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.
Myer, Xero provide Thursday highlights
There was not much action on the Australian share market on Thursday, if you are judging that by index movements: the benchmark S&P/ASX 200 index added 3.3 points, to close at 7311.1, while the broader All Ordinaries edged 10.5 points higher, to 7,514.40.
On the industrial screens, accounting software giant Xero surged $89.38, or 10.7 per cent, to $87 after the company said it would cut up to 800 jobs, representing about 15 per cent of its total headcount, to improve profitability. The announcement comes five weeks after new CEO Sukhinder Singh Cassidy formally took over from former boss Steve Vamos.
Myer shares surged 17.5 cents, a startling 18.3 per cent, to $1.13, after the department store rewarded investors with a 4-cent interim dividend plus a 4-cent special dividend. Revenue in the six months ended January 28 rose 24.2 per cent to $1.88 billion, while net profit more than doubled to $65 million. Long-suffering Myer shareholders are breathing a little easier in 2023, with the stock up more than two-thirds this year. But while it has left its all-time low of 10 cents far behind – that was struck in the depths of the COVID Crash in March 2020 – the float price of $4.10 a share in October 2009 is also a very distant memory.
Three of the big four banks, National Australia Bank, Westpac and ANZ, said they were passing on the full amount of Tuesday’s Reserve Bank of Australia interest rate increase if 0.25 of a percentage point to mortgage borrowers. On the market, Westpac advanced 27 cents, or 1.2 per cent, to $22.38; ANZ gained 16 cents, or 0.7 per cent, to $24.49; National Australia Bank added 44 cents, or 1.5 per cent, to $29.89; and Commonwealth Bank lifted 31 cents, or 0.3 per cent, to $98.72. Investment bank Macquarie Group eased 6 cents to $190.78.
Coal, lithium producers gain
Among the bulk miners, BHP dropped $1.04, or 2.2 per cent, to $46.59; Rio Tinto gave up 39 cents, or 0.3 per cent, to $121.23; and Fortescue Metals retreated 9 cents, or 0.4 per cent, to $22.11.
In the coal sector, Whitehaven Coal recovered 39 cents, or 5.6 per cent, to $7.42; New Hope Corporation surged 31 cents, or 5.6 per cent, to $5.82; Yancoal Australia was up 34 cents, or 5.4 per cent, to $6.65; Coronado Global Resources improved 3 cents, or 1.6 per cent, to $1.86; Stanmore Resources added 10 cents, or 2.8 per cent, to $3.67; and Bowen Coking Coal was up 1 cent, or 3.5 per cent, to 30 cents.
In lithium, Allkem gained 33 cents, or 2.7 per cent, to $12.45, and fellow producer Pilbara Minerals jumped 18 cents, or 4.4 per cent, to $4.28. Mineral Resources, which mines iron ore as well as lithium, gained $2.86, or 3.3 per cent, to $89.01, and IGO, which produces nickel rose 38 cents, or 2.8 per cent, to $13.81. Of the project developers, Core Lithium was up 3 cents, or 3.1 per cent, to $1.00; Lake Resources gained 2 cents, or 3.3 per cent, to 64 cents; Liontown Resources lifted 7 cents, or 4.3 per cent, to $1.69; but US-based Piedmont Lithium entered a trading halt, after a report from a US-based short seller alleged Atlantic Lithium acquired a mining licence in Ghana by “textbook corruption”: Piedmont committed in July 2021 to invest $US15.9 million for a 9.9 per cent equity stake in Atlantic, and up to $US87 million in the Ghana project, in exchange for spodumene (lithium ore) offtake rights at market value for the life of the mine.
US market preps for February jobs number
In the US overnight, share indices sank as banks and other financial stocks were sold off, as investors braced for a crucial jobs report on Friday that could shape the direction of interest rates.
The broad S&P 500 slid 73.7 points, or 1.9 per cent, to end at 3,918.32, while the 30-stock Dow Jones Industrial Average retreated 543.5 points, or 1.7 per cent, to close at 32,254.86. The tech-heavy Nasdaq Composite lost 273.7 points, or 2 per cent, to finish at 11,338.35. European stocks were mostly lower.
In the bond market, the US 10-year yield eased 6.9 basis points to 3.907 per cent, while the more rate-sensitive 2-year yield retreated 19.6 basis points, to 4.87 per cent.
Gold gained US$15.64, or 0.9 per cent, to US$1,830.90 an ounce, while the global benchmark Brent crude oil grade slipped US$1.15, or 1.4 per cent, to US$81.51 a barrel, and US West Texas Intermediate lost US$1.06, also 1.4 per cent, to US$75.60 a barrel.
The Australian dollar is buying 65.89 US cents this morning, down from 66.11 US cents at the local close on Thursday.
