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Stocks retreat, alternative assets gain attention: ASX 200 market wrap

We examine some of the key developments from the week ending 24 April.

ASX 200 Source: Bloomberg

It’s been a topsy turvy week for global financial markets.

Equities have mostly traded flat, oil plunged into negative territory on Monday and an all-important event in the obscure world of cryptocurrencies looms.

ASX 200 drops; bear rally talks persist

Amidst this volatile backdrop, the ASX 200 index struggled to find its footing during the week, with the blue-chip benchmark recording losses during four out of the last five sessions.

Overall, the ASX 200 finished out the week down 111 points, or 2.1%, closing out Friday’s session at the 5,242 point level. Energy, health care and materials were the best performing sectors on Friday, while the industrials index was the worst performing.

These broad market declines come amid concerns that what we are witnessing right now is nothing but a suckers rally or a bull trap.

According to the Australian Financial Review, the Regal Funds CIO Philip King this week said:

‘It's important to be patient and wait for the bull market. There'll be a lot of false dawns. There'll be a lot of suckers' rallies, such as the one we're seeing now, but I think we just need to let time pass before this bear market is over.’

Forward looking theories aside, on Friday Webjet, NRW Holdings, Corporate Travel Management, and Southern Cross Media Group were the best performing Australian equities; while Orocobre, Challenger and Lynas were some of the worst performing.

Illiquid assets in focus

Though listed equities may have their detractors right now, alternative or unlisted assets – and particularly how such assets are valued – have gained increasing levels of media attention in recent weeks. This comes after the Australian government announced that it would allow individuals early access to up to $20,000 from their super fund – in one $10,000 lot before 1 July, and another $10,000 lot after 1 July.

In the wake of that news, industry super fund Hostplus has faced significant media scrutiny, due in part to the construction of its default balanced fund – which is heavily weighted to illiquid assets – as well as its handling of potential customer redemptions.

Indeed, in a move that aggravated many onlookers, in early April Hostplus updated its product disclosure statement (PDS), giving the fund absolute discretion to ‘suspend or restrict applications, switches, redemptions and withdrawal requests, for all or a particular investment option.’

PDS changes aside, there are broader concerns that funds like Hostplus lack the required liquidity to meet redemption requests. According to Investment Magazine:

‘Some industry funds are said to be concerned about the ability of not just Hostplus but also Rest Super to meet the redemption requests of their members, who mostly work in the hospitality and retail industries that have been hardest hit from the outbreak of the coronavirus.’

The Bitcoin halving approaches

Elsewhere in the land of alternative assets, bitcoin’s third halving is fast approaching. In the most basic of terms, a bitcoin halving is an event where the reward for mining new blocks is halved, meaning miners receive 50% fewer bitcoins for verifying transactions.

Looking at the potential consequences of this event, IG Senior Market Analyst Joshua Mahony, said:

‘The upcoming bitcoin halving has raised hopes for holders that we could see a surge in the price of this crypto posterchild in the lead up to the event.’

The halving is set to occur in May.

How to trade the ASX 200

What do you make of the current situation: do you see bullish or bearish opportunities? Whatever your opinion, you can trade indices, cryptocurrencies and equities – both LONG or SHORT – with IG’s easy to use trading platform now.

For example, to buy (long) or sell (short) the ASX 200 index using CFDs, follow these easy steps:

  • Create an IG Trading Account or log in to your existing account
  • Enter ‘ASX 200’ in the search bar and select it
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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