Investment Matters

What Matters this week

The US market (S&P500) has been up 8 days in a row.  This is actually quite a rare occurrence - 2013 was the last time, and it even more remarkable given the current backdrop (politics around the world, instabilities, economic concerns...).   As detailed in the chart above, Australia has had a more subdued week.

To macro matters in Australia - unsurprisingly the RBA left interest rates on hold.  One factor that may be starting to weigh on their mind is consumer spending.

The decade-long plus debt party is over.  Retail sales slumped in August, and what was notable is that it was the second month in a row in which sales went backwards.  It was also in contrast to economist expectations of a 0.6% rise.  The significant amount of debt held by Australian households, combined with higher effective mortgage interest rates and cost pressures (electricity included), appears to be starting to bite.  Retailers will be nervous heading into the Christmas period, and in the longer term, they will be hoping the debt hangover isn't itself a decade long.

Australia's trade surplus grew in August to $989m.  A 10% increase in the value of iron ore sales supported a 1% increase in exports, while imports remained flat.

On to company-specific developments - Qantas' shares soared to record highs.  It came after a prominent broker upgraded the stock.  The last time the company's share price traded above $6 was back in 2007 (very briefly).  It closed the week at $6.18 - a record high.

Source: IRESS, First Samuel

Motorcycle Holdings did a capital raising to fund the purchase of a parts supply business.  Australia’s largest motorcycle dealership operator, with 34 franchises in Queensland, NSW and the ACT, has been roaring - supported by booming motorcycle sales.

Property group Cromwell has walked away from its bid for the Investra Office Fund (IOF).  Cromwell made a modest $25m over the time they owned the 9.8% stake in IOF, but the takeover didn't get up.  One of the key concerns was Cromwell's ability (or lack thereof) to fund the $3 billion deal.  Cromwell sold the bulk of its IOF securities to the Investra Property Group, the manager of IOF, at a price of $4.65.    IOF's share price is now back to $4.46.