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| On Wednesday, July 16, 2025, the ASX fell 69 points to finish at 8562. This is after the ASX 200 hit a new ALL-TIME CLOSING HIGH (ATH) of 8630.3 yesterday, which was just shy of the ATH intraday of 8639.10. The US markets saw new ATHs from the S&P 500 and NASDAQ overnight, with NVIDIA driving most of the gains. With an increase of 4% to a new high, the company was valued at US$4.16 trillion after CEO Jensen Huang visited the White House and gained approval to sell semiconductors (computer chips) to China. However, there were broader concerns from the US inflation figures, which gave a slight uptick from the tariffs. US banks started the US quarterly reporting season last night with mixed results, which might set the tone of the upcoming reporting season in the US and Australia, as the results may be inconsistent within sectors. We are now entering the profit confession season, where companies are signing off on their June 30 results, and they have to make sure the market is informed. Earlier this week, China announced its exports had increased 5.8% in June after allowing for a 16.1% drop in exports to the US. In short, China is still growing, as shown by its GDP result yesterday, which increased 5.2%, and it is looking for other trade opportunities. Just to let you know, as noted in the UBS note below, the US only represents 16% of global trade. We previously mentioned that China kept its powder dry to wait for Trump’s trade deal. This is causing growing global confidence that China could withstand a trade war with the US. This might also explain why iron ore has rebounded from near $90 to near $100. The bond markets are still reasonably calm, but did increase after the inflation numbers last night. We will likely see more volatility in the coming weeks. For the first time this year, the brokers have decreased the target prices for the CORE Watchlist (30 stocks) more than increased. We are happy for you to share our Not So Daily Bulletin with family and friends, and if we can help them, we are also happy to chat. |
| US Inflation US inflation released last night was slightly higher at 2.9% headline and 2.7% core. The markets have been expecting some inflation impact from the tariffs, which has also kept US Federal Reserve chair J. Powell from cutting rates. The results were OK, but could be read in many different ways. It shows that the tariffs haven’t had an impact on inflation over the last couple of months. The goods (green) inflation hasn’t been seen with a slight uptick in this month’s figures, but the inflation figure increased rather than continued the recent downtrend. This suggests a couple of things. 1) The exporters are absorbing tariffs. 2) The US supply chain businesses are absorbing the tariffs. 3) Retailers are selling pre-tariff goods from inventories and haven’t started passing on the higher prices yet to the consumers. Most economists suggest it will take 3 to 6 months for the tariffs to impact prices as goods work their way through the supply chain. The other observation from the inflation chart below is that services inflation (blue) has stalled at 2%. Tonight, the US releases the PPI (producer price index). This may give further signals about where the tariffs are impacting the supply chain. |
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| Global Equities UBS research summarised UBS expect consolidation near term in equities (until mid-September). Concerns being: i) UBS Risk Appetite is just above neutral. ii) Earnings downgrades are likely, UBS has EPS growth of 7% in ’25E. as US GDP growth slows from 1.8% YoY in Q2 to 0.9% YoY in Q4. iii) The US Fed doesn’t restart a cutting cycle until September 17th. Hence, weak economic data will likely be taken as bad news. iv) August and September are the worst two months of the year. UBS would be surprised if the consolidation phase brought more than 5% downside. UBS would buy into this and raise the year-end forecast to 960 MSCI World AC = c4% upside (from 940 MSCI AC World) and introduce a year-end target of 1000 MSCI World for end-2026 = 8% upside. What is supportive, outside of a tariff discussion? i) fiscal and monetary policy easing outside the US has resulted in a downgrade to global GDP of just 10bp since April 1st for 2025 and 2026, when taken together. ii) US wage growth is very well behaved. This not only helps profit margins but, more importantly, market expectations for inflation, allows the Fed to cut by 1% by year-end starting in September iii) some exceptionalism in the P/E is normal at this stage of the cycle. If the relationship between credit spreads and P/E stays in its post-’22 range, then the ‘fair value’ P/E is c23x (using 12-month forward) = c6,600 S&P 500. Perceived productivity improvements from Gen AI only add to this: iv) historically, if markets just avoid a bear market (as was the case in mid-April), then 1 year later they are up an average of 34%, cf to 25% so far. From here UBS are reasonably relaxed about the impact of tariffs because: i) as above, the policy response is offsetting much of the hit to global GDP; ii) the fiscal boost from the ‘BBB’ adds c0.45% to GDP over the next 6 quarters and offsets about around half the US GDP hit from tariffs – the CBO estimates that the revenue raised from tariffs covers 85% of the cost of the BBB; iii) the US is only 16% of global trade; iv) Some other regions are reducing trade barriers with each other. We think that there are good logical reasons to expect no major hike in tariffs from here. UBS up the probability of a Bubble scenario to 25% for end-2026 and acknowledge a risk that this is too low. UBS has 6 out of 7 preconditions for a bubble. The only major one missing is benign monetary conditions, but if UBS forecasts for the Fed are borne out, then UBS get all 7. Into bubbles, historically 30-43% of market cap has traded up to a P/E of 45x -72x on a 10-year bond yield of 5.5% to 6.4%. We are far removed from this with the Mag 6 (excl Tesla) on a P/E of 33.5x 12-month trailing. Into a bubble,MSCI AC World rises by c20%, at least. The ‘justification’ for a bubble would be either Gen AI being perceived to increase productivity by 2% from 2028 (which gives c 20% upside by end-’26 in the Equity Risk Premium model) or corporate balances being less risky than normal against government balance sheets. |
| Australian Banks Macquarie research updated Bank research. Offshore investors have taken over from Super in buying banks: Over the last 6-months the primary source of net-buying of banks has shifted from domestic institutions (largely superannuation funds) to offshore investors. Macquarie thinks this reflects a few factors including: (1) super funds already implementing bank ‘overlays’ to manage underweights, (2) super allocations to Australian equities peaking in Sep-24, (3) offshore investors looking for tariff safe-havens and betting on a weaker USD. Looking forward Macquarie see several key risks to these positioning trends which have supported banks including; (1) super funds turning negative on the bank sector, (2) a return of unlisted activity and increased preference for offshore investments seeing allocation to Australian equities fall, (3) US regulatory easing unlocking billions in capital returns, seeing global financial investors fund US bank buying with Australian banks, where capital returns have already played out. This combined with downside risk to FY25E/FY26E earnings should drive banks underperform. • Following the flows: Bank share registry data suggests offshore and domestic investors remain buyers of the banks in the Jun-25 quarter. With international institutions buying ~$2.7bn of bank shares, the highest since Mar-20, while domestic institutions bought ~$700m. International institutions largely bought CBA (~$2.2bn), while Domestic institutions bought NAB (~$600m) and WBC (~$300m). . • Macquarie proprietary flows data: Our proprietary data supports this with offshore investors continuing to buy financials since March, with strong flows into CBA and NAB in particularly. • US ADR volumes at record high: May saw record traded volume (and value) in US listed ADRs of ANZ, CBA and NAB, with a combined A$1.5bn traded. This saw ADR volumes a record 7-9% share of ASX volumes. While difficult to confirm, we think much of this flow was driven by currency views aiming to take advantage of a depreciating US Dollar and end of ‘American Exceptionalism’. • Who else has been buying? Retail investors continued to be net sellers of banks in the June quarter, with selling activity in CBA, NAB and WBC, but buying of ANZ. Domestic investors remain overweight NAB, and increased their positions for the first time since Jun-24, they remain neutral WBC. International investors remain underweight CBA, but their underweight position is now at a record low. Short interest decreased across all banks, except BEN and JDO, with CBA’s short interest now broadly in-line with major bank peers |
| Resources Morgans research updated on resources BHP We have a BUY recommendation on BHP, with a A$43.90 target price (SOTP DCF). The group pairs sector-leading balance sheet strength with exposure to copper and potash growth that is not fully captured in consensus numbers. A 5%+ forward dividend yield, underpinned by robust earnings strength, supports total shareholder return. That said, softer near-term iron ore pricing and a healthy valuation cap immediate upside, so we favour building positions on market pullbacks. Longer term, sustained free cash flow, rising copper output and further potash expansion should unlock further value. Key risk to our call is primarily global/regional macro driven (metal prices), and secondly execution on potash and copper growth. Rio Tinto RIO is under a HOLD recommendation, with a A$109ps target price (SOTP DCF). The miner’s strong balance sheet and diversified earnings base support an abovemarket forward dividend yield that we see as underpinned for the next 12 months. However, Pilbara execution risks around volumes, PB fines quality and unit costs, plus geopolitical overhangs in Mongolia, Guinea and Canada, weigh on near-term sentiment. In addition, non-growth capex looks to have peaked at a high watermark, yet its elevated run-rate threatens medium-term free cash flow and dividend capacity, particularly as RIO ramps up investment in lithium. With a share price near fair value we await clearer operational delivery before turning more constructive. Key risk to our call remains sensitive to execution performance on critical mine replacement projects in the Pilbara; political/country risk in Mongolia, Guinea and Canada (US tariffs); and global macro growth risk (metal demand drivers). South 32 We have S32 on a BUY, with a A$4.10 target price (DCF SOTP). The company offers true commodity diversity, with a high weighting to base metals, without the iron ore cyclicality that dominates its larger diversified mining peers. S32 trades at a clear discount to NAV and historical EV/EBITDA multiples, presenting compelling value upside. While near-term catalysts are thin, and next month’s Mozal impairment could weigh on sentiment, we see this as an incremental negative rather than thesis-changing. We expect patient investors will be paid to wait via a sturdy balance sheet and sustainable dividends. Key risks to our call are global/regional growth (base metal demand drivers), and execution on Hermosa project developments. Woodside We have WDS on a BUY recommendation. Operational discipline continues to shine, with unit costs consistently beating guidance and peers in recent periods, underpinning a robust 6-7% forward dividend yield. The planned partial selldown of Louisiana LNG in 2H25 should crystallise value, further delever the balance sheet and fund organic growth, providing a clear near-term catalyst path. Trading on a healthy discount to smaller-peer STO in P/NAV and EV/EBITDAX, the stock offers compelling upside to our A$31.00 target price (SOTP DCF). While oil price volatility remains a risk, WDS’s tier-one assets and proven capital discipline leave us high-conviction buyers. Key risks to our call are execution risk on LALNG development, Scarborough construction and oil/LNG market outlook. |
| Lend Lease (LLC) Citigroup note today summarised We note the announcement from LLC this morning around the win of a >A$2.5bn gross end value development project at 175 Liverpool Street in Sydney. LLC plans to build 300 luxury apartments and 2,000sqm of retail space. We have previously highlighted new project wins as catalysts for LLC, and therefore see today’s announcement as a positive, as it helps provide visibility for future development earnings. The project is targeted to start in FY27 and complete in CY30, and LLC expects to announce a 50% selldown in the coming weeks to a capital partner. Below, we also highlight a range of other projects that LLC is working on that could possibly provide future earnings visibility, and a win of any of these could be a potential catalyst, in our view. We retain Buy on LLC. Based on our research of various articles, we highlight a range of potential future projects that could contribute to LLC’s development pipeline and earnings into the future. • Hunter Street Overstation development – LLC, MGR and Justin Hemmes backed a hospitality group (Merivale), which have formed the Metropolis consortium together, are close to winning the project as one of the rival bidders, Brookfield, has pulled itself out of the process. • Athletes Village development – LLC’s Brisbane Showgrounds had been announced as the location for the 2032 Brisbane Olympics Athletes Village, which is expected to accommodate more than 10,000 athletes, and will become residential post the Olympics. • Blackwattle Bay development – LLC and 2 competitors were shortlisted last year for the Blackwattle Bay redevelopment in Sydney, which is expected to have 1,100 homes. • Arden Central Precinct in Victoria – LLC and 3 competitors have been shortlisted by Development Victoria in a multi-stage process to select a development partner for the Arden Central precinct. |
| Exchange Traded Funds (ETF) ETFs are a collection of investments. They usually pay an income payment either half-yearly or yearly. Today, most ETFs trade ex-dividend, which means they trade without the expected dividend, which is paid later in the month. Payment dates are as follows; Blackrock I Shares 11 July 2025 Betashares 16 July 2025 Global X 16 July 2025 Vanguard 16 July 2025 Fidelity 18 July 2025 Magellan 21 July 2025 Van Eck 25 July 2025 The distribution can vary each year (more than a dividend from shares) as it can include any realised capital gain sold within the ETF over the period. This year, we are seeing some ETFs pay a higher-than-normal distribution. These include; IAA (Asia) distribution yield is 4.1%. RBTZ (Global Robotics) distribution yield is 4.01% SEMI (Global Semiconductors) distribution yield is 7.09%. |
| Financial Planning Snippets PLEASE BE VIGILANT regarding financial scamming. If anyone is requesting financial information from you (via phone, email, text, or social media), please contact us first or ask them for their ABN. Super Guarantee (SGC) for employees increases to 12% from 1/7/25 Concessional super contributions maximum of $30k Commonwealth Seniors Health Care card has seen the income limit increase to $158,440 (couple) $99,025 (single). If you are of Age Pension age and don’t have the card, please let us know. |
| Other Stories RBA are recommending the removal of surcharge fees, which will be a good saving; however, it might remove the benefits from the reward points programs. Therefore may be better to use your points (if you have them) sooner rather than later. |
| Broker Target Price changes Target Prices should be viewed as a compass (the general direction) rather than a GPS destination. Ord Minnett South 32 (S32) decreased from $4.10 to $3.90 Morgans BHP increased from $43.70 (highest broker) to $43.90 (still highest broker) Santos (STO) decreased from $6.90 (lowest broker) to $6.80 (still lowest broker) S32 decreased from $4.30 (highest broker) to $4.10 (still highest broker) Telstra (TLS) increased from $4 (lowest broker) to $4.70 Woodside (WDS) increased from $30.10 (highest broker) to $31 (still highest broker) Morgan Stanley Computershare (CPU) decreased from $34.60 (lowest broker) to $33.70 (still lowest broker) Macquarie Goodman Group (GMG) decreased from $36.06 to $35.24 Lend Lease (LLC) decreased from $7.79 (highest broker) to $7.23 (still highest broker) S32 decreased from $3.60 to $3.40 Orora (ORA) decreased from $2.39 to $2.36 Bell Potter/Citigroup NextDC (NXT) decreased from $18.70 to $18.35 UBS Tracking changes for 2025 Upgrades 168 Downgrades 170 |
| Core Watchlist Index (changes since last Not So) The CORE Watchlist is a collection of 30 Australian shares, predominantly “Blue Chip”. We obtain research from up to 6 brokers on each share. Each broker provides a Target Price (value in 12 months) which then provides us with an average for each stock. We then compare that average to the current price as a percentage. IE Macquarie price $176.95 Av. Target Price $205.96= 85.9% (meaning 14.1% upside over next 12 months) + income 4.35% (including franking). To get the CORE Index we take the average across the 30 stocks. This provides us with a market average as there are up to 80 teams of analysts providing the research and target prices. The CORE Watchlist stocks represent more than 55% of the ASX 200 and so provide us with a good indicator of the market value. When it’s at 100% then the market is fully priced. We have seen that when the index is below 90%, then it’s good buying, but that doesn’t happen very often. Should you have any questions, please let me know. The Core index decreased from 98.41% to 97.78%. If we removed the 4 banks, the index falls to 93.37% Overall Earnings Per Share (EPS) FY25 decreased from 1.13% to 1.06% new low of 0.85% last week. FY26 increased from 8.17% to 8.19% Most expensive – CBA 162.5% (176.5% highest ever). Least expensive – NextDC (NXT) 71.9% The CORE Watchlist has 10 (10) stocks trading above 100%; they are; ANZ BXB CBA CPU JBH MQG NAB TLS WBC WES, lowest number ever is 0, highest is 14. While 7 (5) is trading below 85% (the highest is 18, and the lowest is one). AMC CSL LLC NXT RMD S32 SEK (Figures in brackets are last Not So). STOCKS TRADING BELOW ALL BROKER FORECASTS ARE AS FOLLOWS; (it has been a handy indicator in the past). 10 out of the 30 CORE stocks are trading below the lowest broker target price. Highest 24. Lowest is 2. ALL current price $66.60 Broker range $70 to $76 AMC current price $14.48 Broker range $14.50 to $20.31 BHP current price $39.11 Broker range $39.50 to $48.70 COL current price $20.39 Broker range $20.95 to 23.50 CSL current price $247.45 Broker range $310 to $360.30 LLC current price $5.09 Broker range $5.85 to $7.79 NXT current price $14.08 Broker range $18.00 to $21.20 RMD current price $38.90 Broker range $44.07 to $48 SEK current price $24.00 Broker range $25.80 to $30.10 WOW current price $31.11 Broker range $31.80 to $36 Added AMC COL RMD Removed ORI |
| Banking Index (changes since last Not So) Like the CORE Watchlist index, the Banking index is the four major banks’ average target price based on research from up to 6 brokers. The percentage below 100% is the potential upside over the next 12 months (not including income). If at or over 100%, then this indicates the Banks are fully priced. The banking index increased from 127.8% to 128.8%. Based on today’s bank prices, the table below shows the estimated dividends (c) and yield. PLUS FRANKING. FY 25 % FY 26 % FY27 % ANZ 164.00 5.44% 162.00 5.38% 162.2 5.39% CBA 484.20 2.73% 499.60 2.73% 515.4 2.90% NAB 170.00 4.44% 170.20 4.45% 165.4 4.32% WBC 152.00 4.56% 155.20 4.66% 148.6 4.46% MQG 650.00 2.92% 739.50 3.32% 801.25 3.60% CBA yield is below all the others. Dividend expectations for BHP and RIO. The forecasts below are for the full year. Plus franking. Please note RIO is Calendar Year (CY). Cents per share (CPS). FY25 % FY26 % FY27 % BHP 153.83 3.93% 155.50 3.98% 167.00 4.27% RIO 581.17 5.26% 582.83 5.27% 606.17 5.48% |
| Other Indicators (changes since last Not So) US VIX (Fear) Index increased from 16.17 to 17.59. Just above normal levels. Normal is 10-17. Iron Ore increased from $95.85 to $98.95. The average expectation for 2025 is $99.1. Copper decreased from $5.64 to $5.52. New ALL TIME HIGH of $5.8955 on July 8, blowing past the previous high of $5.26. The 50% Copper tariffs were the cause Gold increased from $3335 to $3344. ATH $3509.90. AUD/USD decreased from 65.58c to 65.26c. Asian markets – MIXED. US 10-year Bonds increased from 4.35% to 4.48%. 2-year rate 3.95%. 30 year rate back above 5% at 5.02%. German 10 year Bonds increased from 2.63% to 2.72%. Japanese 10 year Bonds increased from 1.50% to 1.57%. Highest for 16 years was 1.59%. Aussie Bonds 10 year Bonds increased from 4.29% to 4.41%. Recent high 4.95%. Oil prices decreased from $68.46 to $66.74. Tungsten—China price remained at $433mtu. The European price range increased from $440-$485 to $450-$485mtu (highest price for 12 years). |
| This week & next week Last, “Not So” opened in 7 Aust states (excl Tas), 6 US states (California, Massachusetts, New Jersey Colorado, South Carolina, Virginia), Bulgaria, Sweden, NZ, India, Chile and Israel. This week – In Office – July reviews Next week – In Office- July reviews (except Friday) PO BOX 149 Deniliquin NSW 2710 125 End St Deniliquin NSW 2710 Ph. 03 58950100 Fax 03 58950101 Mobile 0412113524 scottm@provincialwealth.com.au kevinh@provincialwealth.com.au chrisp@provincialwealth.com.au maddyl@provincialwealth.com.au |
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