ASX 200 (XJO) morning report – ASX records fifth straight month of gains

The S&P/ASX 200 (ASX: XJO) is tipped to drop at the open this morning according to ASX futures. Here’s what’s making headlines.

ASX 200 continues to gather steam

The ASX 200 finished Monday near its low, down 0.2%, yet the market was able to finish August 2.2% higher. The result marked the fifth straight month of gains and a 33% rally from the March lows; those who sold amid the volatility have now truly been left behind.

The monthly gains closely reflected the recovery of US markets, with the digitally-enabled IT sector up 15% behind the likes of Afterpay Ltd (ASX: APT) and ASX Ltd (ASX: ASX), and the Consumer Discretionary sector up 11.6% driven by the e-commerce powered JB Hi-Fi Limited (ASX: JBH) and Kogan.com Ltd (ASX: KGN).

Featured video: ASX results recap – APT, Z1P, FXL & more

IOOF makes a big play

The biggest news of the day was the $1.6 billion IOOF Holdings Limited (ASX: IFL) announcing the purchase of MLC Wealth from the National Australia Bank Ltd (ASX: NAB) for a price of $1.44 billion.

The successful acquisition would result in a $510 billion superannuation, wealth management and advisory platform, the largest of its type in the country.

In my view, the deal will take some convincing given the entire premise of the Royal Commission was on removing these vertically integrated institutions.

Australia-China trade tensions deepen

The Australian beef and wine industries took another hit on Monday after China announced it would be launching an investigation into Government subsidisation of the domestic wine industry; with China our largest export market.

This follows last week’s banning of another Australian abattoir as the Chinese seek to exert their position of strength and comes amid news that some 17% of Victorians are employed but with no work to do. Treasury Wine Estates Ltd (ASX: TWE) remained under pressure, falling 0.8%.

Pacific Current Group Ltd (ASX: PAC), the owner of the fastest-growing boutique fund manager in the world, GQG Partners, added 1% after reporting a 21% increase in net profit to $25 million. Funds under management increased 52% to $93 billion with GQG Partners alone accounting for $19 billion of the increase. The result was a 40% increase in the dividend to 35 cents per share for the year.

Meanwhile, online furniture retailer Temple & Webster Group Ltd (ASX: TPW) announced an FY21 trading update. It reported a 77% lift in active customers, a 74% increase in revenue for the year and a further 161% revenue growth in the short period from July to 27 August. Temple & Webster shares finished 18% higher. 

US markets set new records

The records continue to fall with US markets posting their strongest August since the 1980s. The S&P 500 finished down 0.2% for the day but 7.2% higher for the month. It was a similar story for the tech-driven Nasdaq, up 1% and 9.6% respectively behind another rally in both Tesla Inc (NASDAQ: TSLA) and Apple Inc (NASDAQ: AAPL), adding 12.6% and 3.2% after their stock splits.

As another month of positive returns passes, it’s more evident than ever that those relying on traditional ‘value-based’ investing has been left behind, with digital-enabled businesses leading the way post-pandemic; this trend is unlikely to cease anytime soon.

Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) has announced another sweeping investment, adding substantial allocations to 5 mini ‘Berkshires’ based in Japan. The holdings include trading houses, Sumitomo, Mitsui, Mitsubishi and Itochu, with the news sending the Nikkei 225 up 1.1%.

This week sees European inflation data and Australian GDP on Wednesday.

This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. 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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