Corporate giants drag down ASX

The benchmark S&P/ASX200 index closed 0.55 per cent lower at 7485.7, while the All Ordinaries Index dropped 0.37 per cent to 7783.8.

CommSec analyst Steve Daghlian noted it was the second consecutive day of declines and a few companies were making all the difference.

“The big one is BHP, which is ex-dividend today … the fact that it’s paying out such a big dividend, the biggest ever, that’s why it’s down so much,” Mr Daghlian said.

“The dividend is about 6 per cent of its share price … couple that up with a 6 per cent drop in the iron ore price last night.”

BHP fell 6.86 per cent to $41.94 and Rio Tinto dipped 0.68 per cent to $108.65, but Fortescue lifted 1.87 per cent to $20.71, with its “mammoth dividend not out of the equation until October”, OMG chief executive Ivan Tchourilov said.

Mr Tchourilov said it was poor timing for BHP that China’s manufacturing PMI, which tracks manufacturing activity, came in below estimates due to the spread of the Delta variant, as well as government directives to reduce steel production.

“BHP has pared all of this year’s gains, and is now back around December 2020’s price range,” he said.

Mr Daghlian said other big companies trading ex-dividend included CSL, Woolworths, Perpetual and Nib.

“All of those played a reasonable part in keeping the market negative,” he said.

“BHP on its own is wiping out about 30 points from the ASX200.”

CSL was down 1.83 per cent to $303.44, Woolworths retreated 1.53 per cent to $40.47, Perpetual backtracked 2.09 per cent to $40.79 and Nib slid 2.8 per cent to $6.59.

Mr Tchourilov said another big weight was brewing products company United Malt Group, which fell 6.14 per cent to $4.13 “after serving up a trading update and guidance without much froth”.

“The guidance comments were reported after yesterday’s market close and weren’t particularly cheery about the impacts of lockdown on the Australian and Asian markets, as well as noting two significant items impacting their expected earnings,” he said.

“Bad debt provisions and a storage contractor in administration took the hop out of UMG’s step, who have otherwise led a spirited recovery from Covid so far.

“Shareholders and the wider public are all likely thinking the same thing – the pubs can’t open soon enough.”

Flight Centre added 0.53 per cent to $16.99 after announcing it planned to continue its expansion in the Asian corporate travel sector via a joint venture with Tokyo-based NSF Engagement Corporation.

“Japan is a key corporate market because of its size and importance within the global economy as a business hub for multinational companies,” managing director Graham Turner said.

The big four banks were mixed, with ANZ easing 0.25 per cent to $27.91, Commonwealth Bank putting on 0.37 per cent to $101.37, National Australia Bank rising 0.53 per cent to $28.49 and Westpac shedding 0.3 per cent to $26.03.

There were glimmers of green in the tech and energy sectors, with NEXTDC rising 2.7 per cent to $13.70 and Contact Energy gaining 2.19 per cent to $7.95.

In economic news, Australia notched up a record trade surplus of $12.117bn in July.

ANZ Research issued a commodity update, saying it believed gold was undervalued and maintained its short term price target of $US1900 an ounce, up from about $US1814/oz currently.

“The conditions under which gold can flourish are diminishing quickly,” the bank said.

“Big moves in the USD appear behind us, while the bond market has stabilised.

“Inflation expectation is the one factor that can spark a final rally in gold prices.”

Among gold miners, Evolution gave up 2.75 per cent to $3.89, while Newcrest slipped 1.5 per cent to $24.74.

The Aussie dollar was fetching 73.8 US cents, 53.5 British pence and 62.3 Euro cents in afternoon trade.

Originally published as Australian sharemarket in the red as BHP, Woolies, CSL and others trade ex-dividend