Latest / ausbiz a.m / 17.08.26 with Kai Chen, MPC Markets
Transcript
- Andrew: Good morning and welcome to your morning wrap from Ozbiz setting you up the day on the Australian share market. It is Monday, August the 17th, and we're expecting to extend last week's losses on the local market when we get underway this morning. ASX futures down around 0.4%. In a moment, we'll preview the day ahead with Kai-Chen. First, though, a quick check of where global markets finished on Friday, and US and European shares fell. Oil prices rose as markets monitored. US Iran talks with transit through the Australian. Was appearing to be near a standstill. In July, retail sales in the US came in weaker than expected, further diminishing the prospect of a rate height next month. The SP falling from record highs down around one-fifth of a percent under pressure as shares in the chipmakers, well, in particular applied materials, ⁓ fell, along with the other ones, including Broadcom and Intel dropping, the Nasdaq losing around a quarter percent, the Dow down one-fifth of percent. Among the commodities, ⁓ Brent. Up around 1% to $88.50 a barrel, goal up slightly to $4,375 an ounce, and Bitcoin trading around $63,000. The Aussie, let's climb to 70.9 US cents. Let's get across the market moves. Joining us, Kai Chen from MPC Markets. Kai, good morning. So what did you make of where we finished on Friday? ⁓ you know, in particular, I guess, a focus on further. Kai Chen: Good to be here. Andrew: weaker data in the US which ⁓ sort of takes the prospects of a rate hike out of the equation at least immediately. Kai Chen: Yeah. Yeah, no, absolutely. And that's ⁓ no exactly right. ⁓ we're seeing a bit more ⁓ of the oil prices coming back up. ⁓ I mean, you know, the conflict in the Middle East is still going at the moment. ⁓ they really haven't they haven't really started up the flow in t in terms of ⁓ ships out of Straits of Hamu. So, you know, I think ⁓ we had a bit of a rally in the oil over the last couple of weeks. It's consolidated, but I think the risk still presents itself there. ⁓ but we are seeing a little bit of a bounce back from you know, gold and silver, the precious metals. ⁓ you know, basically inflation being softer than where ⁓ people thought it would be, and ⁓ a little bit of dovishness to be to come out of the US as well. So yeah, precious metals seems pretty strong at the moment. Andrew: So Kai, ⁓ what are you anticipating this week locally then? ⁓ we what we finished down, what about was it one point eight percent last week and we're opening lower again. What what do you where is the pressure coming from at the moment? Kai Chen: Mm. Yeah, I mean, you know, we're seeing a bit of a ⁓ sell off in both BHP and ⁓ Rio, so the large mining stocks, ⁓ as well as weakness out of the banks, right? So ⁓ CBA and Westpac reported well, in fact, C BA was a bit of a mixed ⁓ earnings report because you know, it's come out ⁓ with profits ⁓ and better than expected, but ⁓ a weaker, you know, weaker loan books, so loan growth. ⁓ and ⁓ Westpac didn't report so well. So we've saw the banks sell off a bit, and this is with the backdrop of the federal budget, ⁓ which has caused the ⁓ real estate market to really kind of dampen. ⁓ so we got NAB coming on today ⁓ to report. ⁓ you know, it'll be interesting to see how they play. ⁓ but you know, the another th another bank to mention is Judo Bank. ⁓ they reported a couple of weeks ago. ⁓ and ⁓ their small and media small and medium business loans have been ⁓ showing a bit of higher impairment. So yeah, it would be be interesting to see what NAB reports today. Andrew: Yeah, clearly a focus just on where those ⁓ those mortgage applications in particular, given we've heard from the other big three too, just how far they've fallen. So that will be interesting. Elsewhere, ⁓ Kai, we get a a reading on the on the retail sector, ⁓ with JB Hi Fi, obviously one of the well one of the quality retail stocks. What are you expecting? Kai Chen: ⁓ Yeah, no, JB Hi Fi, you know, it's ⁓ traditionally ha one of the best retailers in Australia. ⁓ best sales square f per square foot. ⁓ but yeah, no, it's ⁓ it's had a bit of a correction over the last half a year. I mean, with the backdrop of the economy. ⁓ so the cost of living crisis is still ⁓ you know, the major theme and I think it still dampens ⁓ you know, even even being JB High Fi, ⁓ even JB High Fife being one of the best retailers in Australia. ⁓ you know, it's still in a tough position. So ⁓ it'll be today I think it's all about forward guidance in terms of what they report. So with the backdrop, ⁓ how it's gonna go looking forward, ⁓ and if they miss expectations and guidance, this is this is really ⁓ this is what really people will be looking out for. Andrew: Now you mention in the material sector, we'll we'll talk about BHP in just a moment. I'd like another stock reporting today, Blue Scope. what ⁓ now interesting of course, ⁓ SGH ta tried to ⁓ tr did a number of bids for this and sort of didn't succeed. what what can we expect from Blue Scope? Kai Chen: Yeah, no, absolutely. I think Blue Scope's been really interesting because they've they've had a very strong half a year. And most of it is actually caused by the US ⁓ their US segment performing much better than expected. and ⁓ you know, I think ⁓ basically we you're exactly right. With the taker takeover bid from Seven Holdings Group, that's ⁓ I think that was placed at about thirty four dollars. So you And they rejected the bid because they felt it was undervaluing the company. So, ⁓ that was a really strong signal to the market. And I think that's why we're seeing ⁓ you know, it perform very well over the last half year. ⁓ but yeah, no, it's doing exceptionally well in the US. ⁓ it's not just an Australian business anymore. ⁓ so I think if it reports well today, I think it would get another boost in its share price. Andrew: ⁓ BHP this week. so you mentioned obviously BHP Rio, I mean they've been doing very well, but just some more recently have have come off. ⁓ look the iron ore price has been under a bit of pressure. But you take a look at those businesses now, it's really about copper, isn't it? Kai Chen: Mm. Yeah, no, exactly. ⁓ I think a lot of the larger miners, ⁓ they're well, they're all very well diversified in terms of the materials that they have, but they've been positioning ⁓ their well, they've been yeah, positioning assets more towards copta copper. ⁓ because of all the data center build and electrification, ⁓ you know, and we're seeing copper prices r do really, really well. So ⁓ it's it's about at ⁓ highs at the moment. So, you know, Yeah, iron ore prices, I think, you know, they've they're trying to really diversify away from iron ore. ⁓ however, you know, they're they're so large, ⁓ a big portion their revenue still comes from iron ore Andrew: What do you see more broadly with the resources and I and you mentioned gold earlier too? Are you what are you looking forward to and when some of the bigger ones start Kai Chen: Yes. Yeah, no, it's ⁓ you know, we saw gold try to test about the four thousand level. ⁓ so there was a bit of support around that zone. ⁓ it's really come back, and I think it a lot of it stems from ⁓ dovishness, ⁓ dovishness out of the f ⁓ central banks. So ⁓ you know, we we thought Walsh coming in would be fairly hawkish. ⁓ and it hasn't really been the case. And inflation has been softer than expectations. It's still there, so you know, I'm not saying that there is no inflation, but ⁓ you know, I think given the backdrop where we had the conflict in the Middle East, ⁓ I think people were expecting a lot higher inflation. So ⁓ yeah, it's it's kind of it's coming back a bit more now. ⁓ and then, you know, in terms of the Australian gold miners, we we've got l some of the large largest gold miners in the world. ⁓ you know, Mumont, ⁓ Evolution, Northern Star, they will all perform I think I think ⁓ evolution will ⁓ you know, benefit out of the the underlying commodity prices bouncing back. Andrew: And Kai CSL this week as well. We ⁓ this is one of the most talked about stocks certainly here on OSBIS ⁓ when we do Kai Chen: Mm-hmm. Andrew: favourite. ⁓ and you get that really real diverse opinion on where this is likely to go and how the business is faring. What should we expect as far as its results are concerned? Kai Chen: Yeah. ⁓ I know it's ⁓ it was one of the the market darlings for for decade, you know, for a decade and ⁓ it's fall from grace. But you know, like it ⁓ coming back to where it came from and fell down to, you know, you know, it went under a hundred dollars. ⁓ and I think it was a you know, it was one of these big surprises to the market where ⁓ I don't think it was i I don't think a hundred dollars was where CSL should have been given what was reported. Right. So I mean, obviously their vaccine businesses haven't ⁓ segment hasn't done as well as the market was expecting, or done rather poorly. but still, you know, like I think going from three hundred dollars at a hundred dollars it re represented a really undervalued stock. So it's come back to about a hundred thirty six dollars. ⁓ and, you know, I i in my opinion, I think it's still fairly undervalued ⁓ compared to where you know, where it should be. So ⁓ and we're seeing a little bounce back in general in healthcare as well, right? So a lot of the biotechs, a lot of the healthcare industry is kind of bouncing back. and you know, yeah. Andrew: Well yeah, on th on that point I was gonna say, I mean, do you think the market is now recognising that value they're seeing in healthcare in particular CSL but also the likes of Cochlear, which has been slammed 'cause it's had a series of downgrades, ⁓ Resmed as well. Kai Chen: Yeah, absolutely. I think I think the health health ⁓ healthcare sector has been ⁓ you know underpriced for a while. ⁓ and generally, you know, in from a macro standpoint, ⁓ healthcare healthcare sector is a defensive ⁓ play. So, you know, whenever we're seeing a bit more risk on the table and ⁓ you know, the economy downturn, ⁓ healthcare generally tends to people tend to rotate out the growth sectors into healthcare. So, you know, it it has given where ⁓ you know, where all the money has flowed into tech and growth, ⁓ you know, b healthcare's definitely been neglected ⁓ for for a while. Andrew: So Kai, ⁓ as I mentioned, the market has been under a bit of pressure over the past week or two. Is that sort of coinciding essentially with reporting season? Is that how we should expect this to play out? Kai Chen: ⁓ no, not necessarily. I think I mean, ⁓ you know, the the market's gone to all time highs, right? So you know, it's made a spectacular recovery in the US. I mean, the tech stocks especially, that's a yeah, it's it's a bit of a rebound from the lows in terms of ⁓ a lot of the SaaS companies and then ⁓ you know, the chip stocks really correcting. So there's there's a lot going on. I think in terms of the ASX, ⁓ yes, there's a big portion that ⁓ that's definitely influenced by reporting season. ⁓ but you know, we had a spectacular run mostly with the banks and ⁓ BHP of prior to this. ⁓ I think it's just a bit of consolidation and then now coming into earnings season, I think, you know, ⁓ basically the all the focus is on the s stock reportings. Andrew: Well, Kai, hope you have a good day and a good week. Thanks for joining us from MPC Markets. Kai Chen: Thank you very much, Andrew. Andrew: And that is your Osbiz morning rep. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.