A long-awaited “liquidity event” in Woodside Petroleum shares sparked selling across ASX bluechips and pushed the ASX 200 back below 6000 points.
The S&P/ASX 200 index immediately dropped below 6000 points at the open before heading lower through early trade. Shares regained some equilibrium later in the session but still ended the day down 56 points, or 0.9 per cent, at 5969 – their worst day in approaching two months. The wider All Ordinaries index lost 49 points to close at 6049.
Analysts suggested that institutional investors needed to make space in their portfolios after hoovering up Shell’s $3.5 billion stake in Woodside Petroleum last night.
“We’re seeing broad-based falls across the sharemarket and I think it’s because the funding for Woodside is happening,” Citi director of equity sales Karen Jorritsma said. The selling extended beyond the oil and gas space, with the major banks and miners also used as funding sources, Ms Jorritsma said. The big four lenders and BHP and Rio Tinto all fell in the vicinity of 1 per cent on Tuesday.
“There’s nothing in the energy space that are equally sized to Woodside.”
Nonetheless, the energy sector was where the sharpest losses were felt, losing 2.3 per cent as a group. Oil Search and Santos ended down 2.2 per cent, Beach Energy lost 3.1 per cent and Origin Energy was 1.1 per cent lower. Woodside itself dropped 3.2 per cent, in line with the discount applied to the sale of Shell’s stake, a result which Ms Jorritsma labelled “a pretty good outcome”.
“There has been a worry that at any time there could be a liquidity event, and today was that liquidity event,” Ms Jorritsma said, referring the large stake formerly held by Shell. “Now people are able to focus on Woodside’s fundamentals, which is a really strong balance sheet and best in class management.”
Retailers were also under pressure as the market readjusted for a possibly earlier-than-expected entrance by Amazon into the local market, possibly before Christmas. Harvey Norman lost 1.3 per cent and JB Hi-Fi dropped 2.6 per cent.
A highlight was Incitec Pivot’s full-year earnings, which came in ahead of the market’s expectations. Investors were particularly impressed with news of a $300 million share buyback, pushing shares in the chemicals, fertiliser and explosives manufacturer up 4.8 per cent over the session.
In economic news, NAB’s monthly business survey showed conditions reached record highs in October. The n dollar ticked higher but failed to show any sharp movement and ended the session up 0.1 per cent to US76.3??. Stock watch: Computershare
Investors were pleased with Computershare’s trading update on Tuesday sending the stock jumping 4.9 per cent to $15.93. The shareholder, employer and secretarial services provider increased its full-year profit guidance thanks to strong contributions from its Corporate Actions and Mortgage Services businesses. The company now expects management earnings per share increase by around 10 per cent on FY 2017 in constant currency terms. Previous guidance had been for earnings growth around 7.5 per cent. Computershare has enjoyed significant investor interest this year with the stock trading around 28 per cent higher year-to-date. Business conditions
Business conditions hit an all-time high in October, according to NAB’s latest monthly survey. Business confidence is not quite as lofty, but still above its long-term average. “This is an extremely strong result and of itself would suggest a better than expected performance for the economy,” NAB boss economist Alan Oster said. Oster did, however, caution that “it is unclear just how long conditions can remain at these record levels given that the result was driven by a surprise jump in manufacturing”. Forward orders, a leading indicator, have softened in recent months, too. Oil
Oil traded around $US57 a barrel throughout Tuesday as OPEC boosted demand forecasts for its crude in 2018, signalling market re- balancing could gather pace. OPEC increased estimates for the amount it will need to pump to meet demand next year by 400,000 barrels a day to 33.4 million a day, according to a monthly report from the group. US crude inventories probably resumed declines last week, according to a Bloomberg survey before government data Wednesday. Oil last week capped the longest run of weekly gains since October 2016 amid tension in the Middle East and on signs the OPEC will extend output curbs past the end of March. Chinese data
Real estate investment cooled in China in October and a sales decline steepened, reinforcing expectations of a gradual slowdown in China’s economy as the property sector loses momentum amid official crackdown on riskier lending. The country’s economic expansion dialed back a notch as factory output, investment and retail sales all decelerated. Industrial output rose 6.2 per cent from a year earlier in October, versus a median projection of 6.3 percent and September’s 6.6 per cent. Retail sales expanded 10 per cent from a year earlier, versus an estimated 10.5 per cent and 10.3 per cent the prior month. Fixed-asset investment excluding rural households rose 7.3 per cent in the first 10 months of the year over the same period in 2016, matching economists’ forecasts. Nickel
Nickel eased throughout Tuesday after a three pre cent jump overnight, as investors contemplate the recent exuberance in the market. The metal climbed to the highest level this month since June 2015, lifted by predictions of a jump in demand from electric vehicles. But batteries will represent only 3 per cent of demand this year, compared with the two-thirds used in stainless steel, according to the International Nickel Study Group. Nickel has benefited recently from strong stainless steel demand in China, especially in the third quarter, and relatively restrained supply from Indonesia. But those drivers are weakening, with the highly cyclical stainless market softening, and supplies of nickel set to rise from Indonesia and the Philippines, according to Macquarie Group.