Investment Matters

What matters this week

This week, political matters in the US may have moderated the Trump rally.  For now anyway.  A real digression is opening up between the US and Australian markets, as seen below.

Invesment Matters graph

The major local economic news was Wednesday's release of the Mar-17 quarter GDP data.    In response, the market finished flat for the day, and the Australian dollar hit a one-month high, as a few sighs of relief were exhaled (especially from the vicinity of Canberra).  It came in at positive (but very moderate) 0.3%.   Scratch the surface though, and it feels a bit like sugar free Coca-Cola.

The oil price took a little stumble leading into our Thursday (WTI down 5%).  The flow on impact to local energy producers (e.g. Woodside, Santos and Oil Search) was not as great as the impact for many listed overseas.

The notable movers on the market this week were Retail Food Group (Michel's Patisserie, Donut King, Brumby's, Gloria Jean's, Crust, Pizza Capers and other food retailers) and Vocus.  The former (-11% on Monday, part recovered to be -5% for the week) got caught up in a broker note and subsequent press article about the potential impact of leases being brought on the balance sheet under new accounting standards (although nothing changes operationally or in relation to risk, the paper impact is to increase the technical gearing levels of companies with leases).

Vocus finished up 29% for the week, after it received a $3.50 per share takeover offer (non-binding, indicative) from private equity player KKR.  The telecomms provider (internet, fibre, underseas cables and data centres) had been on a downwards slide over the last year (from >$9 per share) with acquisition indigestion and disappointing earnings downgrades.

Things were much simpler on the dairy farm in the old days of co-ops.  The now corporatised dairy processing space is subject to the whims of the international milk price, and competition.  Hence, the move by Bega to set a price for milk solids (how farmers are paid) that is 17% above the level that troubled rival Murray Goulburn is offering its farmers received attention.

There are a few stocks that keep giving and giving at the moment.  Slater & Gordon is one.  Not only is it subject to a class action from shareholders relating to disclosure of information (or more precisely the lack thereof), but now one major shareholder has reportedly launched proceedings for misleading representations in relation to the company's FY-13, FY-14 and FY-15 annual reports.

And to wrap up the week, as we got our coffee this morning it became apparent the UK has voted for a hard Brexit.  Their share market is not yet open to provide a reaction.  However, initial indications from currency markets are not that positive.