Co-written by Market Strategists Jessica Amir in Australia and Redmond Wong in Hong Kong.
What’s happening in markets?
- In US the Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) fell 1.2% and 1% and are now trading back at 8 month lows. Keep in mind three things; firstly the overnight move lower of 1% came as US investors absorbed news that news Russian forces invaded Ukraine. Secondly in keep in mind throughout history amid geopolitical events, the S&P500 has historically fallen 5% on average. This is why some clients are offsetting potential further falls, by shorting the market. But thirdly, as always, you can still find outperforming shares. Better than expected company news saw some bright sparks rise like; Kraft Heinz (KHC) shares jumping 5% after it lifted longer-term growth forecasts, Ralph Lauren (RL) shares rose 2% on a potential merger with LVMH. While, in afterhours trade, Ceasers (CZR) shares climbed 4.5% on reporting Las Vegas quarterly revenue hit $1.04 billion, beating expectations.
- In Australia, on Wednesday, the Australian share market measured by the ASX200 (ASXSP200.I) moved to a different beat, rising 0.3%, erasing some of yesterday’s 1% slide. Ironically, the best performer among ASX stocks was a tech EFTPOS company, Tyro Payments (TYR) which rose 10% after traders closed their short positions, because the stock has fallen 60% from October. Elsewhere, better than expected earnings news drove high performers.
- Shares in ASX lithium giant Pilbara (PLS) rose 3% after reporting record sales in the half year, which drove the WA company to report a profit following last year’s loss. Pilbara guided for an ‘extremely bright’ second half of 2022 as it estimates the lithium price will grow strongly, while its operations and production is tipped to increase. Hearing about the expected lithium price increase, other lithium players got a boost; with shares in Liontown Resources (LTR) and Allkem(AKE) both rising over 7%. In other news Nickel Mines (NIC) shares rose 7% after reporting a 23% jump in revenue in the full year after Nickel prices surged to decade high on batter demand and Ukraine tension. Elsewhere, logistics software monopoly, WiseTech (WTC) who provides software for FedEx and DHL, reported better than expected results, its revenue rose 22%, with total reoccurring revenue rising 2% to 93% of its total business. WiseTech also upgraded its forecasts for the year ahead, expecting earnings growth of 33% to 43% (up from 26% to 38% previously expected). This highlights why at Saxo we believe logistics could form a great building block in people’s portfolios.
- Hong Kong’s Hang Seng (HK50.I) and China A shares (CSI 300) fell 2.7% and CSI 300 1.3% respectively on Tuesday. Provisions for large exposures to the Chinese real estate sector haunted banks. HSBC (00005) and Hang Seng Bank (00011). Hang Seng Bank fell 10% after reporting a much worse than expected fall in 1H21 earnings resulted from higher provisions, weaker fee income and higher operating expenses. HSBC, which fell 3.6%, reported below consensus 4Q21 earnings on higher than expected provisions. On the other hand, semiconductor equipment maker ASM Pacific Technology (00522) reported better than consensus results, driven by revenue growth and margin expansion.
- In Singapore, the Straits Times Index (STI) fell 1% yesterday in risk-off day due to heightened tension in Ukraine. Having risen 9% since the beginning of the year, Singapore is among the top performers in global equity markets.
What to consider?
- General: Wages are growing. Consider what this means for stocks. In Australia as an example, Australian wage growth data came out today, showing wages are growing at 2.3% year on year. Wages are growing slower than forecast, but it's important to note, this is the highest wage growth 2019. So when you are looking for stocks, if you are looking for share price growth, remember earnings drives share price growth. So consider stocks that are poised to do well despite rates and wages and petrol prices rising. Investing in oil and gas companies and other commodifies, and as well as defensive stocks like logistics for example could be a great idea.
- In Hong Kong & the China A sharemarket: Investors may take a more cautious stance towards banks which have large exposures to the Chinese property sector, such as Bank of East Asia (00023) yet to release results. Chinese local governments are highly dependent on land sales for their revenues. The weakness on the Chinese property may somewhat constrain the fiscal flexibilities of local government to increase expenditures on infrastructures. The Chinese Government issued a key document yesterday to reiterate its determination to promote the farming industry and the wellbeing of people in the rural area. It also released a blue print for action to increase the production of dairy products.
- Equites: As mentioned above, if you believe markets could continue to fall, you could consider selecting from the wide range of hedging instruments on the Saxo platform based on your trading experience and risk appetite. If you are in Australia you could potentially look at hedging by using futures or options or CFDs on the S&P500, the Nasdaq and ASX200 for instance. Separately, In Asian equities, given favorable government policy, Chinese farming, fertilizers, farming machines, dairy, rural household consumption, and rural area logistics stocks may be something worthwhile to look at. As geopolitical conditions globally have been undergoing seismic changes that will linger, defensive stocks may also be interesting.
- Commodities: Given our bullish outlook on oil Crude oil (OILUSMAR22 & OILUKAPR22, it could be worth considering oil exposure by using futures for example. Also consider Russia supplies 11% of the world’s oil output. The US produces most of the world’s oil. So if tensions escalates, the oil price is likely to rally further, at a time when global supply is already short. For Gold (XAUUSD), its price is trading above above $1,900 with focus on momentum, diversification and geopolitical tensions. Consider that if gold breaks above $1917 and $1923 there could be further highs, while if gold falls, key support is at $1877
Upcoming company earnings calendar
Feb 24: Perpetual (PPT), Qube (QUB), NEXTDC (NXT), Appen (APX), Flight Centre (FLT), Life360, 360), Nine Entertainment (NEC), Link Administration (LNK), Blackmores (BKL), APE Group (APE), Reece (REH), Qantas (QAN), Zip (Z1P)
Feb 25: Brambles (BXB), Medibank (MPL), Iluka (ILU), National Storage REIT (NSR) Charter Hall (CHC), Novonix (NVX), Lynas Rare Earths (LYC), PolyNovo (PVN)
Hong Kong & A Shares:
Feb 23: Galaxy Entertainment Group Ltd. (00027), Lenovo Group Ltd (00992), SmarTone (00315)
Feb 24: Alibaba (09988), Hysan Development (00014), Sun Hung Kai Properties Ltd (00016), Hong Kong Exchanges & Clearing (00388), Bank of East Asia Ltd (00023), NetEase (09999.HK), PCCW Ltd (00008), Pacific Basin Shipping (02343)
Feb 25: Li Auto Inc. (02015), AIA Group Ltd. (01299), Beigene (06160), New World Development Co. Ltd (00017), HKT Trust & HKT Ltd (06823), Seazen Group (01030.HK), NWS Holdings Ltd (00659), Great Eagle Holdings (00041), Angelalign (06699), Sunlord (002138)
Feb 23: Oversea-Chinese Banking Corp (OCBC), SATA (SATS)
Feb 24, 2022 Singapore Airlines (SIA)
Feb 25, 2022 Singapore Technologies Engineering (STD)
For a global look at markets – tune into our Podcast
For prior Australian market and APAC updates - click here.