News of a fresh North Korean missile test early Tuesday morning sent traders scurrying for safe-haven assets such as gold and bonds and sent sharemarkets around the region tumbling as investors lost their appetite for risk.
The S&P/ASX 200 had been set for a cautiously upbeat start before the fresh provocation from the rogue state, but instead sank like a stone at the open and failed to recover from there amid heavy selling in the biggest, most liquid blue-chip names. The benchmark measure ended the session down 41 points, or 0.7 per cent, at 5669, wiping out the year’s gains in the process. Close to three quarters of the top 200 names ended the session in the red.
While markets reacted swiftly as news broke that North Korea had fired a missile over Japan for the first time since 2009, with gold, bonds and the yen bid quickly higher, “the initial knee jerk risk off move was relatively shallow and short-lived,” RBC Capital Markets head of Asia currency strategy Sue Trinh said.
“All things considered, the market reaction to this latest development has been impressive for its muted tone.”
“It is a sad indictment that markets have become increasingly desensitised to otherwise disturbing events, but you can’t really blame them; the buy the dip investment strategy has paid off and will carry on doing so – until it doesn’t.”
The n dollar pushed as high as US79.73?? on Monday night, with traders speculating that the currency was set to make another assault on US80??, only for the Aussie to drop close to US79?? as the news about North Korea’s missile launch hit news wires. The Aussie recovered over the session to fetch US79.3?? in late Tuesday trade.
That sanguine attitude was less obvious on the ASX, which threatened to make a decisive break below its recent multi-month trading range. The big banks weighed heaviest on the bourse, with CBA dropping 1.2 per cent, and Westpac, NAB and ANZ losing a uniform 1.3 per cent. Macquarie was hit particularly hard, shedding 2.1per cent.
Gold miners were a rare bright spot, with the sector adding 2.6 per cent as the stocks traced the yellow metal’s price higher. Newcrest Mining climbed 2.2 per cent. Iron ore miner Fortescue also managed to lift, by 1.4 per cent, while Rio Tinto added 0.2 per cent and South32 finished flat.
Amid the geopolitical drama, the final days of earnings season produced some well received profit updates. Among the highlights was vitamins business Blackmores, which jumped 7.5 per cent, Downer EDI, which moved up 2 per cent, and Caltex, which gained a more modest 0.9 per cent.
New Zealand telco Chorus slumped for a second day on a trio of broker downgrades, bringing its losses since it reported on Monday to a hefty 13 per cent. Stock watchAltium
Shares in Altium surged 12 per cent to $9.50 on Tuesday to approach after the engineering software firm the previous evening reported an annual net profit of $28.1 million, up 22 per cent from the prior year. Revenues climbed 18 per cent to $111 million, around 3 per cent ahead of consensus forecasts. The company’s management reiterated their goal of reaching $200 million in revenue by the 2020 financial year. A final dividend of 12 cents was declared. It was a “strong” result, Credit Suisse analysts said, who maintained their “outperform” rating on the stock despite noting the shares are “not inexpensive”. “However, this should be viewed in the context of [over] 20 per cent earnings per share growth and multiple areas of incremental upside,” they said. Movers’Chump change’
CBA shares dropped a further 1.2 per cent to $75.73 on Tuesday with the bank still under a cloud from the allegations of money laundering that emerged earlier this month. The scandal has wiped more than $13 billion off the lender’s market value this month, meaning CBA has lost its crown as the ASX’s biggest company by market capitalisation, ousted by miner BHP Billiton. Credit Suisse analysts described CBA’s share price slide as a switch “from market darling to chump change”. South Korea
South Korea’s stock market declined as much as 1.6 per cent on Tuesday, while the won weakened 0.4 per cent after North Korea’s missile launch. South Korean “investment risk” is rising as Pyongyang escalates tensions, Huh Nam Kwon, chief executive officer at Shinyoung Asset Management said. The issue could start affecting the Kospi’s fundamentals, he said. “Uncertainties are rising, it’s hard to predict what will happen next.” The KOSPI hit a record high in July and is up 16 per cent this year. TV stocks
Media names with television interests came under pressure Tuesday as investors digested Monday’s surprise news that US company CBS planned to but embattled Ten Network Holdings. Seven West Media slumped 5.1 per cent on Tuesday while Nine Entertainment lost 2.9 per cent. “While the CBS takeover proposal still needs to be signed off by the regulator and creditors, it is very difficult to see any positives for key competitors, Nine Entertainment and Seven West Media,” Credit Suisse analysts concluded. Gold
Gold was, as ever, one of the primary beneficiaries of heightened risk aversion among investors on Tuesday, as the precious metal pushed 0.7 per cent higher over the session to $US1317 an ounce. The yellow metal is trading at its highest point for 2017, extending the year’s gains to 15 per cent. It’s not all about investors seeking shelter in an uncertain world. Weakness in the greenback, in which gold is priced, has added extra lustre to the yellow metal: Bloomberg’s US dollar spot index is at its lowest since January of 2015 and is off almost 10 per cent in 2017.