IG Markets - Afternoon Thoughts

Good afternoon

Across Asia, regional markets are mainly higher after European and US indices closed last week strongly on the back of a Chinese GDP report that wasn’t as bad as had been feared. The Hang Seng is the region’s best performer, higher by 0.15%, while the Kospi is 0.1% to the upside. Despite the world seemingly a little more comfortable about China, the Shanghai Composite is the laggard of the region, lower by 1%. Japan’s Nikkei is closed.

In Australia, the ASX 200 is currently 0.7% firmer at 4111, having earlier traded to a high of 4126. Gains for the day are relatively broad based, but are being led by the energy and materials sectors, which are continuing to rebound from oversold positions courtesy of China’s ‘not so bad’ GDP reading. Elsewhere, consumer and industrial names are mainly higher, while the heavyweight financial sector is being driven by a solid performance across the big four banks.

Just how long Friday’s ‘China inspired’ momentum was going to last was always going to be an interesting question. Probably not long if this afternoon’s gradual drift is anything to go by. After a sluggish start, Friday’s gains came courtesy of a Chinese GDP report that was only thereabouts the consensus range. The rally was more on relief that the data wasn’t as bad as it could have been, as opposed to it being considered a strong result, which clearly would have been more preferable and made gains a little more legitimate. Given the market’s advance from midday Friday was predicated on ‘less bad news’, as opposed to ‘legitimate good news’, it certainly feels like there are still plenty of would-be sellers out there.

While the macro issues surrounding Europe, China and the US are well documented and have been done to death of late, the current US earnings season, and upcoming Australian one, may provide a welcome distraction for investors. While market- level doom and gloom has dominated since the end of Q1, it might be nice to get back to some company-specific stories and actual analysis of how individual companies are navigating themselves through these turbulent times. Often of late, the ‘baby has been thrown out with the bath water’, when in fact there are probably numerous companies that have managed themselves quite well during this period. Thus, the current/upcoming earning period could provide a real opportunity for ‘bottom up’ investors and stock pickers to re-gig their portfolios.

www.igmarkets.com.au

ENDS

© Scoop Media