China's appetite for imports worse than expected, US & Europe weaker, ASX futures down 24 points

While the Australian Securities Exchange (ASX) was shut for the Queen's Birthday holiday yesterday, the futures market was open and was exposed to falling equity markets in the US and Europe. We can expect a moderately weak start this morning as the S&P 200 loses grip of the 5,500 mark. Australian government bond yields have continued to firm, with 10-year yields trading about 36 basis points higher than they were a week ago. Combined with weaker-than-expected Chinese import data, weakness across finance and resources names should be broad today. But as you can see from today's first chart (June ASX 200 futures), the sell-off that we've experienced is showing some signs of slowing down, as investors look to the top end of the 2014 trading range as a bit of a cushion to the selling that we've seen since the beginning of June.

Recent selling has breathed some life back into the grossed-up historical dividend yields of some of the more reliable names in the ASX 50, which is a nice dynamic as we move closer to the release of Rivkin's July Blue Chip Portfolio, due out in three weeks' time. Of the larger banks and insurers, here are a few of the current highlights:

  •  IAG: 9.20% (6.44% before franking)
  • NAB: 8.90% (6.23% before franking)
  • WBC & SUN: 8.50% (5.95% before franking)
While Rivkin's Blue Chip strategy uses historical dividend yields for the selection of its components, three out of the four above are showing forecasts to maintain or improve their dividends, while IAG is set to cut its by 20% or so after some mediocre earnings. The remainder of the 10 stocks will be calculated and presented in three weeks' time, so start thinking about capital allocation with regard to how much exposure you want to the 10 upcoming blue chip names and their relatively high grossed-up dividend yields.

With regard to China, there has been a lot of fiscal and monetary policy change so far this year and it cannot be expected that this will hit the domestic economy there immediately, so the market will have to keep guessing for the next couple of quarters while stimulus measures take hold. I don't hear many optimists when it comes to above-forecast Chinese GDP growth expectations, so I don't think the market is ahead of itself on this issue anyway.

Source: Rivkin, Saxo Bank
 

To view the Rivkin economic calendar and Global Markets matrix, members can click here.

This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

Complex product warning

This article contains information about foreign exchange contracts, which are considered complex financial products. Please click here to read ASIC's foreign exchange trading article before considering an investment in foreign exchange contracts. 

This article contains information about CFDs, which are considered complex financial products. Please click here to read ASIC's "Thinking of trading contracts for difference?" document before considering an investment in CFDs.
comments powered by Disqus

DISCLAIMER: Rivkin aims to provide clear and simple information to those visiting our website. If any part of this disclaimer does not make sense, please phone Rivkin and ask to speak with a member of our Dealing and Relationship Management Team. Rivkin provides general advice and dealing services on securities, derivatives and superannuation (SMSF). Rivkin also provide SMSF administration and accounting services. Rivkin does not provide advice that takes into account your, or anybody else's, investment objectives, financial situation or needs. We strongly suggest that you consult an independent, licenced financial advisor before acting upon any information contained on this website. Investing in and trading securities (such as shares listed on the ASX) and/or derivatives (such as Contracts for Difference or 'CFDs') carry financial risks. CFDs carry with them various additional risks that differ from more simple securities such as fully-paid company shares. Some of these risks include not owning the underlying instrument from which a price is being derived, settling trades 'over the counter' with a financial institution rather than on a stock exchange, and using leverage to gain access to trades that may have a higher face value than your initial deposit. This risk of leverage means that it is possible to lose more than your initial investment. Our aim is to create more life choices for our clients, which means improving the wealth of clients throughout many market cycles by nurturing a relationship spanning many years. If you are not comfortable with your understanding of the risks involved before using a Rivkin product and service, please contact our office to seek further information or a Product Disclosure Statement, or make an appointment to sit with one of our friendly financial experts. It is in our interest for your Rivkin experience to be a rewarding and comfortable one. Rivkin is a trading name of Rivkin Securities ABN 87123290602, which holds Australian Financial Services Licence No. 332 802.