Australia’s enthusiasm for the Matilda's chances of beating England tonight has not been passed onto the ASX.
The local market managed to trim intraday falls but did fall as much as 1.6% to a five-week intraday low dragged down mostly by tech stocks and jitters surrounding the outlook for US interest rates and China's economy. The ASX 200 finished down 1.49%.
It was also an overall disappointing day for earnings reports.
Eight of 12 reporting companies in the ASX 200 lost between 1.7% and 6.8%.
Iron ore miners and banks also dragged. BHP (ASX:BHP) Group was down 2.7%, while CBA lost 3.4% ex-dividend.
The bottom-performing stocks in the ASX 200 index were Fletcher Building and Syrah Resources, down 9.27% and 5.81% respectively. The index has lost 1.93% for the last five days but sits 4.91% below its 52-week high.
Earnings season continues
eToro’s Farhan Badami and Josh Gilbert have run the ruler over Mirvac Group Ltd and Transurban Ltd respectively.
Badami kicks off with his take on Mirvac’s earnings.
“Property group Mirvac reported an operating profit of A$580 million, a result in line with estimates despite falling by 2.7% from the previous year. The company completed settlements of 2,298 residential lots within the year, surpassing the revised guidance of 2,200 lots provided to investors in April.
"Their residential business garnered pre-sales amounting to A$1.8 billion by the end of June, consistent with the balance recorded at the close of its fiscal third quarter. Additionally, Mirvac has a robust occupancy rate of 96.9% across its investment portfolio, having successfully leased 223,400 square metres.
“Mirvac has struggled with macroeconomic factors which have affected prices, demand and the supply chain of its properties. High interest rates were the catalyst once again as the company projected a decline in its operating earnings for 2024. Additionally, high inflation has changed household behaviour and spending patterns as Australian home buyers in major cities struggle to afford new homes.
“Property developers in general are facing a challenging period marked by higher interest rates, contributing to increased debt costs and causing some households to curtail their spending. Despite considerable price discounts, national retail sales showed considerable weakness in June.
“Nevertheless, the residential property market gains a performance boost from a tight labour market and resurgent migration. The company has expressed optimism around population growth and tenant interest in its collection of build-to-rent developments, setting up a relatively positive outlook for the financial year ahead."
Gilbert looks at the Transurban numbers
“Transurban CEO Scott Charlton has signed off his reign at the company with a beat across the board in a solid set of full-year results, demonstrating that the business continues to navigate the current economic conditions exceptionally well as it passes on costs to consumers. Revenue climbed by 22% year-over-year to $4.16 billion, while net income rose by a whopping 475% to $92 million.
“Scott Charlton will step down as CEO in October and will be replaced by Michelle Jablko, who has been with the business since 2021. Charlton’s tenure ends on a very high note thanks to this result, on top of having delivered more than 120% returns (not including dividends) in his 11-year reign.
"Any changing of the guard- especially after such a long term, can mean some uncertainty for shareholders, but its full-year forecast shows investors need not worry.
“Transurban says it expects to payout a record distribution in FY24. That was supported by the company's confidence that traffic growth would continue in the year ahead, with volumes set to stay at record levels.
"Transurban’s government contracts with inflation-linked toll rises mean that while most businesses bite the bullet on inflation, Transurban’s revenue rises. This should help continue to boost revenue in 2024 and aid further profit growth.
“Shares have risen by more than 7.5% this year so far, suggesting this defensive stocks' time in the sun might not be over just yet. However, it won’t all be one-way traffic for Michelle Jablko. As interest rates remain high, Transurban’s large debt pile could be a cause of concern for investors over the years ahead on top of the crackdown from competition regulators."
Is it safe to invest in China?
We wrote earlier today that amongst a slew of other problems, the latest round of economic data further underscores the challenges China faces, including foreign investment plummeting to levels not seen since 1998.
Read: China's central bank intervenes with rate cut amid economic challenges
That was taking a broader economic view but does it apply to general sharemarket investment?
We asked Webull Australia CEO Rob Talevski, his thoughts on the investment landscape in China.
Talevski said of the leading electric vehicle (EV) manufacturers globally, Tesla (NASDAQ:TSLA) often tops the list, followed by other conventional carmakers. Yet, China's BYD is a formidable contender in the EV arena.
“BYD is the world’s second-largest EV maker and outstripped Tesla on EV sales in China throughout 2022 and 2023. Add the fact that BYD actually makes their own batteries for their EVs - whereas Tesla relies on third parties and recently signed a supply deal with BYD - primes BYD to continue its global ascent."
BYD is well positioned for global growth, suggesting there's more to the investment horizon than the well-trodden paths of the ASX 200 and S&P 500.
“On a trip to China in March this year, I was able to see firsthand the potential opportunities for investors," Talevski says. "The mainstream press publishes a lot of information about trade wars, real estate developer debt and geopolitics, and these are certainly risks that investors should consider.
"However, ignoring the world’s largest emerging economy for its investment potential could mean passing up some great opportunities, especially when there are 5,000 listed companies across China that can be accessed as easily as any local stock."
From bikes to buses, electric vehicles have nearly eclipsed traditional combustion engines, presenting a stark contrast to countries like Australia, where EVs are more of a rarity.
Companies like BYD, besides addressing the needs of the world's largest populace, are crafting new technologies and their strategic global forays, from manufacturing plants in Europe to South America, are reshaping perceptions of China from merely a global manufacturing hub to a trailblazer in technological advancements.
“However, possible investment opportunities aren’t based just on EVs. We have already seen the emergence of technology companies like Trip.com, Tencent and Alibaba (NYSE:BABA) hit the world stage, and others like Baidu (NASDAQ:BIDU) making recent waves.
"There are also traditional western style investment opportunities such as Yum China, which operates the likes of KFC, Pizza Hut and Taco Bell in a land of 1.4 billion people - these are names that have been sanitised for Western investors through dual listings on exchanges like NASDAQ.
"Whether listed onshore or off, the fundamentals that drive the thousands of other listed companies in China can be understood by investors who harness and standardise that data. Suddenly, a whole new world opens up,” Talevski says.
Of course, like all investments, diving into the Chinese market requires prudence. New entrants would do well to create a selective watchlist, familiarise themselves with the companies, and perhaps start with a paper-trading portfolio.
Source: Webull Securities (Australia) Pty Ltd
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