- Markets are back in action, with investor optimism over economy reopening amid easing restrictions.
- During 1 May-5 June, the benchmark index moved up by more than 14%.
- Major banks including WBC and CBA have returned strongly after being hit hard.
- While CSL has entered a significant partnering agreement for a COVID-19 vaccine development and manufacturing, Telstra is continuing to expand coverage of its 5G services.
Created in the year 2000, S&P/ASX 200 is the benchmark index comprising top 200 companies listed on the Australian stock exchange, by their market capitalisation. Stocks that meet investment benchmarks and minimum volume become eligible for the index inclusion.
On the basis of sectors, major contribution comes from the financial sector, followed by materials, health care, industries, information technology, among others.
On 5 June 2020, S&P/ASX 200 advanced by 0.12% from its previous close to settle the day at 5998.70. The benchmark index continued to perform better, on the back of investors regaining confidence amid economy reopening with easing restrictions.
The benchmark index reached to its all-time high level of ~ 7197.20 on 20 February 2020, after which it tumbled sharply to a low level of 4402.50 on 23 March 2020, primarily owing to concerns related to COVID-19, globally.
Some of the worst-hit sectors were tourism, hospitality, aviation and manufacturing, because of implementation of strict lockdown measures and social distancing norms. While few sectors that played a defensive role during these difficult times included telecom, utilities, and cloud-based technology service sector. Moreover, pharma and healthcare sector observed a dramatic surge in demand.
From 1 May 2020 till 5 June 2020, the index improved from 5245.90 to 5998.70, representing a growth of 14.35%. Many indices that were hit by impacts of the coronavirus outbreak seem to be back in action following gradual reopening of economic activities.
In this backdrop, let us discuss recent updates from four of the top players listed in the S&P/ASX 200 index.
Westpac Banking Corporation (ASX:WBC)
On 4 June 2020, Westpac Banking Corporation (ASX:WBC) announced the results of its investigation into Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance issues. Moreover, the bank released the Promontory Assurance letter on management’s accountability review and the Advisory Panel Report into Board Governance of AML/CTF Obligations.
Owing to the severity of issues raised by AUSTRAC, Westpac’s former Chief Executive Officer had stepped down, while former chairman brought forward his retirement.
Mr McFarlane pointed out that the company is committed to fixing these issues, ensuring that these do not happen again. Additionally, the WBC Chairman highlighted a mix of technology and human error dating back to 2009 for the failure related to the International Funds Transfer Instructions non-reporting.
Westpac Chairman Mr John McFarlane highlighted that the investigation identified three primary factors that led to the AML/CTF compliance failures:
- Few AML/CTF risk areas were not adequately recognised within the company.
- Ambiguous accountabilities (end-to-end) for the AML/CTF compliance management.
- There was a lack of adequate AML/CTF skill & resourcing.
The failure to follow to AUSTRAC advice for child abuse risk related to certain products happened because of inadequate financial crime procedures, along with weak individual judgements.
Stock Information - By the market closure on 5 June 2020, WBC stock settled at A$18.79 a share, up 3.355% from the previous close.
Commonwealth Bank of Australia (ASX: CBA)
CBA also came under scanner, after its customers were found to be using its digital services platform to send abusive messages in descriptions of banking transactions.
On 5 June 2020, Commonwealth Bank (ASX:CBA) announced that the bank would be providing more tailored coronavirus support to its customers. The initial COVID-19 pandemic package of support measures for retail clients consisted of automatic deferrals of repayment on ~ 169k home & personal loans, in addition to waived fees & charges and fixed-rate offers for debtors.
As the economy is beginning to recover and customers are returning to job, CBA has noted several applications to defer home loan, and personal loan repayment flatten. The number of requests has been on a downward trend for home loan and personal loan repayment deferrals, averaging 32% & 30%, respectively, every week since the peak in March 2020.
CBA has also made additions to workforce at its Australian-based Financial Assistance Solutions teams, which include the provisional placement of ~ 500 branch staff to its call centres and online teams. These staff members would make phone calls to the bank clients to confirm whether they are receiving the right assistance. Other than this, CBA would be getting in touch with each client in a deferral to make sure their existing support is still appropriate for their present conditions.
During mid-May 2020, the bank agreed to sell a 55% interest in Colonial First State to KKR, which is a global investment company with US$207 billion of AUM as at 31 March 2020.
Stock Information: By the end of day’s trade on 5 June 2020, CBA stock settled at A$68.73 a share, up 1.581% from the previous close.
CSL Limited (ASX:CSL)
Recently, a new agreement was reached between CSL Limited (ASX:CSL), The University of Queensland, CEPI, and the Coalition for Epidemic Preparedness Innovations. The collaboration is designed to speed up the development, production and distribution of a vaccine candidate for coronavirus. The Queensland university researchers have pioneered the vaccine candidate.
As part of the significant partnering agreement, CSL and CEPI will hold the responsibility to provide funding for the vaccine development and manufacturing. In case of successful trials, a vaccine is expected to hit the markets in 2021.
Strategic Partnership with Thermo Fisher Scientific: Late-May 2020, CSL announced to have entered a strategic partnership with Thermo Fisher Scientific for the lease of its state-of-the-art biotech manufacturing facility that is presently under construction in Lengnau, Switzerland, and contracting of capabilities & capacities from within the Thermo Fisher network.
Stock Information: On 5 June 2020, CSL stock settled at A$285.33 a share, down 3.025% from the previous close.
Telstra Corporation Limited (ASX:TLS)
During mid-May 2020, Telstra Corporation Limited (ASX:TLS) announced the expansion of 5G coverage into more of Tasmania and Melbourne. TLS’ 5G rollout has gained pace with more than 50% coverage to over 600 suburban regions across the nation.
Across Hobart and Launceston in Tasmania, forty-four suburbs have more than 50% covered by the latest mobile technology, while in certain regions, 5G is available throughout the whole suburb.
In Melbourne, 5G rollout has gained momentum with more than 50% of fifty-seven sub-urban regions covered by the latest mobile technology, and in few parts, the company made available its 5G coverage across the entire suburb.
While providing coverage to selected areas in thirty-two cities, major as well as regional, Telstra Corporation remains on track to cover selected areas of thirty-five cities with its 5G services by mid-2020. TLS is focused on continuing to expand its 5G coverage, as the company believes that 2020 is going to be the year of 5G.
Stock Information: TLS stock settled at A$3.22 a share on 5 June 2020, down 1.529% from the previous close.
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