Billabong makes a splash as stocks enjoy bumper month
Shares in the company, which had seen its market value slump after a series of failed takeover talks, soared by 170 per cent to 40.5¢ in July - a bumper period for shares after two months of declines.
The sharemarket rebounded strongly in July, with the S&P/ASX 200 benchmark index finishing the month 5.2 per cent higher, its best monthly gain since October 2011. It eased by 2.52 per cent in June and 5.1 per cent in May.
The broader All Ordinaries ended July 5.5 per cent higher, after shedding 2.82 per cent in June and 4.93 per cent in May. The ASX 200 benchmark index has gained 9.4 per cent since the start of the year.
Expectations of further stimulus from the Reserve Bank in terms of another cut to the cash rate boosted yield stocks, as well as stocks in sectors that could benefit from more monetary policy easing, said JBWere executive director Mike Kendall.
"The negative reaction across the latter part of May and into June was really a response of the market trying to figure out what the implications of the US's tapering of the quantitative easing program would be," Mr Kendall said.
Since then, investors have had the time to analyse the US Federal Reserve's stimulus plans, as well as observe the economic recovery in the US and Europe, Mr Kendall said. As a result, financial markets had a more positive run in July.
"People realised that the world is still in a process of economic improvement than malaise ... Once people had a chance to process Bernanke's comments, think about what that means, look at the outlooks for the global economy - then they said maybe we're overdone a little bit."
The three strongest performing sectors in July were materials, energy and financials, which gained 9.3, 6 and 5.5 per cent respectively, as oil and iron ore prices rose.
"You've seen the miners bounce pretty hard off a heavily sold-down level, helped by the recent buoyancy in the iron ore price," UBS's head of strategy David Cassidy said. "There was a bit of a relief rally [following] the build-up in negative sentiment towards China through to June."
Materials and energy stocks also dominated the top 10 performing members on the ASX 200. Diversified energy firm Linc Energy was the second-best performer after Billabong, with a rise of 97.6 per cent, while Energy World Corporation was third with a lift of 53.9 per cent.
Oceangold, Beadell Resources, Evolution Mining, Medusa Mining, Northern Star Resources, Buru Energy and Independence Group made up the rest of the top 10.
The worst performer was salary packager McMillan Shakespeare, which shed just under half of its value after the federal government announced plans to abolish the fringe benefits tax for employer-provided cars.
Mr Kendall said the corporate reporting season in the US has been solid, while expectations for Australia's reporting season, which starts on Thursday, was that results should be steady. "That's given investors a little bit more comfort. The general global macro outlook is probably net positive, and people have bought that view," he said.
At the same time, offshore investors had not yet returned to the sharemarket, as the Australian dollar remained on a downward trend. The Australian currency was buying US90.26¢ late on Wednesday and was more than 13 per cent lower than its value in mid-April.
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Billabong’s shares jumped after the company secured a $294 million refinancing deal. The refinancing helped reverse investor sentiment — shares soared about 170% in July to around 40.5¢, making Billabong the best performer for the month after a difficult prior financial year.
The S&P/ASX 200 finished July up 5.2%, its best monthly gain since October 2011, while the All Ordinaries rose 5.5% for the month. The ASX 200 had previously eased by 2.52% in June and 5.1% in May, and is up about 9.4% year-to-date.
Materials (+9.3%), energy (+6%) and financials (+5.5%) were the strongest sectors in July. These sectors drove the rally because commodity prices such as iron ore and oil rose, which often boosts miner and energy company profits — information everyday investors can use when assessing sector exposure.
After Billabong, top performers included Linc Energy (up about 97.6%) and Energy World Corporation (up about 53.9%). Other notable top-10 performers were Oceangold, Beadell Resources, Evolution Mining, Medusa Mining, Northern Star Resources, Buru Energy and Independence Group.
Analysts pointed to a bounce in the iron ore price and a relief rally after negative sentiment toward China eased. UBS’s head of strategy noted miners rallied hard off heavily sold-down levels as iron ore buoyancy supported the turnaround.
Expectations of further stimulus — including a possible RBA cash rate cut — helped boost yield-oriented stocks and sectors likely to benefit from easier monetary policy. JBWere’s Mike Kendall said talk of additional easing supported investor appetite for those companies.
McMillan Shakespeare was the worst performer, losing just under half its value after the federal government announced plans to abolish the fringe benefits tax for employer-provided cars. For investors, this highlights how policy changes can quickly affect companies tied to specific tax or regulatory frameworks.
Offshore investors had not yet broadly returned, partly because the Australian dollar was on a downward trend. The AUD was trading around US90.26¢ late on Wednesday and was more than 13% lower than its mid‑April value, which can influence foreign investor returns and their willingness to buy Australian equities.
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