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ASX 200 (XJO) morning report – QAN, KGN & GPT shares in focus

The S&P/ASX 200 Index (ASX: XJO) is expected to open flat on Tuesday according to ASX futures. Here’s what you need to know.

ASX sharemarket recap

The ASX 200 hit a three week high to start the week, adding 1.8% as slowing Victorian coronavirus case numbers boost confidence. This strength could continue into Tuesday, but investors should be wary of key companies reporting to finish the week.

The highlights were the Commonwealth Bank of Australia Ltd (ASX: CBA) and Westpac Banking Corp (ASX: WBC) increasing 3.4% and 3.3%, respectively. With no indication on the figure required to warrant a loosening of restrictions, markets appear overly optimistic.

President Trump’s decision to overrule Congress and extend social security payments further buoyed markets at the same time as ramping up pressure on Chinese businesses.

Blood donor issues facing CSL Limited (ASX: CSL)’s US operations appear to have been overcome, with foot traffic to donation centres just 25% below 2019 levels in July; shares finished 1.9% higher.

Meanwhile, Kogan.com Ltd (ASX: KGN) hit another all-time high, reporting a further 110% increase in sales in July. Unfortunately, this one looks like a poor man’s Amazon Inc. (NASDAQ: AMZN) to me and is best avoided at current levels.

Featured video: Mental health & wellbeing during uncertain times

Qantas’ share purchase plan falls short

Qantas Airways Limited (ASX: QAN) surprised markets yesterday, announcing that just $71.7 million of the $500 million retail share purchase plan was applied for, leaving the company $400 million short.

Are retail investors being more prudent with their capital than fund managers and super funds investing on behalf of others? Only time will tell but given Warren Buffett’s recent suggestions only a vaccine will save airlines, Qantas may be in for a rough period.

Diversified real estate investment trust GPT Group (ASX: GPT) was the latest property owner to disappoint investors, reporting a $519.1 million net loss for the half-year after cutting property valuations by $711.3 million; the net asset value of the trust fell 4.8%. Rental income fell some 23.3% and forced a similar 30% cut in the dividend to just 9.3 cents.

GPT’s management highlighted strong retail leasing results for the financial year, averaging 4.7% rent increases, yet with $48.2 million in waived rent and arrears accumulating, this could be papering over the cracks ahead of what will be a very difficult few years for the business and sector.

Overseas markets mixed

Overseas markets finished mixed to start the week, with investors seemingly balancing the benefits of Trump’s social security policy with the increasing tit-for-tat playing out between US and Chinese officials. What began with Tik Tok has expanded to sanctions on US and Chinese officials.

The pressure saw the Nasdaq weaken 0.4% but the S&P 500 continued to close the gap, adding 0.3% on the back of a global rally in the oil price; this case after Saudi Aramco announced a 73% fall in profit but suggested demand was improving. Other beneficiaries were travel and leisure stocks including Las Vegas casino owner MGM Resorts Inc.(NYSE: MGM), up 13.8%, and cruise line Carnival Corp (NYSE: CCL) up 8.6%, as President Trump suggested he is still open to negotiations on further aid.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. He may maintain positions in the securities mentioned. To get in contact with Drew, click here to visit the Wattle Partners website.

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Disclosure: Drew Meredith is the author of this post. He may maintain positions in the securities mentioned.

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