Latest / ausbiz a.m / 20.10.26 Kai Chen, MPC Markets
Transcript
- Andrew: Good morning. Welcome to your morning wrap from OSBs. It is Tuesday, October 20th, and the local share market is expected to reverse course this morning. ASX futures down around three tenths of a percent. In a moment, we'll preview the day ahead with Kai Chen. First, though, a look at the global markets and European equity markets retreated sharply. That's amid those widespread protests over the cost of living, which appear to be spreading. Wall Street staged a Solid tech led recovery to raise some of the previous weeks' steep losses, and also reassuring comments from Fed Reserve officials indicating no immediate rush to hike interest rates. Further stabilized the market, so the Nasdaq gaining more than one percent, led by rebounds in some of those hard-hit chipmakers, including Intel and Micron. The SP around six tenths of percent higher, breaking its worst weekly streak since June. The Dow was flat. Now in terms of commodities, Brent crude around one hundred and nine US dollars a barrel, gold slightly weaker at four thousand one hundred and fifty an ounce, Bitcoin trading above eighty two thousand US, and the Aussie dollar firmer at sixty nine point eight US cents. Well let's get across those market moves. Kai Chen joining us from MPC Markets. Kai, good morning. Kai Chen: Good morning, Andrew. How are you? Andrew: Very well. So yeah, bounce back on Wall Street with tech in particular. I mean, this is ease broader concerns about what's going on in the tech sector at the moment. I mean, how what are you seeing there with cracks having emerged, of course, and investors certainly continue to ask that question about CapEx and where those returns are. Kai Chen: Yeah, no, absolutely. We saw we saw the US market, especially in the tech sector, get tested last week on Friday. you know, basically the concern was that a lot of these neo cloud providers, especially Coreweave, that it was they they were taking on too much debt, and basically that, you know, if there was any weakness in demand, would they be able to support the cash flow to to pay off the debt? and you know From what we saw last night, I think Goldman Sachs came out and changed the recommendation to a buy full core weave. I think it's a little bit overblown in terms of how you know, how the market is really seeing it. We know there's a lot of you know, there's there's a lot of excess going on in a lot of the chip sector stocks, a lot of some of the hyperscalers. So, you know, it's natural that to have some correction, but I think the fears on some of the debt is a little bit overblown. Andrew: Now of course this comes as we're in the midst of earnings season excuse me and some notable companies in the tech space reporting this week. Kai interested Kai Chen: Hm. Andrew: to get you viewed, most notably Meta, Tesla, SpaceX. What are your thoughts? Kai Chen: Yeah, no, absolutely. So exactly some pretty big names to be reporting in the tech sector. I think Meta will be a very interesting one to have a look at. you know, they've obviously come out recently with their LM models and they seem to be actually doing fairly well and catching up. but also in terms of where they're positioning, you know, we've recently actually seen you know, as a hyperscaler, they are able to cater to a lot of the demand for compute. So They're actually going really well. but also from a free cash flow point, you know, they stand out as one of the strongest ones out there. So, you know, I think Microsoft has the most free cash flow and is the least indebted, and Meta's actually doing fairly well as well. So yeah, that'll that should be interesting to see how they actually report. Tesla as well, obviously last week, a bit of bit quite interesting in terms of the presentation on social media and their the release of that flying car. so there's a lot of memes going around with that. Andrew: Yeah. Well well it's certainly impressive. I don't know that's one you want to take home though. Kai Chen: Yeah, no, exactly. i it I don't know in terms of commercialisation how that would turn out, but it was certainly impressive in t how it flies. but yeah, no, I think Tesla's an interesting one to watch as well. Lamb Research is another one that's kinda reporting as well out of the socks. yeah, so so a couple key ones this week. Andrew: so how do you think earnings season is likely to pan out? 'Cause I mean expectations, once again, very high. Kai Chen: Yeah, no, it's started off fairly weak. you know, we've had some come out. not not none of the major ones yet, but yeah, it's g it started off fairly softer. Andrew: Let's turn to the local market then and w just before we came on we were talking about just how quiet it is. I guess, you know, we're in the midst of AGM season. So any particular revelations you've seen there and I I should note though, at the time of recording we're looking forward to BHP announcing its third quarter results. We'll get that this morning. Kai Chen: Yeah, no, absolutely. So I think, you know, we've got some yeah, with BHP it should do fairly well. I think the the commodity prices have actually stabilized and, you know, they're they've done pretty well. there has been in over the last couple of weeks there has been a bit of a correction in terms of a lot of the iron ore stocks, but I think it should I don't think there's anything too surprising to be coming out for BHP. but you know, really we're t Really in our market at the moment there's a lot of and A activities going on with Challenger. and yeah, so th that was a very interesting one for the takeover bid from the Japanese firm for Challenger, which saw it actually go up quite a bit yesterday. Andrew: Yeah, in fact, yeah, the Japanese insurance Tao Daiichi. So interestingly too, Challenger is actually did a report today as well. w what are you making I mean the the MATOD seems to be quite intense at the moment. What do you make of that? Kai Chen: Yeah, no, it's picking up a little bit, which is a good thing. There's a bit of movement in the market. I think you know, in certain s I I I mean the ASEX has underperformed for quite a while. So there are companies which represent value on the Asex I th I guess that's why globally a lot of people are looking at it at the moment. Andrew: All right, so are you looking at adjusting your portfolio? I know there at MPC Markets, you sort of tended to be a little more underweight locally, with the focus there on Wall Street and tech. Given what's happened there in tech, have you readjusted at all? You're you're waiting? Kai Chen: yeah. Well, the in for certain sectors, you know, like we're we're fairly heavy into metals. we do have BHP, we do have a bit of healthcare as well. you know, in these sectors some Aussie companies do represent pretty good value at the moment. so yeah, I I I think actually one sector that's really been hit quite heavily is lithium miners. I know they're volatile, but actually some of them have pulled back quite substantially like PLS and Lion Town. you know, if you look at the spot spot spotamine price, it hasn't really come off as much as as the miners. So that's a sector that we're really having a look to see whether it's worth re entering. on some of the on our watch list is REITs. We've been quite patient with it. Obviously there's a lot of structural headwinds against that. But you know there are some companies which are extremely cheap. Andrew: Yeah, in fact, well we were talking about that yesterday on the call, Kai, and Kai Chen: Hm. Yeah. Andrew: more broadly I guess what we're seeing with those interest rate sensitive sectors such as the RITs and the retailers and at what point you would see an in, what what are you Kai Chen: Yeah. Andrew: gonna what are you gonna be looking for? Kai Chen: I think it's to really the interest rate cycle is gonna be the lead indicator, right? So I think any any signs that we're hit reaching the the end of the hike cycle, I think you know, it'd be a good timing to kind of just start looking at really the undervalu value high quality assets. I mean, you know, the even if you w if wanted to play safe with Goodman, it's quite undervalued at the moment. and it's all all of this is really dependent on inflation. So I think you know, if we do see oil prices coming back down for a sustainable period of time or we see some resolution there, then you know, perhaps it it might be a good early entry. Andrew: What do make of those stocks such as Goodman and Kai Chen: Mm. Andrew: w well next EC, obviously data centre focused, that really have underperformed despite what we're seeing with data centres both here and globally? Kai Chen: Yeah, no, absolutely. There's there's some r REIT stocks that have been really hit hard. and they're trading, you know, fair amount below NTA. so you know, I I think that there's there's some really pocket good pockets of gem out there if we had a look. you know, so Goodman being one obviously one of the bigger blue chip ones. and they have underperformed relative to the US data centers, you know. So I think it's a good opportunity to pick up some when they're on discount. Andrew: Yeah, in fact we had that news yesterday, next D C went into a a trading halt, 'cause Kai Chen: Hmm. Andrew: it's having power issues. I guess maybe that's symptomatic of what we're seeing in that sector at the moment is that com competition for resources is intense for for data centres and you're obviously getting that community backlash as well. Kai Chen: Yeah, no, absolutely. So the sentiment here is certainly different to what is in the US. I mean, I think there's obviously been issues in the US as well, but generally, you know, we've seen the US market a lot more positive on tech stocks. I mean, if you even looking at some of the other tech stocks in Australia, right, like the some of the SaaS companies like Zero or WiseTech or Live three sixty, they've been really punished again over the last couple of months. so yeah, I think I think there's just less positive sentiment on tech in in the Aussie market. Andrew: So given they have been punished again, are you looking at picking those up or not? Kai Chen: i I'm sorry, for for the textbook. Andrew: The i in in those tech, those SAS related stocks. Kai Chen: Yeah, I mean you know, they they they've been very undervalued for a long time. I mean WiseTech last week they came out with the announcement that they've cleared the insider trading allegations. and you know, they actually did report fairly well for their earning last earnings. and it's still trading at about thirty eight dollars. I mean, I mean the sentiment is changing slightly, but I think yes WiseTech is very undervalued at the moment. Andrew: Well Kai, good to get your perspective of what you're seeing in the market at the moment. hope you have a good day. Thanks for joining some MPC Markets. Kai Chen: Thank you very much, Andrew. Andrew: And that is your Osbiz morning wrap. Hope you have the well make the money. I'm Andrew Gagan. Thanks for listening.