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.
Blue chips fire ASX to Monday rise
ASX jumps on China stimulus, materials winning, API’s pay day
The ASX 200 (ASX: XJO) started the week on a positive note, increasing 0.9% on Monday after a strong global lead over the weekend.
The biggest contributor was an unexpected announcement from the People’s Bank of China around the loosening of monetary policy.
The central bank reduced the amount of capital required to be held by each of its member banks in an effort to once again stimulate lending.
The move was seen as a positive for the mining sector, with BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) adding 3.2% and 3.3% on hopes this will result in more infrastructure spending and construction.
The bearish among us, on the other hand, suggests this could be a leading indicator of a weaker outlook for the global economy as China’s first in, first out, V-shaped economic recovery appears to be slowing.
Within the market, the real estate sector also benefitted, up 1.3%, with the likes of Vicinity Centres (ASX: VCX) and Charter Hall Group (ASX: CHC) up 1% and 3.1% as activity picks up in commercial property markets despite the pandemic.
A2 drops on restructuring plans, Wesfarmers’ next buy, NRW simplifies
Australian Pharmaceutical Industries Ltd (ASX: API), the owner of the Priceline chain of pharmacies, jumped 19.7% on Monday after Wesfarmers lobbed a bid to purchase the company.
The offer is $680 million at a price of $1.38 per share for the entire group, which both produces and distributes a diverse range of pharmacy products. API shares quickly closed the gap finishing at $1.37.
Largest shareholder Washington H. Soul Pattinson (ASX: SOL) has backed the purchase, which shows Australia’s leading retail and distribution network’s willingness to double down when they see opportunity.
On the other side of the spectrum, A2 Milk Company Ltd (ASX: A2M) continued to weaken despite announcing a ‘restructure’ of its operations following a recent chief executive departure.
The group will be split into China domestic, Australia domestic, and international export business units, in an effort to allow greater management focus on each division.
Mining service provider NRW Holdings Limited (ASX: NWH) jumped 12.0% after announcing the sale of a number of leased mining assets to one of its business partners, with the deal set to reduce debt and improve capital returns.
New records ahead of earnings, tech sector jumps, variant’s growing concern
Global markets finished stronger ahead of the start of US earnings season tomorrow, the Dow Jones and S&P 500 both added 0.4%, and the Nasdaq 0.2%, with big tech a major contributor.
In fact, the Dow Jones finished just 4 points short of the 35,000-point mark in what would have been its first-ever close above that level.
In a broad-based rally, both financials and communications jumped strongly despite a small jump in bond yields, with record profits from the former expected this week.
NVIDIA Corporation (NYSE: NVDA) jumped 3.3% and Intel Corporation (NYSE: INTC) 1.3% as concerns continue to grow that the ‘delta variant’ may lead to longer lockdowns than expected.
According to FactSet, estimates are for 64% year-on-year earnings growth for the S&P 500 for the July quarter, an acceleration of 50% in the previous quarter amid hopes that the strong signs for economic growth have filtered across the economy.
