The ASX 200 (ASX: XJO) is poised to rise when the market opens on Tuesday. Here’s what ASX investors need to know as we emerge from the Easter long weekend.
Second-quarter off to strong start, AMP’s CEO departs
The S&P/ASX 200 finished the week and commenced the new quarter on a strong note, finishing 0.5% higher with both IT, up 2.3% and materials, up 1.3%, contributing.
It was a day for stock-specific news with the worst kept secret in finance being confirmed – AMP Limited (ASX: AMP) CEO Francesco de Ferrari is set to depart effective 1 July. ANZ’s deputy CEO Alexis George is now taking on the difficult task of rebuilding the group’s reputation at the same time that all its major asset is up for sale; AMP shares finished 4.7% higher.
Boral Limited (ASX: BLD) confirmed the completion of the sale of USG Boral for US$1.01 billion, management announcing its intention to undertake an on-market buyback in the coming months with the proceeds. The announcement sent the Boral share price 6.7% higher.
Webjet Limited (ASX: WEB) was the big underperformer, slumping 5.4% after it announced a $250 million debt raising in an effort to replace a pending loan maturity in 2022.
Macquarie Group Ltd (ASX: MQG) fell just 0.5% despite APRA forcing the group to hold an additional $500 million in capital due to ‘historical breaches’ that related to capital funding across its various business units.
Commonwealth Bank of Australia (ASX: CBA) was also hit with proceedings as ASIC alleged the overcharging of $55 million in fees over a decade, impacting some 969k customers including pensioners.
US strength continues, Deliveroo IPO fails to fly
US markets finished the week on a similarly strong footing, with the Nasdaq adding 1.8%, leading the S&P 500 up 1.2%, and Dow Jones up 0.5%, with lower bond yields supporting higher company valuations.
Over the week, it was the Nasdaq once again asserting its dominance, jumping 3.8% compared to the S&P 500 which added 2.8%.
Cathie Wood’s ARK Invest group finally launched their space-oriented ETF, with the fund attracting over US$1 billion in investments in its first day of trading.
On the flip side, the London IPO of Uber competitor Deliveroo was derided as the ‘worst IPO in UK history’ falling 26% on debut, placing questions over the bourse’s ability to attract popular technology companies in future years.
OPEC agreed to only slowly boost output, which will ensure any impending falls in the oil price aren’t significant. This supports continued profitability in the short term, but once again confirms where the power lies in global energy markets.
Earnings estimates for S&P 500 companies increased by 6% in March, the strongest rate since 2002, as investors become increasingly confident about the economic recovery.
My three key investor takeaways from the week
1. Frothy markets
Is Deliveroo the so-called ‘canary in the coal mine’ for the booming IPO sector?
Attending a conference last week, one speaker highlighted the growing risk and falling quality of many IPOs coming to market in the current environment.
Low cash rates are forcing investors to seek additional returns wherever possible, with IPO oversubscriptions a clear beneficiary.
The speaker went a step further, suggesting several companies seeking to list may not survive the next few years as the economic recovery wavers.
2. Executive pay in focus
With talk of growing inequality as large businesses benefitted from the pandemic, leaving thousands unemployed and small businesses to fail, last week’s executive pay announcements are unlikely to help close the gap.
Larry Fink, CEO of index manager BlackRock (NYSE: BLK), saw an 18% pay rise to US$29 million after a strong year.
In Australia, the new AMP CEO will receive a $1.7 million salary along with a $4 million signing bonus as she commits to turning around the business.
3. Property on fire
Finally, all eyes are on the property market, with the same experts predicting a 30% fall in 2020 now calling for a 15% increase in 2021.
Low rates and a fear of missing out are combining with a lack of supply to move prices into bubble territory.
There is little doubt that macroprudential measures will be used in 2021 before it moves out of control ahead of a likely increase in borrowing rates.