For super funds and their advisers

ASX at 11 month high

25.1.21

ASX at 11 month high, Fortescue’s (ASX:FMG) bumper dividend, Lynas (ASX:LYC) in deal with US Government

The ASX200 (ASX:XJO) reached an 11 month high this week, adding 1.3% for the week despite falling 0.3% in late trading on Friday.

The commodities sector remains key to the market strength, with rare earth miner Lynas Corp (ASX:LYC) jumping 13.7% on Friday and 26.1% for the week after announcing a deal with the US Government.

Management announced they had partnered with the US Department of Defense for the construction of a $60 million processing plant based in Texas.

This is another step in the reshaping of global supply chains as the US seeks to reduce its reliance on China who dominates the sector.

Billionaire owner of iron ore miner Fortescue Metals (ASX:FMG) Andrew ‘Twiggy’ Forrest used a speech on Friday to report the company had made a profit of US$940 million in December alone, with the board confirming first-half profit would be between $4.0 to $4.1 billion.

Forrest also took the opportunity to lay out an ambitious plan to turn FMG into a green energy and steel production powerhouse, however, shares fell 2.2% on the news.

Zip Co (ASX:ASX:Z1P) into overdrive, Intel (NASDAQ:INTC) data hack, Coca Cola (ASX:CCA) returns to growth

Buy now pay later competitor Zip Co (ASX:Z1P) was the top performer for the week, adding 28.8% after releasing a strong set of quarterly sales numbers with their new US business experiencing significant growth.

In a recent analysis, Z1P was shown to trade at a significant discount to the likes of Afterpay (ASX:APT) and Affirm (NASDAQ:AFRM) despite generating similar growth and revenue per user numbers.

Australian retail sales fell 4.2% in December from November but were 9.4% higher than 2019 figures, likely contributing to Coca-Cola Amatil’s (ASX:CCA) first revenue growth in three quarters, up 0.4% in December.

Intel (NASDAQ:INTC) fell 9.3% on Friday after a data hack forced management to bring forward their earnings report.

The company delivered a fifth consecutive record year of revenue, up 8% to US$77.9 billion, despite a 1% fall in December quarter revenue.

Intel’s Mobileye business remains the highlight, the company which provides autonomous driving and crash protection systems for vehicles grew 30% quarter on quarter and 10% on the year.

Records are made to be broken, QE, stimulus staying with us, bubble talk gathers steam

It was another week of records in global sharemarkets with the Japanese Nikkei 225 hitting a 30 year high during the week, powered higher by pent up demand and inventory restocking across the world.

The S&P500 and Nasdaq are regularly topping records despite the pandemic, placing pressure on passive, index-focused strategies, with the likelihood that more active management will be required in the years ahead to both protect capital and ensure investors are exposed to appropriately valued companies.

Biden’s inauguration and immediate signing of Executive Orders, along with Secretary of the Treasury Janet Yellen confirming that debt is of little concern to US policymakers, with fiscal stimulus and money printing policies set to continue for the foreseeable future.

This is directly impacting the AUD, and potentially the Australian economy, as our bond rate sits among the highest in the world attracting large capital flows as a result.

The talk of ‘bubbles’ seemed to move into overdrive this week, with more hedge fund managers joining the chorus, so I was interested to read this article that showed bubble headlines in every year since 2010.

There are certainly excessive valuations in some areas, but a broad-based bubble assessment lacks the deeper assessment required.

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