In September, the HNW Australian Equity Portfolio gained by +1.67%, trailing the ASX200 TR +2.68%, a disappointing outcome with the relative underperformance occurring during the final five days of the month after the announcement of measures in China to stimulate their faltering economy. This saw the share prices of the iron ore miners FMG/RIO/BHP gain between 16-18%, though they have given up between 3-4% of those gains so far in October as iron ore euphoria starts top fade.
The stimulus plan broadly included 1) the Chinese central bank lowering interest rates on existing mortgages, 2) lowering the required downpayment for a second home to 15% and 3) allowing institutions to borrow to buy Chinese shares. Atlas remains sceptical that these announced policy changes will increase the need for steel production in China, as the announced stimulus plan targets consumer confidence and clearing a backlog of unsold housing; rather than new steel-consuming bridges to nowhere, as we saw in the 2009 and 2015 Chinese stimulus plans.
Over the month performance was helped by Mineral Resources (30%) and WhiteHaven Coal (+10%) – both weights were fortuitously increased in the Portfolio in September. Additionally, positions in Ampol (+6%), Macquarie (+8%), QBE (+5%) and Bapcor (+10%) assisted performance. On the negative side of the ledger, performance was hurt by CSL (-6%), Woodside (-4%) and Transurban (-3%), all on no new news.
The HNW Equity Income Portfolio gained 2.4% ahead of the Portfolio’s Blended benchmark of +1.79%. Over the month positions in Min Res (+30%), Deterra (+10%), Dexus Industrial (+6%) and Arena REIT (+6%) added value. On the negative side of the ledger, performance was hurt by Woodside (-4%), Transurban (-3%) and CBA (-3%), all on no new news.
As with the HNW Australian Equity Portfolio the IC’s decision in September to increase the holding in Mineral Resources to 2.5% and add Whitehaven Coal to the Portfolio for the first time at a weight of 2.5% looked pretty good at month end with WhiteHaven up +21% on our mid-month purchase price.
Full Reports to follow shortly.
