Latest / ausbiz a.m / 08.10.26 Jason Yin, Prime Financial
Transcript
- Andrew: Good morning. Welcome to your morning wrap from Ozbiz. It is Thursday, October 8th, and we are expecting a sell-off of the open ASEX futures are down around seven-tenths of a per cent. In a moment, we'll preview the day ahead with Jason Yin. First, though, overnight, European stock markets they close sharply lower domestic political instability and rising concerns over France as heavy public debt triggered a bond sell-off there. Wall Street snapping its recent winning streak as a surge in those global bond yields and climbing oil prices reignited inflation. And rate anxieties, the SP down a quarter percent, the Dow six tenths, and the Nasdaq down four tenths of percent, marking its first negative session in six days, in fact, as tech heavyweights such as NVIDIA and AMD finished lower in profit taking. The Fed released its minutes from its last meeting, revealing another rate increase expected this year. Brent crude down at well, it's around $100 a barrel. Strong gains in the US dollar weighed on alternative investments, gold down to four thousand one hundred an ounce, Bitcoin falling back to around eighty three thousand, and the Aussie dollar easing to sixty nine point six US cents. Let's get across those market moves now. Jason Yin joining us from Prime Financial. Jason, good morning. Jason Yin: Good morning, Andrew. Thanks for having me on. Andrew: let's just take a look first of what we're seeing in the States at the moment. Wall Street, so obviously we've been near records, bit of profit taking going on today, concerns about where those bond yields are. But of course we're also leading into the midterms. How critical is that gonna be for markets? Jason Yin: Yeah, look, it's it's going to be pretty interesting to to see whether the Republicans or or the Democrats would will win out of this. we're just sort of looking at some of the websites like Polymarkets, which is prediction websites, and and the the probabilities giving it to the Democrats roughly a ninety percent chance of of taking the House, which is actually pretty extreme. But I think the biggest change is in the Senate and the probability of a Democrat win has gone from below fifty percent from mid September to around sixty percent to to where we are right now. And this is going to be relatively bad for Trump because a loss of control in in both the House and probably the Senate would mean that it's going to be harder for him to push through his agenda through Congress. So it's definitely going to be quite interesting between what happens from from here and also November the third. Andrew: All right, so if his policies are derailed and his agenda, what is the what the implications then for particularly Wall Street, do you think? Jason Yin: Yeah, so I I think we'll we'll look at some of the the government deals that that would come under closer scrutiny, particularly the contracts and also direct investments in in companies. we're already seeing Democrats question the the tax benefits of Trump's big beautiful bill act. and this will support companies like Amazon, Meta, Google and and Microsoft's AI spending. Trump will also still have significant power, of course, over tariffs and and deregulation. So I don't think it's going to be a complete reversal if the Democrats really take the House or the Senate. But as an investor, I'll be asking how much of a company's output really depends on that political support continuing and whether that share price right now is supported by a lot of the legislative changes that that we are seeing. Andrew: So when you take a look at the broader market, I mean it has been a very narrow leadership that we've seen pushing to those record highs, do you feel as though perhaps if Trump loses one or both houses that the share market may may stall or even pull back? Jason Yin: Yeah, yeah, that's that's definitely something that that we are concerned about because look Trump's policies are are relatively bullish, especially a lot of the tax reforms and the depreciation that that we sort of that I talked about, especially in this big beautiful bill act. we know that the Democrats are a little bit more I guess in a way, conservative, if I can use that word. so they might be a a little bit against some of the the policies, especially for business. So it might not be a conducive environment for for corporates if they do take the House or the Senate. Andrew: Jason, let's turn to the local markets. w what have you made of recent moves? Obviously very much lagging what we've seen, particularly Wall Street. We don't have that AI trade to to build on, Jason Yin: Mm. Andrew: and ongoing rate concerns too, of course. How are you viewing it at the moment? Jason Yin: look, it's it's definitely a a pretty clear juxtaposition between what bond markets are are saying and and and what equity markets are saying. if you just have a quick look at the VIX index, where the last time I looked at it yesterday was around sixteen sixteen or so, which is relatively low. but when you look at the move index, that's actually skyrocketed quite substantially. and what fixed income markets is saying, look, there's going to be higher interest rates for longer. And that's I I guess reiterated by the fact that the Fed minutes showed a a pretty hawkish tone behind a the the September rate hike. so there there is a little bit going on. Equity markets think it's it's going one direction. Bond investors think it's going another direction. And I think it's going to be really interesting. there's there's definitely volatility coming. I mean from from our perspective There's only so much macro news that you can trade on because it changes overnight and changes very rapidly now. So we're still focused on quality businesses and and holding them, taking a a very Warren Buffett type of approach. It is pretty what can I call it? A a very slow way to to get rich, if I can recycle some of Buffett's word, but it it is pr proven way to to go through it. Andrew: Well speaking of quality businesses, I know Cochlea is on Jason Yin: Mm. Andrew: your list at the moment. Now of course it's suffered from a series of profit downgrades. It has struggled excuse me, and that's certainly reflected in its share price. Interested us to get your view on perhaps where you see Cochlea going from this point. Jason Yin: Yeah, look, one of the major concerns I guess over the past week or so that has impacted cochlear share price has been an announcement from a private Austrian company called Mel Ed, Medel. that company launched a a fully implantable cochlear device in in Europe and for patients, I guess the intraction of a fully implantable device is the ability to to hear without wearing that external processor, which most cochlear implant patients will would have to to have. so as you can understand, a lot of investors were a little bit worried about cochlear potentially losing a bit of market share, especially in Europe. And we take that risk quite seriously. So we've been looking into a lot of the details. but if I was to take it from a a a glass half full type of approach, we think this totally implantable device would actually encourage people who have actually who have held back going into surgery for traditional cochlear implants and potentially opening up the market. Andrew: So are you then positive on Cochlear or would you be buying it at this point? Jason Yin: Yeah, look, Cochlear has a a very large base of patients who already use its implants and that supports a lot of the ongoing process or demand upgrades and and also services. Companies got in in net cash of 188 million in June and and that gives the balance sheet a a pretty strong base for it to develop its next generation of products. we know that Cochlea is investing and doing a lot of R and D into its own implantable version. and if that does come to market then then I think even though they've lost that first mover advantage to Med L, I think they're in a a pretty prime position to also capitalize on that technology if they were to to get something that is available. So we're we're still positive on on the company. Andrew: I also know that Cochlea fell out of the AS X fifty last month. What are the implications of that? And perhaps more broadly when a stock suffers from that fall and grace if you like, what what are the broader implications? Jason Yin: Well, investment funds often follow an index benchmark, such as the XX two hundred, three hundred, or even fifty, in the case of Cochlea. So when there is a change in in terms of the constituents of of an index, then these funds will typically adjust their their holdings. Cochlea was removed from the XX fifty. that prompted some funds to sell regardless of the view of the company, which had put sh pressure on the share price, even if the earnings haven't really changed from from our point of view. All of this happened before the the Med L announcement and that's why we've seen the the Cochlear share price down probably over the last twelve months. There's separate events, but it does show that when there has been a a lot of selling on behalf of a lot of h hedge fund activity, this could be a pretty useful signals for for investors to be to be cognizant of. Andrew: Yeah, so what goes on around particularly short selling, given that rebalance? Jason Yin: Yeah, so we we've been looking into research on a lot of short positions, especially around rebalance date and and what stood out was was timing. So half of the stocks with unusually large short interest changes saw those changes concentrated on the rebalance day itself. I'm sure a lot of viewers and and and listeners would would have seen a lot of volatility in in some of their own portfolio and probably didn't really understand why, given there was no change in real fundamentals. but if you look under the hood a little bit, a lot of the volatility suggests that hedge funds were positioning around the index changes. how it usually happens is that short sellers typically borrow shares and and then they sell them on market, hoping to buy them back a little bit cheaper. So if they go shorting a stock before there's an index change, and if the share price increases, then they're gonna have to buy back that stock to to limit a lot of their losses. And that buying can give the share price another lift, and and that's called short covering. Andrew: All right, so that potentially creates an opportunity for retail investors. Have you got any other examples perhaps of stocks you're looking at that may be in that position? Jason Yin: Yeah, of course. So Coden and SKS are are two stocks that that we hold in in our fund. both of those companies have done extremely well. Coden's share price went bananas this week. from our perspective and and looking at the short interest trades, we think a lot of short covering has contributed to a lot of that positive momentum going through. also as well, two other stocks, Cuscus, so CCL and also Genus Plus Group. these are two other companies that may have also benefited from from short covering. once that extra buying drops away, you're going to really need earnings to support the share price or else the share price is going to fall. So if these two names are potentially in your portfolio, that would be something I would be cognizant of. perhaps lightning some of these positions in case once that short covering is finished and finalized. Andrew: Jason, great to get across the opportunities you're seeing in the market at the moment. Thanks so much for joining us from Prime Financial. Have a great day. Jason Yin: Thanks, Andrew. Thanks for having me. Andrew: And that is your Osbys Morning wrap. Hope you have a great day. I'm Andrew Gagan. Thanks for listening.