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S&P/ASX 200 morning report – A-REITs & OPC shares in focus

The S&P/ASX 200 (ASX: XJO) is set to tumble when the market opens this morning after US stocks fell again overnight. Here’s what you need to know.

ASX 200 recap

The ASX 200 continued its recovery on Tuesday, adding 1.1%, with every sector but Consumer Staples finishing higher. Healthcare was the highlight once again, CSL Limited (ASX: CSL) continuing to see support following yesterday’s announcement of production agreements for COVID-19 vaccines, finishing 2.1% higher.

Payroll data has reiterated the issue facing the Australian economy, with Victorian jobs falling 2% in August as the rest of Australia gained 0.1%. Further pain is likely ahead as businesses await the announcement of a support package from the Victorian Government with retailers facing lockdown until November.

Despite the lockdowns, Westfield shopping centre owner Scentre Group (ASX: SCG) reported that rent collections were 86% in August, well above the lows of 28% in April. Analysts noted that Vicinity Centres (ASX: VCX) and GPT Group (ASX: GPT) are the most exposed to Victorian retail, with 52% and 38% of their assets located in the state; all but guaranteeing continued weakness in their share prices. The sector is clearly a potential recovery play, with timing the most important consideration for investors with a high tolerance for risk.

Time to break up with China?

The analysts’ predictions are coming thick and fast post reporting season, with Citi updating their GDP forecasts in light of the Victorian ‘roadmap’. They now expect a third quarter of contraction, down 1%, based on the assumption that restrictions are released as outlined.

US giant Jefferies reiterated the point I raised yesterday, that investors need to be wary of indirect exposures to China. They estimate some 55% of the ASX 200 would be impacted by a continuing weakening of our trade relationship, expanding from wine and grain into tourism and consumer products like Blackmores Limited (ASX: BKL).

In other news, Uniti Group Ltd (ASX: UWL), known as Vocus 2.0 for its strategy of acquiring multiple broadband and wireless businesses, has been trumped by First State Super in its latest target, Opticomm Ltd (ASX: OPC). First State Super lobbed a $5.85 per share bid, sending the Opticomm share price up 10.1% for the day. Quite a result for a company that installs fibre in new housing estates, I’d suggest Uniti will increase its offer.

Nasdaq at a four-week low, valuations in focus

The selling resumed in the US with the NASDAQ falling 4.1%, taking the three-day loss to 11%, and the S&P 500 a more conservative 2.8%. It is all about technology, with the sector finally moving to reality after reaching multiple all-time highs in recent weeks.

Telsa Inc. (NASDAQ: TSLA) fell 21% in a single session, Apple Inc. (NASDAQ: AAPL) was down 6.7% and vaccine developer Moderna (NASDAQ: MRNA) 13.2% after announcing it would not rush a product to the market without ensuring its safety.

The selloff comes despite a lack of any real news, suggesting it is more likely a bout of profit-taking as markets had moved ahead of themselves, particularly with the backdrop of spiking COVID-19 cases around the world.

European markets were similarly weak as PM Boris Johnson once again heightened the risk of a ‘no-deal’ Brexit. The energy sector was among the hardest hit, with the lack of any trade agreement a worst-case scenario. Expect Australia’s oil and gas and IT sectors to perform poorly today.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.

The Golden Rules of Investing

We might be experts in retirement, but with combined financial advice experience of 35+ years, we’ve nearly seen it all. 

In mid-2023, our senior team at Wattle Partners Financial Planning put the finishing touches on a brand-new report “The Golden Rules of Investing“.

In this free report, we outline the key principles that determine all of the portfolio construction and investment decisions of Wattle Partners. Collated over decades, this paper should be seen as a work-in-progress, constantly under review in light of the ever-evolving nature of markets. 

You’ll find the free report on my Author page. Simply click the button below to view the Golden Rules.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Disclosure: At the time of publishing, Drew owns shares of CSL.

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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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