ASX adds 24% in record-breaking financial year

ASX fades to small gain, 24% return for the financial year, Telstra’s buyback surprise

The ASX 200 (ASX: XJO) managed to finish the financial year on a positive note, adding 0.2% on Wednesday with the communications sector the biggest contributor, up 2.7%.

The result took the quarterly return to 7.7% and the financial year to 24%, the best since the 1980s.

There were two trends pervading markets on the final day of the financial year: buybacks and tax loss selling.

It’s clear that a number of the year’s biggest losers, including Nuix Ltd (ASX: NXL) which was down 9.5%, and AGL Energy Limited (ASX: AGL) down 10.0%, were being sold off by investors to realise capital losses after what has been a generally strong year for the market.

AGL’s sell off came as the company confirmed its decision to demerge the retailing business in an effort to separate it from the labour intensive baseload power division.

Under the split, which will occur in the final quarter of the 2022 financial year, retailing will be renamed AGL Australia, and the power stations transferred to a new entity Accel Energy, which will focus on redeveloping its baseload power sites into lower carbon industrial energy hubs.

The decision has been questioned by many and is clearly not welcomed by the market, at least for now.

Telstra sells towers, announced buyback, Thorn under pressure, ASIC warns on Bitcoin

Telstra Corporation Ltd (ASX: TLS) waited until the final day of the financial year to announce the sale of 49% of its yet-to-be-separated InfraCo Towers business.

The telecommunication towers located across the country will be packaged up and sold to ventures between the Future Fund, Commonwealth Super Corporation, and Sun Super in a $2.8 billion deal.

Telstra will remain a controlling interest of 51%. The deal values the business at $5.9 billion, a multiple of 28 times, well above Telstra’s current market valuation.

Management confirmed that a significant amount of capital would be returned to investors, likely via a share buyback, with a portion retained to continue investing in its regional network. Telstra shares responded with a 4.4% rise.

Embattled lender Thorn Group Ltd (ASX: TGA) fell 1% after flagging a ‘material operating loss’ in the 2022 financial year if disappointing trends in the current quarter persist.

Finally, the corporate regulator released guidance warning that a Bitcoin exchange traded fund could create the ‘real risk of harm’ if proper protections aren’t put in place beforehand.

US markets deliver records, Robinhood’s massive fine, Boeing ramping up

US markets finished mixed for the financial year, with the Dow Jones and S&P 500 both positive, up 0.6% and 0.1% driven by a rally in consumer staples, energy, and financials.

The tech-driven Nasdaq was slightly weaker, down 0.2% as the stay-at-home trade took a breather.

Over the financial year, the returns were among the strongest in the world with the Dow adding 34.1%, the S&P 500 37.9%, and the Nasdaq 42.8%, the strongest returns for over 20 years.

Whilst the lower starting point and vaccine-led recovery helps, earnings have been the biggest surprise.

Micron Technology, Inc. (NASDAQ: MU) part of the important semiconductor sector, reported a 76% increase in cash flow and 36% growth in sales as its mobile and desktop chips saw huge demand amid a global shortage.

Boeing Co (NYSE: BA) also jumped 1% after new plane orders began ramping up when United Airlines confirmed the purchase of 270 new aircraft.

Finally, the popular low cost trading platform Robinhood received the largest fine in FINRA history.

The online brokerage was hit with US$70 million in costs on alleged infractions that included providing false and misleading information to customers and failing to complete due diligence on options trading accounts for novice traders.

The Inside Adviser