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.
Financial Planner’s morning report – ASX to open higher, CBA profit falls 11%, SEK dividend cancelled
ASX to open higher, CBA profit falls 11%, SEK dividend cancelled
The ASX 200 (ASX:XJO) jumped out of the blocks this morning after the Commonwealth Bank of Australia Ltd (ASX:CBA) released its full year results (more below); CBA was up over 2% at the open by finished down 0.5% for the day.
Ultimately the market finished 0.1% lower. Analysts clearly saw something positive in the result, sending National Australia Bank Ltd (ASX:NAB) up 2.2%.
Gold bullion drew the morning headlines, with reports the precious metal had fallen the most in seven years; on closer inspection the 5.7% fall looks to be some profit taking.
It was an important day for the ASX, with a number of major companies reporting, starting with CBA.
CBA dividend cut by 60% as profit falls 11% – The bank’s profit fell 11.3% to $7.3 billion pushed lower by $1.2 billion in impairments for unpaid loans. CBA’s final dividend was reduced by 60% on 2019, but paid at the maximum 49.95% of profit threshold announced by APRA; an annual income of just 4%.
$15 billion in new deposits means the banks loans are 74% funded from customer deposits, the lowest cost source of capital. Summary: Solid but not great result.
SEK dividend cancelled, investing for growth – Seek Ltd (ASX:SEK) delivered a weak, albeit not unexpected, result with profit falling 51% to $90.3 million.
Management were forced to mark venture capital investment in Brazil and Asia down by $198 million due to accounting principles.
The Chinese Zhaopin and Online Education businesses, revenue up 12% and 7% for the financial year, were the highlights.
Dividend was cancelled to avoid a capital raising and maintain all-important growth investment.
Summary: Difficult decisions but a long-term opportunity.
TCL dividend cut after reporting a $111 million loss – Transurban Group (ASX:TCL) posted a net loss of $111 million, as average daily passenger numbers fell 8.6% due to the stay-at-home measures.
Victoria’s City Link has been hardest hit, falling 48% in the financial year and 60% following the Stage 4 restrictions.
The final distribution was cut by close to 50% and remains aligned with free cash flow to avoid a repeat of the GFC cash crunch.
Summary: More pain to come, as debt piles up.
S&P 500 falls just short of a record, gold recovers
The S&P 500 fell just short of its mid-February record close, rallying another 1.4%, on the back of technology and energy stocks continuing their recent bounce.
Apple Inc. (NASDAQ:AAPL) led the way, adding 3.3% but it was not alone with all but one of the markets eleven sectors heading higher.
The Eurostoxx also continued its four day rally, adding 0.9%, ensuring the ASX will open stronger this morning.
Gold bullion also recovered ground lost from yesterday falls. Chinese tech leader Tencent (HKG:0700) released its quarterly report, boosting revenue by 29%, the fastest growth in two years.
The companies online gaming division, which owns Fortnite creator Epic Games, grew even quicker at 40%, due to the global lockdown measures.
Management also sought to reduce concerns about the threat to its WeChat platform suggesting any bands by President Trump would only relate to US operations.
