3 July 2023 | Weekly Snapshot

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The Info Tech sector led the gains on the ASX for the 2023 Financial Year, up an impressive 36.43% helped by strong offshore leads from the U.S Info Tech sector that rallied 42.06% over the past 6 months.

Market Movements

Australian Share Market (ASX 200) – up 1.47% last week, closing out the month, quarter, and financial year with the ASX 200 up 0.81%, 1.14%, and 10.14% respectively. Info Tech led the gains again last week and was the best performing sector in FY2023 with a 36.43% gain. The Gold Index was the next best up 34.56% followed by the Materials sector up 17.29% for the Financial Year. The REIT sector posted the lowest returns up 1.54% followed by Consumer Staples up 2.82% and Health Care up 4.23% for the Financial Year. The highlight of the week was the monthly inflation indicator with headline inflation falling to 5.6% for the year in May, down from 6.8% in April, below the 6.1% expected, and the lowest since April 2022. A drop in fuel prices led the decline and some discretionary categories also experienced lower inflation with clothing prices falling year on year. Rent prices on the other hand accelerated to the highest in over 10 years and electricity price inflation remains elevated. Excluding volatile items (which is more in line with the RBA’s preferred trimmed mean measure) annual inflation slipped to 6.4% from April’s 6.5%, showing broader price pressures persist. Our retail sales figures rose 0.7% in May, higher than expectations for a 0.1% increase and rebounding from April’s flat result. Retail turnover was driven by discretionary spending with household goods retailing rebounding after three consecutive monthly falls. Other retailing which includes online stores, pharmaceutical and cosmetic retailers surged 2.2% while cafes and restaurants spending climbed 1.4% to a new record high. In other ABS data, the quarterly jobs vacancies report showed vacancies fell just 2% for the 3-month period. It was the fourth straight quarter of declines with vacancies now down 10% from a year ago but still 90% higher than pre pandemic levels. Economists are split ahead of tomorrow’s RBA meeting with a poll showing 16 of 31 economists expect the RBA to hike with 15 expecting no change. Rate hike odds had fallen with the lower-than-expected inflation data, but the unexpected rebound in retail sales and still historically high number of job vacancies saw rate hike odds firm later in the week.

U.S. Share Market (S&P 500) – up 2.35%, with the Dow (+2.02%) and Nasdaq (+2.19%) also higher.
June was a strong month with the Dow up 4.56%, the S&P 500 up 6.47% and Nasdaq up 6.59% as the narrow rally broadened out into other sectors and style factors. The Nasdaq recovered most of the mid-month decline while the S&P 500 closed at new 2023 high with both these indices extending their winning streaks to 4 monthly gains in a row. For the June quarter the Dow rose 3.41%, the S&P rose 8.30% and the Nasdaq surged 12.81% with the 2023 year to date Nasdaq gains having now recovered more than half of the 35% decline for that index in 2022. The U.S REIT sector led the gains last week, with office REIT’s having been among the worst performers this year, down 20-30% on a combination of secular and cyclical headwinds, but got a boost following a US$2 billion Park Avenue, New York transaction that was higher than expected. Fed Chair Powell at a Central Banking forum in Portugal last week remained hawkish but optimistic on the outlook, reiterating his base case for a soft landing. And that after 500 basis points of tightening said they are near the point where risks of doing too much are more balanced against risks of doing too little. Data was strong last week with Durable Goods, Consumer Confidence and New Home Sales all the highest since early 2022. The final estimate for U.S Q1 GDP saw an unusually large upgrade to 2.0% from 1.2% in the prior estimate with personal consumption revised up 0.4% to 4.2% and the fastest pace in almost two years with the 10 yr. bond yield hitting a 3-month high on the better-than-expected data. Annualized headline PCE inflation fell 0.5% to 3.8% in May in line with consensus and lowest since April 2021 and down from the 7% peak this time last year. Annualized core PCE was down 0.1% to 4.6% but remains stubborn, holding in the 4.6% -4.7% range for every month since December.

Portfolio Movements

Linde (LIN) announced they have signed a series of contracts with Wanhua Chemical Group, expanding the companies’ operations in China, particularly the Fujian province. Linde will acquire three air separation units (ASUs) from Wanhua, including two ASUs that are currently under construction. And will enter into long-term agreements with Wanhua for the supply of industrial gases to their chemical production sites through the acquired ASUs. “We are proud to strengthen our long-standing global partnership with Wanhua,” said John Panikar, Executive Vice President APAC, Linde. As a global chemical company, Wanhua Chemical is committed to continuously optimizing industrial structure and actively setting a benchmark for low-carbon and green development in the chemical industry,” said Liao Zengtai, Chairman of Wanhua Chemical Group

Ramsay Healthcare (RHC) announced that together with its partner Sime Darby Berhad (Sime Darby) that a decision has been made to explore selling its 50:50 joint venture in Asia, Ramsay Sime Darby Health Care (RSD). “The decision has been reached following the receipt of significant inbound interest in RSD at values that are in shareholders’ interests to explore, noting that there is no certainty that a sale process will result in a completed transaction,” they said. Ramsay also announced they have secured A$1.5 billion in new committed revolving bank loan facilities with two of its key relationship banks. The facilities, which will mature in 1HFY26, are part of Ramsay’s ongoing bank loan refinancing activities and will be used to repay facilities maturing in 1HFY25.

Sonic Healthcare (SHL) announced they signed binding agreements to acquire SYNLAB Suisse SA, the Swiss laboratory network of SYNLAB Group, following a strategic decision of the SYNLAB Group to divest its Swiss operations. SYNLAB Suisse is expected to generate annual revenues of around CHF100 million and employs around 600 staff across 19 laboratories. The purchase price of CHF150 million (cash and debt free) will be funded in Swiss francs from Sonic’s existing cash and debt facilities. Sonic’s CEO, Dr Colin Goldschmidt said: “The partnership with SYNLAB Suisse is an important step for Sonic as it significantly expands our presence in Switzerland. Whilst an important strategic step for Sonic Healthcare in Switzerland, the transaction is not considered to be material.

The Week Ahead

Domestic economic highlights this week include the ANZ Job Ads, Building Approvals and Housing Finance today. The RBA meeting tomorrow is the highlight where odds of another hike or pause are too close to call, and New Vehicle Sales are on Wednesday.

International highlights include Japan Tankan Manufacturing and China Caixin Manufacturing PMI today, with U.S Construction Spending and ISM Manufacturing tonight. Japan Services PMI and China Caixin Services PMI is Wednesday with Eurozone PPI Wednesday night along with U.S Factory Orders and the FOMC meeting minutes. German manufacturing Turnover and Construction PMI is Thursday night, along with Eurozone Retail Sales and U.S ADP Employment, ISM Services PMI and JOLTS Job Openings. The highlight is the Non-Farm Payrolls on Friday night where another 215K jobs gain is expected, with the Unemployment Rate to hold steady at 3.7%

Corporate reporting remains light on with just a Q2 sales and production report from Shell on Friday night.