Market Update & Important Indicators
Growth worries rattled stock markets, with the Dow industrials on course for their lowest finish of the year. The latest catalyst to pull shares lower was the Federal Reserve, which on Wednesday released July meeting minutes showing that some central-bank officials harbored doubts about the health of the global economy. That further spooked investors who were already unnerved by the economic and financial turmoil in China and a renewed plunge in crude-oil prices. Both the Dow and the S&P 500 fell 2.1% to 16,991 and 2,036 respectively.
Australian stocks slid yesterday to their lowest close of the year, hit by broad selling as crude-oil prices continued to slide and banks came under pressure. The S&P/ASX 200 fell 91.6 points, or 1.7%, to 5289. That wiped out Wednesday's 77-point gain, leaving the index down 2.3% year-to-date.
Stocks in Hong Kong and Taiwan fell into bear-market territory, as the effects of China's volatility spills across its borders. Both Hong Kong's Hang Seng Index and Taiwan's Taiex fell 20% from their peaks in April earlier Thursday before retracing losses. The Hang Seng Index closed down 1.8% and Taiwan's Taiex, which was down as much as 0.9%, rebounded to end 0.1% higher.
Losses accelerated in European markets as Greek Prime Minister Alexis Tsipras plans to hand in his resignation, clearing the way for early national elections. The Stoxx Europe 600 closed 2.1% lower, as the prospect of fresh elections raised concerns over Greece's ability to meet its bailout conditions.
Metals on the LME were mixed with copper gaining 2.6% to US$2.32/lb and tin falling 1.7% to US$15,330/t. Gold rose on the back of market uncertainty, lifting 1.7% to US$1,153/oz. The AUD/USD is trading at 0.734.
In This Issue
Matrix (MCE) | HOLD
A focus on costs and efficiencies saw earnings climb in FY15 despite weaker revenue. However a softer 2H reflects the tough conditions this calendar year and we expect little improvement in FY16 as MCE reduces output to match demand. Longer term we believe sustained recovery and improved plant utilisation will require the product and market diversification that MCE is targeting. Until it occurs, our hold call remains appropriate.
Saracen (SAR) | BUY
Saracen (SAR) announced an agreement to acquire the Kailis and King of the Hills gold projects from St Barbara (SBM) for A$3m cash. The projects are located within trucking distances to the Thunderbox mill (65-80km). Whilst King of the Hills provides Thunderbox with further flexibility, the Kailis open pit is expected to deliver high grade feed in the medium term. Due to the modest acquisition cost and complementary nature of the Kailis ore (see below), the deal is likely to prove highly value accretive in due course. Given the strategic location of the Thunderbox and Carosue Dam mills, SAR is expected to continue to opportunistically consolidate the region. BUY and A$0.58 valuation maintained.
Recent Contacts & Presentations
Dacian (DCN), Evolution (EVN), Austal (ASB), Resolute (RSG), Pacifico (PMY), Kingsgate (KCN), Troy (TRY), Regis (RRL), Saracen (SAR), Sino Gas & Energy (SEH), Buru Energy (BRU), Empire Oil & Gas (EGO), Pura Vida Energy NL (PVD), High Peak Royalties (HPR), Karoon Gas (KAR), Austex Oil (AOK), Central Petroleum (CTP), Senex Energy (SXY), Newmont, Coventry (CYY), Energia (EMX), Heron (HRR), Atherton (ATE)
Please read Argonaut's Important Disclaimers & disclosures
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