Weekly Wrap 5 June

Jessica Amir
June 5, 2020

The Aussie share market touches the 6,000pt milestone and hits a 13-week high this week (Mon-Thu). Technical insights reveal plenty, as the market is 32% up from its bear market bottom.

In this week’s wrap, Jessica covers:

  • The comeback from COVID-19 (0:15)
  • All sectors on the ASX200 rise, with Consumer Discretionary gaining the most (0:40)
  • Unibail-Rodamco-Westfield (ASX:URW) charges 33% as centres reopen (1:24)
  • Three key themes: (1) developers/fund managers set for growth (2) a potential looming recession and (3) the U.S. triple threat (2:30)
  • How these three key themes translate into trade ideas: a word on Centuria (ASX:CNI), CSL (ASX:CSL) and Qantas (ASX:QAN) (4:20)
Read Transcript

Thanks for your company for the weekly wrap, I’m Jessica Amir a market analyst with Bell Direct.

Well the Aussies share market has been on a tear this week and hit a 13 week high and touched the 6,000-point milestone for the first time since the 9th of March and continued its 6-week positive run.

The ASX200 is now up 32% from its bear market bottom and looking at the technical trends, as the 50-day moving average, the pink line, has curved upward that indicates a further growth.

The market is also charging toward its 200-day moving average, the orange line, so if these two technical trends meet, that will indicate a significant bullish trend for the ASX200.

This week all sectors on the ASX rose fourth as Australian loosen restrictions, China eased its foreign flight ban and Qantas announced it would increase local and regional flights.

The consumer discretionary and financial sectors gained the most over 5% each and this week we also saw the Iron Ore price hit a 10-month high bolstering revenue for Australia’s largest export division.

This saw Fortescue Metals (ASX:FMG), BHP (ASX:BHP) and Rio Tinto (ASX:RIO) again at least 5% each.

Plus we also saw every economic data set; manufacturing, economic growth retail sales – all meet or exceed expectations – which is always what you want.

No one likes surprises.

After all the most charge on the stock front this week came from Unibail-Rodamco Westfield (ASX:URW)  leading the rise up 33% to $5.49 continuing to bounce off its all-time lows for the second straight week.

The sugar rush for URW is all about the global shopping or giant reopening most of its centres in France which account for about 30% of revenue for the business and URW is also getting ready to reopen its doors in Britain and Spain.

Now Morningstar says although it’s going to be a tough time with the shift to online purchases, URW could develop land into residential apartments.

It’s given the stock a $9.40 price target and a forward-looking diamond yield of 11.2%.

Another standout stock cement and lime business Adelaide Brighton (ASX:ABC) gaining 24% from Monday to Thursday to $3.36.

Citi expects ABC will grapple with competition as the new cement business is on the block in South Australia and it shares could come back to $3.

Now for three key themes to think about next week, well firstly the Australian property developer and fund manager segment is set for strong growth given interest rates are at a record low.

Many solid rent collecting businesses are at attractive prices and they look set to soar on a COVID-19 recovery path and that’s according to UBS and Citi.

Other things to think about are secondly the looming recession.

Now this week in Australia we learnt Aussie GDP fell 0.3% in the first quarter.

Growth next quater is tipped to fall 5.7% according to Citi.

So if we have two quarters of negative growth, Australia will enter its first recession in 29 years.

After that expect a quick recovery of 0.2% in Q3 and 2.2% growth in Q4, helped by the government’s three job programs, RBA policies and Aussie Iron ore revenue ripping.

So keep your eye on economic indicators along the way like business and consumer confidence data out on Tuesday and Wednesday next week.

And thirdly the final thing to keep in the back of your mind is the U.S triple threat, the economic and health crisis and civil unrest.

America is in a much worse shape than Australia, their economic growth fell 5% in Q1 and Q2 GDP is tipped to tank over 52% according to the Atlanta Fed, then a recovery is on the cards. Now despite their impending recession and risks of a second COVID-19 wave, the stock market FOMO has pushed U.S stocks up 40% from COVID-19 lows and e-commerce demand has pushed the Nasdaq to an all-time high.

Now to trading ideas to consider, firstly with the property developer fund manager segment being on the road to recovery.

UBS says Centuria (ASX:CNI) is ‘the manager to buy for maximum’ growth leverage.

Its diversified across industrial office and healthcare real estate and has an investment bond business.

CNI rental income and earnings have been consistently growing for years and UBS expects this to continue, expecting its shares to charge 30% higher to $2.34, it’s a stock to watch as well as it’s not yet in the ASX200.

Now Citi backs Mirvac (ASX:MGR) with its $20 billion of pipeline opportunities and backs Charter Hall (ASX:CHC) given it’s got no balance sheet debt.

Now secondly with Australia entering a recession, it’s so important to remember that this has already been priced into market.

The markets already looking forward to the recovery.

Now in the meantime, there will be opportunities always.

Magellan and Platinum says you should favor companies seeing a rise in demand and earnings.

UBS and Citi re-backed this week CSL (ASX:CSL) as a buy with many of us getting a flu jab, which is bolstering its sales offsetting weaker blood therapy demand.

Now UBS expects CSL shares to set another new all-time high in under a year and rise 14%.

Now thirdly and finally, with the Aussie household saving rate doubling this quater according to the ABS, Qantas (ASX: QAN) is set to see a surge in flight sales amid pent-up demand.

Qantas also plans to return about 40% of its domestic capacity by the end of next month.

Now all reasons why UBS expects Qantas shares to soar to $4.65.

Thanks for your company this week, I’m Jessica Amir from Belll Direct, stay safe and enjoy the long weekend.

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