It's a shortened week with the Australian Stock Exchange closing early on Tuesday and resuming on Friday. Let's go over some of the news that will shape the week to come.
1. Telstra (ASX: TLS)
Telstra is sometimes described as a bond proxy and has over the past year sometimes reacted negatively when Australian bond yields go up. Bond prices and yields move inversely. This makes Telstra's dividend yield relatively less attractive by comparison to the bond yield.
The good news in the post-Federal Reserve taper world is that 10-year US treasury yields actually fell in Friday's trade and the Australian 10-year bond usually reacts in sympathy with its US counterpart. Assuming the market is anticipating a sooner than expected increased dividend from the sale of its Hong Kong mobile business, Telstra may potentially rally when one also considers the rise in the S&P 500 of 0.48%.
2. Fortescue Metals Group (ASX: FMG)
The US government revised its estimates of business and consumer spending higher, as the economy grew at its fastest pace in almost two years. Consumer spending, which accounts for more than two-thirds of US economic activity and the growth figures may raise hopes of a strengthening world economy. Both Rio Tinto and BHP American Depositary Receipts were up, which may auger well for Fortescue, which will potentially re-rate more quickly as cash flows are being used to pay down its highly geared balance sheet.
3. & 4. Newcrest (ASX: NCM) and Beadall Resources (ASX: NCM)
The feeble rally by gold on Friday night (up 0.85%) will do little to allay fears of local gold investors as the Australian gold price was negatively affected by a rally of the currency back to US$89.24.
Newcrest Mining's horror year sees its share price down 70% and approaching prices last seen a decade ago. It has had sundry problems over the year, not the least being the fall in gold from US$1,700 per ounce to the current US$1,203. A relatively high cost of production makes for troubled times when compared to Beadall Resources, which has one of the lowest unit costs and has recently completed capital expenditures that allows for repayment of debt and a potential dividend increase.
Both stocks will benefit if the Aussie dollar falls, as has been predicted by Goldman Sachs, among others.
Initial public offering
Sandon Capital Investments (SNC) is the sole IPO on Friday, with an issue price of $1.00. It predominately services wholesale and professional investors via analyzing and managing a diverse range of asset classes.
