star GasLimited

887.59 0.59 0.90 50.42

SDL Sundance resourcesLimited

1536.30 0.40 0.54 33.75

WEC White Energy Company

Limited

746.01 1.86 2.36 26.88

CEU ConnectEast Group 2127.68 0.44 0.54 22.73

AZT Aston Resources 2231.40 9.13 10.91 19.50

ASXCode

Company MarketCap ($m)

Lastweek’sprice ($)

This week’sprice ($)

Change(%)

AUN Austar UnitedCommunications Ltd

1379.58 1.33 1.09 -18.73

ALZ Australand PropertyGroup

1528.64 2.81 2.65 -5.69

RMD RedMed inc 4528.84 3.08 2.93 -4.87

ASL Ausdrill Limited 955.60 3.32 3.17 -4.52

GFF Goodman FielderLimited

1311.37 0.99 0.95 -4.04



Market Bulletin

22 July 2011

Page 2commsec.com.au 13 15 19

Economic SignpostsEconomic Forecasts

Commentary

Inflation readings take the spotlight in Australia over thecoming week. Data on producer prices is released on Mondaywith consumer prices on Wednesday. Meanwhile it is more ofan eclectic mix of economic data that is slated for release inthe US over the coming week.

On Monday, the producer price index (PPI) is released, themain measure of business inflation. There are a number offactors that influence the result, driving prices both higher and

lower include coal, iron ore and oil prices as well as theAustralian dollar. Overall we expect that the PPI rose 1.0% inthe quarter to be 1.2% higher over the year. But the measureson manufacturing costs and selling prices are worth focussingon to ascertain the pressure on margins and profitability.

Also on Monday, Reserve Bank Assistant Governor MalcolmEdey is scheduled to deliver a talk entitled “Geared for Growth” – perhaps to discuss borrowing trends in the economy.

On Tuesday it is the Reserve Bank Governor’s turn to front thepodium. Glenn Stevens is expected to talk on the topic, “Issuesin Economic Policy” – a topic that should give the Governor lee-way to speak on almost anything. But ahead of the release ofconsumer price index (CPI) data, Mr Stevens may decide to

send a signal about how the Reserve Bank will interpret thekey inflation figures.

On Wednesday the CPI data for the June quarter is expectedto show prices up 0.8% in the quarter to put the annual rate ofinflation at 3.5%. Clearly volatile elements like fruit andvegetable prices and petrol have been instrumental in pushinginflation above 3%. But the underlying rate (that is, headlineprices excluding volatile elements) is expected to be up just0.7% in the quarter and 2.5% for the year. In other wordsinflation is right in the middle of the Reserve Bank’s 2-3%target zone. And no doubt significant discounting by retailers isa key factor keeping a lid on inflation.

2007/08 (actual) 2008/09 (actual) 2009/10 (actual) 2010/11 (estimate/

actual)

Economic growth (annual %) 3.7 1.0 2.3 2.50

Inflation (CPI, average annual %) 3.4 3.2 2.3 2.75

Unemployment rate (end June %) 4.2 5.8 5.1 4.9

Current July 21 2011 End Sep (forecast) End Dec (forecast) End Mar (forecast)

90 day bills (%) 4.89 5.00 5.00 5.25

10 year bonds (%) 4.96 5.20 5.50 5.55

AUD/USD 1.0736 1.0800 1.0400 1.0200

All Ordinaries index 4626.2 4800 5050 5200

On Friday, private sector credit figures (lending) will bereleased alongside the RP Data-Rismark home value index.Neither consumers nor businesses are keen on borrowing atpresent and credit probably rose by 0.2%. And home priceswere probably flat in June after modestly easing for the pastfive months. Prices are currently down 2.3% over the year – amodest retracement after the double digit gains of a year ago.

In the US, the week gets off to a slow start with just the

Chicago Fed index to be released on Monday. But on Tuesday,data on consumer confidence, home prices and new homesales are released alongside the influential Richmond Fedmanufacturing index. Economists tip weak consumerconfidence, little change on home sales and an encouraging0.5% lift on home prices (in original terms).

On Wednesday the Federal Reserve releases its “Beige Book” – a survey of economic conditions across Federal Reservedistricts. While the report is more qualitative than quantitative, itdoes give a good sense about how the economy is travelling.Data on durable goods orders is released the same day. Forthe past 12 months this series has followed a saw-tooth patternso after a 2.1% lift in May, presumably orders will be down inJune.

Data on pending home sales is scheduled for Thursdayalongside the weekly jobless claims figures (new claims forunemployment insurance) and Kansas City Fed survey.

And on Friday the “flash” or advance estimate of economicgrowth in the June quarter will be released. Most economistsexpect a similar reading to the March quarter – that is,annualised growth of around 1.9%. “Normal” growth is around3% so the current growth pace remains modest, although westill see this as a mid-cycle pause for breath. The University ofMichigan consumer sentiment index, the employment costindex and surveys of economic activity in New York andChicago are also released on Friday.

Craig James – Chief Economist, CommSec



Market Bulletin

22 July 2011

Page 3commsec.com.au 13 15 19

Australian Market WrapThe following table represents our 'big picture' views on Australian sharemarket sectors over the next six months. A rating of'overweight' indicates that we are positive on the outlook for the sector, indicating that we expect it to out-perform the broader index.As a result we suggest taking on a higher exposure to the sector relative to other sectors. Conversely an 'underweight' rating

suggests that investors should reduce exposure to the sector.

Corporate and Economic Calendar

Week beginning 25 July 2011

Ex-Dividend Dates

Sector S&P/ASX200Index Weight

View Comment

Consumer Discretionary 3.61 Indexweight A pickup in consumer sentiment and deflationary pressures will need toease before sales growth rebounds. However, sliding unemployment andreal wage gains should ensure that a modest recovery in spendingpatterns takes place.

Consumer Staples 8.61 Overweight Expect to see healthy interest as investors focus on more balanced

portfolios. More input cost inflation should lead to stronger sales growth.

Energy 7.35 Overweight Energy demand will lift as the global recovery gains traction.

Financials 30.03 Indexweight Lacklustre borrowing and margin pressure will keep sector subdued.

Health Care 3.36 Indexweight Key defensive sector, central to balanced portfolio. Some stocks affectedby high Aussie dollar.

Industrials 6.63 Indexweight Firm outlook for mining and infrastructure projects balanced against risingcosts.

Information Technology 0.57 Indexweight Niche opportunities exist.

Materials 28.04 Overweight Asia will drive global economic activity, supporting commodity prices.

Real Estate 6.29 Indexweight Commercial property still struggling to gain traction but recoveryunderway.

TelecommunicationServices

3.73 Indexweight Mature market characterised by churning, strong competition andtechnology deflation. Niche opportunities exist .

Utilities 1.37 Indexweight Uncertainty about carbon pricing impacts energy utilities.

July 2011

Mon Tue Wed Thur Fri Sat Sun

1 2 3

4 5 6 7 8 9 10

11 12 13 14 15 16 17

18 19 20 21 22 23 24

25 26 27 28 29 30 31

Australia25 July Producer price index (June quarter)25 July Speech by RBA Assistant Governor26 July Speech by RBA Governor27 July Consumer price index (June quarter)29 July RP-Data-Rismark home prices (June)29 July Private sector credit (June)Overseas

26 July US Case-Shiller home prices (May)26 July US Consumer confidence (July)26 July US New home sales (June)27 July US Durable goods orders (June)27 July US Federal Reserve Beige Book28 July US Pending home sales (June)29 July US Economic growth (June quarter)

25 July CUP Countplus Limited 2 cents

29 July CLT Cellnet Group 1 cents

29 July CLT Cellnet Group 1.5 cents



Market Bulletin

22 July 2011


What’s New at CommSec?

Invest: How to be differentInvesting in markets or products that are not currently popular is often seen as either brave orfoolhardy. It just depends on the result.

Page 4

Humans are social animals and we feel most comfortable whenour opinions and views are shared by others. As investors, weoften find it difficult to go against trends.

Before the global financial crisis, when equity markets were atall time highs, brokers’ phones rang hot with buy orders.

When markets slumped, and you could pick up shares in BHPfor $20, Woolworths for $18.70 and Commonwealth Bank for atad above $24, buyers were few on the ground and some

clients were still asking if they should sell everything and keeptheir depleted savings in cash.

Investors who avoid herd mentality and deliberately choose togo against trends are labeled contrarian, whether they get thatway by chance or choice.

In volatile times they include more than the usual number ofbargain hunters and punters who buy and sell purely in thebelief that what goes up must come down and vice versa.

But they also include long-term share investors, who choose toride out market storms as well as patient folk who have donetheir homework and remain confident about their owninvestment choices, even if they are currently out of favour inthe market as a whole.

In the world of fund managers, chance and choice are bothrelevant in who is considered contrarian.

“Ten years ago, managers who were in resources wereconsidered contrarian, now they’re not,” says Tim Murphy, co-head of Morningstar’s managed funds research team.

At times like these, when hot stocks are largely in theresources sector, managers with a mandate to invest in certaintypes of shares, such as stocks paying franked dividends, mayfind themselves labeled contrarian.

However, those who consistently wear the tag do more than just go against trends. Murphy says successful contrarian fundmanagers such as Kerr Neilson of Platinum AssetManagement, Anton Tagliaferro of Investors Mutual and the

team at PM Capital have a history of backing their own judgment on how economies and sectors are likely to fare andwhere the next corporate success story is likely to be.

“Through the cycle these types of funds may go throughperiods of sharp outperformance or underperformance soinvestors have to be prepared for returns that are differentfrom their peers or the market.”

While Murphy says all investors should diversify to minimiserisk, he believes some exposure to fund managers withcontrarian philosophies can make everyone a better investor.

“They are the sorts of guys who back in 2000 were among the

heavier investors in commodities when they were still out offavour and the whole China story was still to take off.

All good investors have an element of contrarianism aboutthem. If you are going to achieve superior investment returnsyou can’t just do what everyone else is doing, but it’s still wiseto never put all your eggs in one basket.”

What would you have done?

The Morningstar chart on the next page shows how assetclasses have performed over the past 20 years. You might liketo think about what the tangible results might have been if youhad followed a contrarian strategy during this time. Forexample, a $10,000 investment in the previous year’s loser ora diversified investment across the previous year’s three worst

performing assets?

Take a look at the Annual Asset Class Returns Chart on thenext page.

We’re here to help

For more information about ASX traded shares, derivatives,International share trading, ETFs and ETIS please call13 15 19 from 8am to 8pm (Sydney time), Monday to Friday.

For more information about managed funds go tocommsec.info/searchfunds to find funds, view the fund profileand download a copy of the relevant Product DisclosureStatement. Alternatively you can contact us on 13 15 20between 8am and 5pm (Sydney time), Monday to Friday.

Important Information:Commonwealth Securities Limited ABN 60 067 254 399, AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of theCommonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a participant of the ASX Group.The content of this article is not a recommendation and has been prepared without taking account of the objectives, needs, financial and taxationsituation of any particular individual. For this reason any individual should, before acting on the content, consider the appropriateness of it havingregard to your objectives, needs, financial and taxation situation and if necessary, seek appropriate independent financial and taxation advice. If thecontent relates to a particular financial product, you should obtain a Product Disclosure Statement (PDS) or prospectus relating to the product andconsider it before making any decision about the product. PDSs are available from CommSec at funds.comsec.com.au or by contacting 13 15 20.CommSec does not guarantee the performance, or the ability to repay capital, of any product, fund, trust or investment mentioned on its web site orelsewhere. Past performance is not a reliable indicator of future performance. CommSec, and its related bodies corporate, do not accept any liability

for any loss or damage arising out of the use of all or any part of this newsletter and do not warrant that any projections or forecasts, which aresubject to assumptions and uncertainties, will be met. This newsletter is directed and available to and for the benefit of Australian residents only, andmust not be used or distributed without prior written consent from CommSec.Product Disclosure Statements are available at funds.comsec.com.au. CommSec will rebate up to 100% of any entry or contribution fees charged bythe fund manager. CommSec will receive a trailing commission of up to 0.6% pa and campaign fees as a distribution service for funds on ourwebsite from fund managers. Trailing commission and campaign fees are paid by the product provider and are NOT an additional charge to theinvestor.



Market Bulletin

22 July 2011


What’s New at CommSec?Invest: How to be different (cont)Appendix 1

Page 5

Important Information:Commonwealth Securities Limited ABN 60 067 254 399, AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of theCommonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a participant of the ASX Group.The content of this article is not a recommendation and has been prepared without taking account of the objectives, needs, financial and taxationsituation of any particular individual. For this reason any individual should, before acting on the content, consider the appropriateness of it havingregard to your objectives, needs, financial and taxation situation and if necessary, seek appropriate independent financial and taxation advice. If thecontent relates to a particular financial product, you should obtain a Product Disclosure Statement (PDS) or prospectus relating to the product andconsider it before making any decision about the product. PDSs are available from CommSec at funds.comsec.com.au or by contacting 13 15 20.CommSec does not guarantee the performance, or the ability to repay capital, of any product, fund, trust or investment mentioned on its web site orelsewhere. Past performance is not a reliable indicator of future performance. CommSec, and its related bodies corporate, do not accept any liabilityfor any loss or damage arising out of the use of all or any part of this newsletter and do not warrant that any projections or forecasts, which aresubject to assumptions and uncertainties, will be met. This newsletter is directed and available to and for the benefit of Australian residents only, and

must not be used or distributed without prior written consent from CommSec.Product Disclosure Statements are available at funds.comsec.com.au. CommSec will rebate up to 100% of any entry or contribution fees charged bythe fund manager. CommSec will receive a trailing commission of up to 0.6% pa and campaign fees as a distribution service for funds on ourwebsite from fund managers. Trailing commission and campaign fees are paid by the product provider and are NOT an additional charge to theinvestor.

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110722-Market Bulletin FINAL