It was an interesting week for Australian stocks. For the first three days things were going well, with the S&P/ASX 200 index climbing steadily, gaining 1per cent by Wednesday.
But come Thursday and the bourse lost 1.3 per cent in a single day, leaving traders scratching their heads. It happened on the day that China's official manufacturing PMI jumped back above 50 - to 50.2 - for the first time since July, with new orders the highest since April (a result above 50 means economic activity is growing at an increasing rate).
Surely that's a good thing, given Australia's reliance on Chinese growth? Shouldn't the market have improved, rather than deteriorated?
Fund managers on Friday suggested two things could have been going on. First, because China has showed further signs of stabilisation, we've seen strong flows of money into the country in recent days. Since Australia is seen as a defensive allocation within the region, some of that money might have been coming out of the Australian market.
Second, there was talk that a big industry or pension fund may have lost a large mandate this week. Why? Because futures were being sold off in a big way on Thursday, and then again on Friday - volumes were twice as large as usual on both days. That suggests that there was a large seller of the futures, ahead of the transition of the mandate, and that was driving the market lower.
Director of Watermark Funds Management, Justin Braitling, explained it this way:
"If you've got a $100 million portfolio to sell, you'll go sell $100 million worth of futures, and that straight away reduces your exposure to the Australian market," he said.
"And then what they'll do is sometime in the future they'll actually sell the physical portfolio and buy the futures contracts back. That's how they do it.
"Large portfolio transitions they'll often sell the futures ahead of transitioning a portfolio. [On Wednesday], futures were trading at premium to cash, and now they've blown out to a large discount."
For the week, the benchmark S&P/ASX 200 lost 12.3 points, or 0.3 per cent, at 4460.1 points, while the broader All Ordinaries lost 12.9 points, or 0.3 per cent, at 4483.3 points.
For the week in trading, Arrium fell 11.5?, at 70?, after the steelmaker's Asian suitor walked away from a $1 billion-plus takeover bid.
The Australian Securities Exchange lost 32? to $29.40 after the chief executive, Elmer Funke Kupper, abandoned his push for trading hours to be extended so they aligned with key Asian markets.
Bendigo and Adelaide Bank fell 7? to $7.91, even though its boss Mike Hirst said there were no signs of a rise in bad debts for regional lender, despite a challenging environment.
Boral rose 5? to $3.61 after the building products supplier said the US market was showing signs of recovery, even though Australia's residential housing sector was still finding it tough.
Elders fell 11? to close at 14.5?, after the agribusiness and automotive interiors supplier said it wanted to sell its biggest business unit, its rural services business, before someone tried to take it over.
Shares in Qantas fell 5? to $1.295. Its chairman, Leigh Clifford, said the airline would begin paying dividends again as soon as possible.
Hills Holdings rose 8.5? to close at 85?, after the troubled clothes line, electronics and building products maker said it would start shedding jobs as part of a massive restructure.