Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
ASX opens lower Friday, Microsoft report upbeat
ASX shares opened lower on Friday with the All Ordinaries index down 3% before midday on Friday, following overseas markets downward.
Global stocks mixed
Europe’s markets slowed after three consecutive days of gains, with the FTSE off 3.5% and Euro Stoxx down 2.2% as investment bank Société Generale posted a first-quarter loss and Royal Dutch Shell cuts its dividend for the first time since World War II.
More positively, oncology and asthma drug maker, Astra Zeneca, remains 1-of-11 FTSE stocks up for the year, after announcing a 16% rise in revenue on the back of a 17% increase in China. The company has also teamed up with the UK Government to push forward on a coronavirus vaccine.
US markets fell, the S&P 500 down 1% and the Dow Jones sliding 1.2%. However, the S&P managed to deliver the largest one-month gain since 1987 – up 11%.
The ASX was similarly up 2.4% for the day on Thursday, and 8.8% for the month.
The EU reported its worst GDP result in decades, falling 3.8% for the quarter, with France the worst-hit economy at negative 5.8%. Is the market getting ahead of itself? Is the worst still to come?
Microsoft’s cloud revolution
The power of the cloud and the digitisation theme continued overnight with Microsoft Corp (NASDAQ: MSFT) announcing they had seen two years of digital transformation in just two weeks. Microsoft’s revenue increased 15% with general cloud up 35% and the growing Azure business, used by smaller companies, putting on another 59% — keep in mind, these are quarterly growth rates.
In-line with Coles’ report, Woolworths announced a 10.7% increase in sales for the March quarter, with online sales up 34% and reaching close to 5% of their total. If anything, the COVID-19 lockdown seems to be pushing more and more people online. This can only be positive in the long-term. Of course, it wasn’t all good news for Woolies with management highlighting the increased costs due to COVID-19, 22,000 new staff and their hotel business costing $30 million to $35 million to run each month.
More capital raisings… and a deferred dividend?
Port logistics provider Qube Holdings announced the details of its $500 million capital raising, opting to treat all investors fairly by structuring it as a 1-share-for-6.35 existing shares entitlement offer at a price of $1.95. Qube indicated the funds will add a $600 million buffer, allowing them to push forward with growth expenditure on a number of new projects with Bluescope, BHP and Shell. They also announced the sale process of a portion of Moorebank remains on track with another tenancy to be signed in May.
ANZ Banking Group (ASX: ANZ) shocked the market, announcing the decision on their interim dividend would be deferred until after the crisis. Is this a deferral or an outright cut? Only time will tell.
Following NAB’s lead, ANZ announced a 51% fall in statutory profit after increasing loan impairments to 0.53% from 0.13%. They have already received repayment holiday requests for $36 billion worth of home loans.
Finally, Amazon.com Inc reported 26% growth in quarterly revenue as consumers flocked to its online platform. However, profits were below market expectations with $4 billion in operating profit to be dedicated towards COVID-19 related costs.
This update was written by Drew Meredith, Director of Wattle Partners.
