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Weekly market update - 9th of March 2020

Written and accurate as at: Mar 09, 2020 Current Stats & Facts

Financials bore the brunt of the selling last week. While travel stocks remained under pressure – Flight Centre (FLT) was down -18.8% and Qantas (QAN) -13.6% – volatile markets and lower rates saw Financials (-8.4%) as the worst-performing sector.  The banks were down -10.5% as the market recognised the margin pressure that comes with rate cuts and the pressure to pass them through. Lower rates also impact investment returns for some insurers. This is more of an issue for QBE (QBE, -8.5%) than insurance Australia (IAG, 3.9%). This is also an issue for Computershare (CPU, -14.8%).

Elsewhere, most China consumer-sensitives continued to struggle. Star Entertainment (SRG) was off -9.0% and Treasury Wines (TWE) -7.6%. A2 Milk (A2M, +6.3%) bucked this trend. It has been able to maintain supply into China. At this stage, sales are expected to remain resilient given the perception of its product quality.

TPG Telecom (TPM, +10.9%) was the best-performing stock. Its result beat expectations and saw management upgrade full-year guidance. Telecom has also held up reasonably well. Telstra (TLS) gained +3.5%, possibly helped by the view that it is one area that won’t see a down-turn in response to social distancing.

Gold stocks such as Newcrest (NCM, +10.6%) and Evolution (EVN, +7.7%) were up.

Panic-buying possibly helped supermarkets outperform, with Coles (COL) up +10.5%, Metcash (MTS) +6.9% and Woolworths (WOW) -0.9%. We think investors need to be careful here. Last week’s frenzy provides a near-term bump – but then leads to a lull as buyers work their way through the toilet paper hoard. There is also a trend to people eating out less – but this could potentially broaden to people spending less time in shopping centres and supermarkets, which could hit revenues and margins.

Healthcare (+1.1%) held up well, led by Sonic (SHL, +6.9%), ResMed (RMD, +3.5%) and CSL (CSL, +1.7%).  This is likely to have been helped by the resurgence of Joe Biden’s campaign for the Democratic nomination, reducing the risk of radical health care reform under a Sanders administration.

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