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ASX drops 2.1% as iron ore rout continues

Daily Market Update (30)

Correction continues, iron ore futures hit US$90, Ausnet takeover

The S&P/ASX200 (ASX: XJO) suffered its worst day since February falling 2.1% on the back of ongoing weakness in the commodity sector.

The market hit its lowest point in three months with just ten stocks out of two hundred finishing in the positive, including Boral (ASX: BLD) which added 0.3%.

The mining sector continues to bear the brunt with iron ore futures now halving and falling below US$90 sending Champion Iron (ASX: CIA) down over 13% and BHP (ASX: BHP) down 4.2%, the sector itself was 3.7% lower.

The utilities sector was the only highlight jumping 1% on the back of a massive takeover offer for AusNet (ASX: AST) by Brookfield Asset Management.

The group which owns Victoria’s electricity grid added 19.2% moving to $2.36 per share, just below the $2.50 share price.

These deals are set to continue for as long as interest rates remain low, and companies have such higher valuations.

Popular green mining stocks Lynas (ASX: LYC), Mineral Resources (ASX: MIN) and Pilbara (ASX: PLS) falling 11.8, 9.6 and 5.3% respectively.

Transurban wins WestConnex, Charter Hall acquires ALE portfolio

Transurban Group (ASX: TCL) entered a trading halt on Monday after confirming they had won the bidding process for the NSW Government’s WestConnex toll road asset.

Transurban and a group of industry funds already owned 51% of the asset, paying $9.26 billion in 2018, with the remaining 49% being purchased for another $11.1 billion.

The acquisition will be funded via a $4.2 billion equity raising, priced at $13 with one new share issued for every nine already held.

The acquisition takes Transurban to a $75 billion enterprise value, a long way from $13 billion in 2012, with Australian Super also set to take up their $250 million entitlement.

Charter Hall Long WALE REIT (ASX: CLW) and an associated trust have agreed to acquire ALE Property Trust, an Australian pub owner for $1.18 billion.

The deal is in conjunction with HOST Plus, payable in shares and cash valuing ALE Group at $5.88, well above the current $4.70 per share.

It marks another step in the significant growth of this long lease-focused strategy.

US markets continue to fall, Evergrande woes, Fed meeting and debt ceiling ahead

Both the Dow Jones and S&P 500 staged late recoveries to finish 1.7% lower as a mounting wall of negative sentiment hits global share markets.

The Nasdaq underperformed, falling 2.2% as the likes of Tesla (NYSE: TSLA) were hit by supply issues.

But it was all about China Evergrande (HKG: 3333) which fell another 10% as fears of default continued to grow.

The largest developer in China continues to face liquidity and debt pressure with expectations it will default on a number of loans as early as today.

The group offers both property development services and ‘wealth management’ products used to fund its operations, with the latter frozen.

Despite the concerns S&P suggest the issue, if not addressed by the Government will end up some way between ‘a tidal wave of defaults’ and ‘ripples in a pond’, with comparisons to Lehman Brothers likely overdone.

There was positive news on Pfizer’s (NYSE: PFE) treatment of children between 5 and 11, sending the share price 0.8% higher, whilst investors await more news on the ‘tapering’ program this afternoon.

IN Partnership

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