The ASX blew back above the 5800 mark on Wednesday, in its second day of strong performances, which one senior trader is attributing to investors cramming funds into superannuation accounts in a bid to avoid regulatory changes coming into effect on July 1.
The benchmark S&P/ASX200 index added 1.1 per cent to 5833.9, while the broader All Ordinaries rose 1.0 per cent to 5862.2.
The ASX blew back above the 5,800 mark on Wednesday. Photo: Ben Rushton
It’s the first solid leg up in some time for the ASX, which was heavily sold down beginning in May and had a less-than-auspicious start to June.
Bell Potter senior trader Richard Coppleson attributed the market’s robustness to the superannuation changes taking place on July 1, which will place caps on concessional contributions.
Super fund members are able to bring forward non-concessional contributions of up to $540,000 in 2016-17, but from July this falls to $300,000 for 2017-18.
“With the super changes on July 1, 2017, we are seeing massive (last minute) inflows in to super. The size of the inflows I understand is very large and (will continue to have) an influence on the market,” he wrote to clients.
Around 40 per cent of all contributions into superannuation in turn go into the Australian sharemarket, noted Katana Asset Management’s Romano Sala Tenna.
He was nonetheless not expecting the rally to continue much further from here.
“We’re a little bit surprised it’s bounced so aggressively,” he said. “There’s no doubt that equities are, at least, fully-valued right now.”
Leading the market on Wednesday was strength in the big four banks. CBA added 1.4 per cent, Westpac rose 1.6 per cent, NAB added 0.6 per cent while ANZ rose 0.8 per cent.
Biomedical shares continued their upward trajectory. CSL, Cochlear and Resmed Cochlear all hit fresh all-time highs, with CSL rising 3.2 per cent, Cochlear adding 0.6 per cent while Resmed closed up 2.2 per cent.
The miners were treading water after the iron ore price hit a 12-month low. Rio Tinto was flat, BHP Billiton added 0.1 per cent, while Fortescue Metals managed to rise 3.0 per cent.
Telstra’s shares, which have been under pressure this year, shed 0.5 per cent after telling investors it planned to cut 1400 jobs in a bid to slash costs.
Meanwhile, the Network Ten was placed into voluntary administration. Its shares remained in a trading halt.
Stock watch: Resmed
Shares in sleep apnea treatment device maker Resmed surged to an all-time high of $9.98 on Wednesday, up 2.2 per cent, after a survey of sellers of such devices found fast growth in the sector, and that Resmed’s masks were the most highly-rated. Resmed is hardly alone among Australia medical stocks in surging ahead – CSL and Cochlear are both at highs, with the sector the best-performing on the ASX200 so far this year. Resmed’s soaring price has seen an increasing number of analysts downgrading the stock, with many fearing the pace has been too fast. According to Bloomberg, four have it as a hold and two have it as a sell, though another four still see further upside. The 12-month consensus price target is $9.81 – slightly below Thursday’s close.
The Bank of Canada may be the first major central bank to follow the US Federal Reserve in raising interest rates, after governor Stephen Poloz said that rate cuts had largely done their job as the Canadian economy gathers momentum. He’s the second official in as many days to set the stage for rate hikes. “It’s coming from the upper echelons at the Bank of Canada so I think it’s a pretty strong signal,” said Nick Exarhos, economist at CIBC. The US dollar fell to its lowest level against the Canadian loonie since February following Poloz’ comments
A measure of consumer sentiment fell for a third straight month in May as disappointing news clouded the outlook for the economy. The survey of 1200 people by the Melbourne Institute and Westpac Bank found consumer sentiment fell 1.8 per cent in June, after May’s 1.1 per cent dip. Economic conditions, the federal budget, taxes and interest rates were the top news topics recalled by consumers, and developments in all were judged as,”unfavourable”. The survey was conducted the week official data showed the economy grew a slim 0.3 per cent in the first quarter.
Embattled telecoms operator Vocus Group reaffirmed its earnings guidance and told unsettled investors it has a plan to transform its business as it confronts a $3.3 billion takeover approach from private equity giant Kohlberg Kravis Roberts & Co. At a strategy day in Sydney, Vocus said it still expects full-year profits to be between $160 million and $165 million and revenue to be about $1.8 billion. It outlined plans to cut costs, transform aspects of its business and win market share from rivals on the NBN. It’s shares rose 1.4 per cent.
China’s factory output grew 6.5 per cent in May from a year earlier and retail sales rose 10.7 per cent, both ahead of expectations, while weaker growth in fixed-asset investment was led by a slowdown in the property sector. Despite some signs of cooling, analysts said the data indicated that the country’s economy remains on solid footing. It came as the IMF raised its forecast for China’s economic growth this year to 6.7 per cent, from 6.6 per cent, citing “policy support, especially expansionary credit and public investment”. China’s economy grew a faster-than-expected 6.9 per cent in the first quarter.