The Overnight Report: Trouble In Africa

This story features FORTESCUE LIMITED, and other companies. For more info SHARE ANALYSIS: FMG

The company is included in ASX20, ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Greg Peel

Madness

For the second time in a week, the ASX200 crashed from the open yesterday, only to bounce right back during the session. Last week it happened when BHP and some other big names went ex-dividend, while yesterday it was all about Fortescue Metals ((FMG)).

Fortescue’s dividend was worth a -20 discount from the bell. The index fell -80 points. It closed up 5 points, or effectively 25 counting back that dividend.

Momentum algos, high frequency trading and naïve retail investors getting caught out? If I were the ASX I’d be asking some questions.

The materials sector was nevertheless the focus of the session. It fell -1.1%, with Fortescue down -10.9%, implying a gain otherwise. The news of the day was the coup in Guinea.

Guinea is one of the world’s largest producers of bauxite, selling mostly to China and Russia. In the year to July, Guinea sold China 55% of its bauxite imports. China is the world’s largest producer of aluminium.

Australia is the world’s largest producer of bauxite. On Guinea uncertainty, yesterday Alumina Ltd ((AWC)) jumped 3.3%. The LME aluminium price rose 2.9% overnight.

But Guinea is also home to the massive Simandou high-grade iron ore project, which is half-owned by a Chinese company and half by Rio Tinto ((RIO)). Rio Tinto shares fell -0.6%, offset by the fact it also owns bauxite mines. But while the aluminium spot price shot up, it was a different story for iron ore.

Spot iron ore has fallen -9%. This is attributed to weekly Chinese port inventory numbers which, according to one Singapore-based commodity trader, were boosted by a “monstrous” 4 million tonne shipment from Australia in the last week of August.

Meanwhile, the energy sector fell -1.7% yesterday on falls of -1.8% for Santos ((STO)) and -2.4% for Oil Search ((OSH)), after the two agreed to extend the period of due diligence on their merger proposal.

Aside from staples closing flat, the two resource sectors were the only sectors to close in the red yesterday (if we count in the dividend).

Consumer discretionary (+0.9%) was the best performer, with all of IDP Education ((IEL)), Redbubble ((RBL)) and GUD Holdings ((GUD)) appearing in the top five index winners. Other sector moves were less emphatic, but added up to counter resources.

In economic news, ANZ Bank’s job ads series fell -2.5% in August, but to a level still 26% above January 2020. Lockdowns have obviously impacted, but on last year’s experience ANZ Bank’s economists expect a swift rebound as soon as lockdowns end.

In news outside the ASX200, Hansen Technologies ((HSN)) fell -9.2% after suitor BGH Capital walked away from its offer following due diligence. BGH declared it found nothing wrong with the business.

BlueBet Holdings ((BBT)) fell -21.7% after withdrawing its application for a Virginia (US) Lottery licence. State by state, the US is currently legalising sports and other betting. Illegally it had been a massive black market right from the beginnings of US sport.

Commodities

I think we have most of it covered.

Action elsewhere amongst commodities was quiet with the US absent.

The Aussie has slipped back -0.4% to US$0.7435.

Today

With Wall Street closed, the SPI Overnight closed up 13 points. The index appears safe at present above 7500 support.

There is a decent-sized list of stocks going ex-div today. No BHPs or Fortescues, but collectively the likes of Amcor ((AMC)), BlueScope Steel ((BSL)), IOOF Holdings ((IFL)), IGO ((IGO)), Iluka Resources ((ILU)), Orgin Energy ((ORG)) and Sonic Healthcare ((SHL)), among others, will still have an impact.

The RBA meets today after a full month of NSW and Victorian lockdowns.

China reports August trade numbers.

The Australian share market over the past thirty days…

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