Good Evening,

Welcome to Equity Espresso. We’re here to catch you up on the day’s important stock market news in Australia and abroad. Here’s a sample of today’s top stories:

1. 📈 Hotter US CPI

2. 🔍️ A Deep Dive on ETFs

3. ❌ Pact Group Reviewer Says No

4. 🚱 Fletcher Building In Pipe Spat

5. 🪙 Newcrest Shareholders Vote Yes

The Recap

ASX Six-Day Streak Ends

The six-day winning streak ended today as the ASX200 index finished down 0.56% to 7,051.0 after U.S. markets tumbled, with September inflation coming in slightly hotter than expected. As is the case, good economic news is bad news for equity markets.

The ASX200 index finished 1.37% higher for the week, whilst so far in October, it’s marginally higher (+0.02%).

Nine of the 11 sectors finished the day lower, Tech (-1.93%) and Real Estate (-1.92%) saw the biggest drops. WiseTech (-1.4%), Xero (-2.4%) and Goodman Group (-1.5%) all finished in the red.

Defensive sectors, Utilities (+0.35%) and Health Care (+0.45%) finished higher. CSL (+1.46%) clawed back some ground after its share price fell to 2019 lows. ResMed shareholders wish they were sleeping as the share price continues its freefall, losing another 2.8% after RBC Capital downgraded its rating overnight, saying it expects slowing earnings growth.

Overseas-based Lithium companies rose overnight, but the party didn’t continue down under, with Pilbara Minerals (-1.43%), Liontown Resources (-2.79%) and Core Lithium (-6.2%) all falling. Allkem (+0.86%) and Latin Resources (+1.72%) were a couple of companies that did finish higher.

Outlook

There is no key economic data on the card in the U.S. tonight. The S&P 500 (+0.10%) and NASDAQ (+0.06%) futures are trading slightly higher.

Economic Data

• The U.S. inflation rate remained steady at 3.7% for September - above expectations of 3.6%, as a softer decline in energy prices offset slowing inflationary pressures in other categories.

• The Core CPI, which excludes volatile food and energy prices, slowed to 4.1%, marking its lowest reading since September 2021.

• China's Consumer Prices unexpectedly stagnated in September, missing market forecasts of a 0.2% gain, following a 0.1% rise in August. A decline in food prices quickened (-3.2% vs -1.7% in August) more than expected.

Wall Street

Sentiment took a turn overnight as the S&P 500 broke its four-day streak, ending Thursday lower as Treasury yields rose after CPI data for September came in slightly above expectations. The S&P 500 (-0.62%) and NASDAQ (-0.63%) ended the day lower.

Atlassian announced it had agreed to acquire video messaging platform Loom for about $975 million, beefing up its team collaboration tools.

Birkenstock shares fell again on Thursday, dropping 6.6% a day after its market debut.

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Quick Singles

🪃 Local News

• Want a resume that stands out from the rest? Using the world of artificial intelligence, now you can. Kickresume’s AI-powered tool will build you a unique and beautifully designed resume with customisable templates, giving you the spotlight you deserve. Get your resume now!

• The Australian Competition and Consumer Commission (ACCC) has imposed a fine of $155,000 on Tesla over alleged safety violations. The ACCC claims that Tesla failed to conduct necessary safety tests on some of its products powered by button batteries, including three of its key fobs.

• Police in New South Wales have urged people not to attend the upcoming pro-Palestine protest in Sydney. Acting Commissioner David Hudson told reporters recently that the police are considering authorising the use of "extraordinary powers" under the state's Law Enforcement Act.

• Macquarie Asset Management is in talks with investors to raise as much as $11.5 billion for funds dedicated to Asia Pacific infrastructure, global renewables and energy transition. $MQG

🌏 Around The Globe

• The IRS has informed Microsoft that it owes an additional $28.9 billion in back taxes due to a dispute over how the company allocated its profits between countries and jurisdictions from 2004 to 2013.

• Disney World and Disneyland have increased ticket prices, with annual passes at Disney World going up by nearly 10%. The most expensive pass, Incredi-Pass, is now priced at $1,449 in Orlando.

• Burger King is having a makeover, with plans to spend $250 million to remodel its restaurants.

• According to Reuters, China has issued a notice to domestic brokerages and their overseas units, prohibiting them from taking on new mainland clients for offshore trading.

₿ Crypto Corner

• Caroline Ellison testified in court that Sam Bankman-Fried asked her to sell Bitcoin should its spot price climb over $20,000 - which it did using customer funds.

• Ethereum gas fees have hit a new low for the year due to decreased usage of DeFi applications, NFTs, layer-2 networks, and various Telegram bots.

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Markets

ASX200 Company Movers

Index & Commodity Prices

Sector

Bond Prices

ETF Watch

ASX News

🗞️ Company Announcements

Fletcher Building (FBU) went into a trading halt this morning as it briefed investors regarding the fallout from plumbing failures and a faulty pipe product. Fletcher has accused BGC, Western Australia's largest homebuilder, of shifting blame and making unfounded allegations regarding plumbing pipe leaks in 11% of new homes built in WA between 2017 and 2022 that used a specific Fletcher product.

Newcrest (NCM) shareholders have voted overwhelmingly in favour (92%) of a $26.2 billion merger with U.S. gold mining giant Newmont.

An independent reviewer has advised Pact Group (PAC) shareholders to reject the proposed $0.68 per share takeover deal by Kin Group, which currently indirectly holds over 50% of the company. The review concluded that the offer was “neither fair nor reasonable”.

Perpetual (PPT) reported Assets Under Management (AUM) at the end of September of $211.7billion - down $0.4bn in the qtr. Net inflows were $100 million during the quarter.

Sky Network Television (SKT) will continue its paused share buyback programme as it remains in talks with an unnamed party regarding a takeover offer.

Unibail-Rodamco-Westfield (URW) announced it has received an offer from real estate company Frey to acquire the Polygone Riviera, located in France, for a net disposal price of €272.3. The transaction is expected to be completed during Q4-2023.

XTEK (XTE) announced it has received an urgent $2.2 million order from an undisclosed international customer for specialist armour products.

Post of The Day

Deep Dive

Best Performing ETFs

We look at a short list of ASX-listed ETFs that are available to investors as options to get broader exposure to certain sectors or geographies.

The performance measurements are against a 1-year, 3-year and 5-year timeframe. Data and performance results are as of the end of September 2023 per the ASX website.

Firstly, What’s an ETF?

An Exchange-Traded Fund (ETF) is a type of pooled investment security that will typically track a particular index, sector, commodity, or other asset type.
ETFs can be purchased or sold on a stock exchange like a regular stock can.

Some of the key characteristics of ETFs to keep an eye on are:

• Passive vs. Active - Passive ETFs generally track an index and will have more companies than Active ETFs. Active ETFs can sometimes have a more concentrated exposure where the ETF provider has selected the best stocks of a particular investment strategy or sector.

• ETF Weighting - Most index ETFs will be weighted by market cap, so you get a larger exposure to the bigger companies. An equal-weighted ETF will be split evenly, not considering the company's size.

• Management Expenses Ratio (MER) - The annual costs you pay the ETF provider. Passive ETFs will generally have a lower MER compared to Active ETFs.

• Funds Under Management (FUM) - The amount of money invested in the ETFs.

Australia Index ETFs

The most commonly held ETFs are ‘index’ ETFs, which contain many stocks linked to a particular index. Due to having more companies, these are perceived to have less risk as the volatility will be lower.

The ETF with the most FUM is the Vanguard Australian Shares Index (VAS) with $12,705m. This ETF holds the top 309 companies on the ASX, weighted by market cap.
Below are the largest index ETFs by FUM on the ASX, along with their returns.

• The equal-weighted MVW has underperformed over three years and 5-years, with a much higher MER.

• A200 by Betashares has the best returns and lowest MER.

Aussie Small/Mid Cap ETFs

Small-to-Medium companies have underperformed the broader index against all three time periods. Van Ecks MVE ETF is the best performer of this group, albeit at a higher MER.

The MVE ETF holds 50 different ASX companies, with WiseTech, Carsales,
REA Group and Washington Sol Patts. the largest holdings.

Australia Sector & Strategy

Resources have been the place to be when looking at 5-year returns, with the three ETFs below outperforming the other sectors. The VHY High-yield ETF has the lowest ETF and has moderate returns compared to the broader list.

The VHY ETF provides exposure to ASX companies that have forecasted higher dividends. It holds 76 companies with high exposure to banking and material companies, with BHP its biggest holding.

Global ETFs

We picked out some globally focused ETFs and how they have performed over time. Exposure to U.S. ETFs has been the best performer. The weighted NASDAQ100 ETF has had the best returns over a 5-year timeframe. It’s top holdings today are Apple (11.0%) and Microsoft (9.6%)

It's important to note that there are over 300 ETFs available to investors on the ASX, so the list above is just a small sample. The ASX publishes monthly performance updates you can access here to get investing ideas.

If there are particular ETFs or sectors you would like us to look into further, feel free to email us at [email protected] 

Daily Quiz

Test Your Knowledge

Yesterday’s Daily Quiz Question. Which country is Novo Nordisk headquartered in?

Answer: Denmark. A 38% tie in the poll between Denmark and Finland. Novo Nordisk was founded in 1923 in Copenhagen and has come to prominence recently with its very popular diabetes injection, Ozempic. The recent stock price surge has seen it pass Louis Vuitton to become the largest company in Europe by market cap.

A Little Extra

📉 Going Down?

Top-10 shorted stocks on the ASX - as of October 9

📊 Broker Ratings

What do the brokers have to say?

1. Bega Cheese (BGA) - Upgrade to Buy from Hold (Bell Potter)

2. Insurance Australia Group (IAG) - Upgrade to Add from Hold (Morgans)

3. Lynas Rare Earths (LYC) - Upgrade to Buy from Neutral (UBS)

4. National Tyre & Wheel (NTD) - Upgrade to Add from Hold Morgans

👨‍💼 Director Transactions

What are the insiders doing? (On-market trade only)

1. United Overseas Australia (UOS)

2. Harvey Norman Holdings (HVN)

3. Cadence Capital (CDM)

💲Dividends

Companies trading ex-dividend today

📅 Economic Calendar

Data to keep an eye on this week

DISCLAIMER: None of the information provided in this newsletter should be constituted as financial advice. This newsletter is strictly for educational purposes only. It should not be taken as investment advice or a solicitation to buy or sell assets or make financial decisions. Please do your research.