All Ords Report 24 November 2016
ANZ shareholders may be experiencing a case of déjà vu, but not in a good way.
ANZ acquired Grindlays Bank in the 80’s to gain a foothold in Asia. Less than a decade later the decision proved to be ill-timed. ANZ fell by around 60 per cent into the early 90’s (when the market declined). To put this in perspective, NAB fell by around 30 per cent. ANZ’s fall in the 90’s was equivalent to the decline in the GFC, when it fell by around 63 per cent from its 2007 high.
Some time ago, ANZ announced their decision to go back into Asia and I thought ‘not again!’ I doubted whether ANZ would get their strategy and timing right once again, and whether the vision would be long term.
However, they appeared to be doing something right, ANZ was heralded as being one of the top four corporate banks in Asia in 2013. So what has happened recently? Actually, I’m still scratching my head as ANZ is looking to exit retail banking in Asia, and their wealth management business. ANZ has confirmed a book loss of $265m.
ANZ Chief, Shayne Elliott declared that Asia remains core to ANZ’s strategy. With the focus being large corporate and institutional clients. So have the ANZ board got the direction right this time? Only time will tell. Major strategic decisions can make or break a company.
Of course, if you are a shareholder and you don’t like the direction taken you can vote with your feet. However, I would not sell a share unless the price chart indicated that it had triggered my exit strategy.
So if you hold ANZ in your portfolio, what you ought to be asking yourself is how much were you willing to risk when you bought the shares? How much have your shares fallen in value? And, at what price should you sell to stop the erosion of your capital if they were to continue to fall?
If you have some shares you must know how to sell them ahead of the next long term low on our market. I have designed a number of courses to assist you to manage your risk well through these volatile times.
ANZ shares were trading at around $28.30 at the time of writing.
What do we expect in the market?
This week the Australian share market pushed up strongly through 5550 points. The move is significant for the market and demonstrates that buyers are returning and the probability for a further solid rise over the coming months has now increased.
The next significant hurdle for the All Ordinaries Index (XAO) is 5640 to 5670 points. Once through, the All Ordinaries Index (XAO) is more likely to continue higher to challenge the 2015 high at 5963.5 points and resume the longer term uptrend.
Listen to this podcast where I discuss whether we are in a bear market or the next big bull-run.
One positive for the banking sector is that many mining stocks are now trading well above long term lows. That said, if you currently are not holding these types of shares in your portfolio it is important to be very selective, as many are approaching important levels of resistance.
The Financial sector (XFJ) chart is looking much improved, compared to how it was trading just a few months ago, this bodes well for most banks for at least the short to medium term. Remember this sector constitutes a significant portion of the Australian share market. Big heavy weights in the sector such as Commonwealth Bank (CBA) appear to have confirmed significant lows back in September.
Most global markets have pushed higher, with the Dow Jones having traded above 19000 points this week, and having the potential to gain another four per cent into the New Year. Our market is likely to follow suit. In January, the financial players will be watching for confirmation of an increase in consumer spending this festive season.
As mentioned previously, the analysis indicated that a low for the Australian share market appeared to be in, and that it would take a couple of weeks to confirm. I believe we have seen the first sign of this confirmation, which is great news for investors.
Dale Gillham is Chief Analyst at Wealth Within