A rare day for Aussie stocks yesterday – in fact a record setting day. The ASX saw two: one was the largest ever for the Australian sharemarket; the other, the largest ever for its sector.
And the market responded appropriately, ending a record day at an all-time record high.
The two deals might have been all paper, but still, there’s nothing like bids carrying price tags in the billions of dollars and in a ‘hot’ sector, to get the juices running on the ASX.
And when it was two bids – yes, all paper, but with a value of $60 billion, the animal spirits were let loose on the ASX yesterday as the Square bid for Afterpay saw its share price surge, dragging the buy now pay later and other financial stocks higher.
The deals overshadowed the negatives from the Sydney lockdown and more infections and the rapid worsening of the infection situation in southeast Queensland which has been extended for a week.
And then there was the $21 billion agreed marriage between Santos and Oil Search (see separate story).
It might have been a while coming, but from the punters’ point of view, it’s a deal with a lot of naughts and a good strategic thrust that will end up creating the country’s biggest oil and gas group.
Investors are now turning their minds to Woodside because the combined output of Oil Search and Santos at an estimated combined 2021 production of approximately 116 million barrels of oil equivalent.
By way of comparison Woodside produced 100 mboe last year and has a forecast of around 95 million for 2021, rising to 120 million by 2024.
The merged company would also top BHP Petroleum which produced 105 mmboe in the year to June and has a forecast of 99 mmboe to 106 mmboe for 2021-22.
For those reasons the deal is bringing a smile to energy sector investors who reckon that Woodside is the natural bidder for BHP Petroleum should it be put up for sale after the company concludes its present review.
Oil Search ended up 4.7% while Santos shares hardly moved with a rise of 0.6%. It had only been a matter of time for this deal to happen. Woodside shares rose 1%.
The $60 billion in paper value of the offers saw investors add $35 billion to the value of the local market as the index rose to an intraday peak of 7,506.3 points. It jumped through 7,500 points for the first time ever just after 11.30am and closed 1.3% higher at 7,491.4.
That was a new record high close but investors will be watching iron ore prices in Asia because after the 7% slide last week and bigger fall in July, there’s a slide in the making if there is another big lurch lower.
While BHP shares rose 0.3% yesterday, Rio shares lost 0.14% and Fortescue Metals shares dropped 2%.
Afterpay’s 19% surge contributed the most points to Monday’s gain but a 2% rise in Commonwealth Bank, 2.4% gain in NAB, 2.1% gain in Westpac, and a 1.8% rise for the ANZ.
There was relief that a non-bank, non-Buy Now Pay later group such as Klarna, or Apple or PayPal weren’t the buyers and looking for a quick way to scale in this fast-growing area of finance and banking (Afterpay last week confirmed plans for a banking product offering).
Square is large enough – it has a market value of around $US112 billion, but it is not a bank or a buy now pay later group which has proved to be a damaging rival to the credit card businesses of banks.
But ASX investors now have a headache. Lithium, copper and nickel are already ‘hot’ so to speak, as are rare earths (Lynas). So, after Afterpay goes, where to next?
