Market Update
The S&P/ASX300 accumulation index (+1.7%) outperformed the US S&P500 (+0.6%) for the month in local currency terms. Profit taking and de-rating of the high profile technology and biotechnology sectors weighed on both the NASDAQ index and the broader US market. Economic data in the US however recovered from a winter pause, with retail sales, employment data, and industrial production all improving.
Geopolitical concerns focused on the territorial dispute between Russia and Ukraine. Russia supplies considerable amounts of gas to Europe, with key pipelines traversing Ukraine. Also, Ukraine is one of the world’s largest crop producing nations. The territorial dispute is therefore placing upward pressure on prices for both oil and wheat.
Closer to home the Chinese economy continues to slow with first quarter GDP slowing to 7.4%, inflation controlled at 2.4% and HSBC manufacturing index again coming in below 50 (at 48.3), the first rise in 5 months. In Australia, business and consumer confidence appears to have taken a pause as the new government has flagged an end to the ‘Age of Entitlement’ ahead of their first budget in May.
Corporate News
In the Australian market, $5bn worth of takeovers were announced with David Jones (DJS) and Australand Property Group (ALZ) amongst the targets. Transurban Group (TCL), together with their financial partners paid $7.01bn to acquire Queensland Motorways. TCL raised both debt and equity to fund nearly two thirds of the transaction. Days later, TCL then announced an $850m proposal to expand and upgrade their CitiLink asset in Melbourne. At the smaller market cap end, several new stocks completed their initial public offering (IPO), including Burson Group Limited (BAP), Beacon Lighting (BLX) and Japara Healthcare (JHC). In the Energy sector, mid cap stocks Roc Oil (ROC) and Horizon Oil (HZN) agreed to a proposed stock based merger. Finally, Melbourne based Equity Trustees (EQT) raised $150m from new and existing shareholders to fund the acquisition of ANZ Trustees from the ANZ Banking Group (ANZ).
The Best of the Month
The best performing sector for the month was Utilities which rose by 3.4%. Amongst the larger Utility stocks, SP AusNet (SPN, +3.9%) and DUET Group (DUE, +4.3%) were the top performers.
The Energy sector also performed well delivering a gain for the month of 3.4%. A rising oil price, together with progress on key projects for the majors, saw Oil Search (OSH, +5.1%), Woodside Petroleum (WPL, +4.6%) and Origin Energy (ORG, +4.3%) move higher.
The Worst of the Month
Healthcare (-1.4%) was the worst performing sector, with both Ramsay Healthcare (RHC, -6.9%) and CSL Ltd (-1.6%) weighing on sector returns. A positive third quarter profit result from ResMed Inc. (RMD, +14.1%), offset some of the sector weakness.
The Information Technology sector also underperformed the market for April, although finished largely flat, declining a mere 0.2%. Computershare (CPU, +2.1%) went against the negative sector trend.