Chinese markets were somewhat indecisive about whether they wanted to join in the Asia-wide ebullience, whipsawing between positive and negative territory early in the session. The market was clearly uncertain as to whether the bounce in house prices diminished the chance of further rate cuts by Chinese authorities. China’s National Bureau of Statistics (NBS) released its property prices for September showing property prices continuing to come back steadily. When one digs into the NBS property data, its clear they are using some large moving averages and smoothing effects on the numbers.
Nonetheless, it seems fairly clear that China’s significant monetary policy easing and the removal of a range of restrictions on property purchases is continuing to steadily stimulate the market. The big question is when the steady increases in property prices begin to feed through into an uptick into property investment, which is still in the doldrums as China continues to work through its heavy property inventory overhang.
The ASX was buoyed along with the rest of Asia on the back of the ECB meeting. Ahead of the open the ASX was looking to open up roughly 1.7%, but it served to surpass even those lofty expectations by rallying over 2% at certain points of the day, and looks set to see its strongest close since 20 August.
Alongside the favourable macroeconomic environment, the ASX was also boosted by a flurry of M&A activity. Speculation that big name private equity funds were eyeing taking Big W off Woolworths' hands.
Beach Energy sought a merger with Drillsearch, offering a 27% premium to Drilsearch’s closing price. There are a lot of potential synergies between the two businesses. Should the deal go through, it would create Australia’s largest onshore oil producer as well as giving it strategic power in the East Coast gas market. And the deal puts into play smaller explorers Cooper Energy and Strike Energy, which could also offer potential accretive benefits for a buyer.
This saw the energy sector as a whole have a fairly strong session despite the poor performance in the spot oil market overnight, with the sector rising 1.5%.
ResMed reported its Q1 FY2016 financial results with a 3% drop in net income from the same period last year. This was mainly driven by the 9% decrease in revenues from EMEA and APAC since the same period last year. Despite that, it managed to trade fairly flat on the day, up 0.1%.
The healthcare sector was the worst performer on the market today, only gaining 0.5% compared to a 2% or more expansion by most sectors. This was mostly driven by the continued selloff in healthcare stocks in the US overnight. Valeant suffered another bout of selling over allegations it had been colluding with pharmacies to boost sales numbers.
NAB chose to follow CBA’s lead yesterday on increasing its home loan rates. This only leaves ANZ left to raise rates, giving the Reserve Bank of Australia considerable room to lower rates over the coming months. While market pricing has given more weight to a November rate cut, December or February are deemed far more likely. In any case, the markets were clearly supporting the moves by the banks as the whole sector rose 1.7%.