Top traded counters in June 2023 July 13, 2023

Top traded counters in June 2023

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At a glance:

  • FOMC skipped the rate hike
  • PBOC cut its 7-day reverse repo rate
  • All 23 US banks pass the Fed’s stress test
  • Attempted mutiny by Wagner Group
  • NIO entered into a share subscription agreement with CYVN Holdings


The Nasdaq and S&P 500 have been on a bullish run for 4 months, while the Dow Jones has recouped its losses from last month.

NASDAQ DOW JONES S&P 500
Month Open 12,944.46 32,929.85 4,183.03
Month Close 13,787.92 34,407.61 4,450.38
Monthly return 6.52% 4.49% 6.39%


At the last FOMC meeting, the committee chose to hold back the rate hike which was highly anticipated by the market, keeping the borrowing rate within the 5-5.25% range.1 The reason for skipping it this time was to give the committee time to assess the impact of the past 10 rate hikes, as the full effect of previous tightening measures has yet to be felt. According to the meeting’s dot plot, the committee has set its sights on a median rate of approximately 5.6%, implying the possibility of two more rate hikes for the year. Furthermore, recent data indicates that the labour market remains strong, giving the Fed more room for rate hikes to crush inflation. With the endpoint of higher interest rates, there is an increased risk of the central bank tightening monetary policy excessively.

With the US central bank maintaining its hawkish stance, the second largest economy surprised the market when it turned dovish. The People’s Bank of China, or PBOC, surprised markets by cutting its 7-day reverse repo rate, the first reduction since August last year2. The rate cut aims to boost liquidity in the banking system and make short-term loans cheaper, indicating the PBOC’s concerns over the recovery of China’s economy. Analysts expect further cuts to other key interest rates, including the medium-term lending rate and the benchmark Loan Prime Rate. China’s economic recovery has shown signs of weakening, with deflationary risks and low inflation levels, contrasting with rising prices in other major economies. Factory activity has contracted, exports and imports have declined, and youth unemployment has reached a historic high. The PBOC’s rate cut suggests an imminent policy pivot towards further monetary policy support to address these challenges.

Towards the end of June 2023, the Fed released the results of its annual stress tests on the banks. These tests were implemented after the 2007-2009 financial crisis to ensure banks can withstand severe economic downturns3. Initially, large banks struggled to pass the tests, but years of practice and increased transparency have made banks more adept. The tests assess whether banks can maintain a minimum capital ratio and determine the size of their stress capital buffer. The tests for 2023 were expected to be more challenging due to a healthier economic baseline, with potential spikes in unemployment and drops in the size of the economy. The tests also focused on stresses in commercial real estate and corporate debt, as well as a global market shock scenario.

The Fed announced that all 23 US banks subjected to the annual stress test successfully weathered a severe recession scenario while continuing to provide credit to the economy4. Despite projected losses of US$541 billion, the banks maintained minimum capital levels. Credit card loans were identified as the most problematic, with Goldman Sachs experiencing the highest loss rate. Regional banks with greater exposure to commercial real estate and credit-card loans saw larger hits to their capital levels. While upcoming regulations and potential recession risks may impact capital plans, the stress test results indicate the strength and resilience of the US banking system, though regulators remain cautious about potential risks.

The Russia-Ukraine war had an interesting turn of events. There was an attempted mutiny by mercenary chief, Yevgeny Prigozhin and his private militia, the Wagner Group5. The mutiny has raised concerns about President Vladimir Putin’s hold on power in Russia. The Wagner Group seized control of the city of Rostov and advanced towards Moscow before abruptly ending the rebellion and turning back. These events have exposed what some see as “cracks” in Moscow’s political stability. The agreement brokered by Belarusian President Alexander Lukashenko is expected to result in the dissolution of the Wagner Group and the integration of some fighters into the Russian armed forces. Overall, the mutiny represents a significant challenge to Putin’s long-standing rule in Russia.


Here are some ETFs for your consideration:


Invesco Aerospace & Defense ETF (NYSE-ARCA: PPA.US)

PPA is an ETF-based on the SPADE® Defense Index6. The ETF will normally invest at least 90% of its total assets in common stocks. The index is mainly invested in the development, manufacturing, operations and support of the US defense, homeland security and aerospace operations. PPA commenced on 26 Oct 2005, with an expense ratio of 0.58%. PPA’s 10 year annualised return as of 31 March 2023 is 14.51%.

PPA opened at US$77.89 and gained 8.45% to close at US$84.47 in June 2023.

Technical analysis

Top traded counters in June 2023

Status: Slightly bullish

Support: 81.80 – 82.36

Resistance: 84.20

It is slightly bullish as the price broke above previous supply levels. However, the price will have to continue to sustain above 82.00 for more bullishness.


SPDR® S&P® Aerospace & Defense ETF (NYSE-ARCA: XAR.US)

XAR is an ETF that seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Aerospace & Defense Select Industry® Index7. XAR’s top 3 holdings consist of Transdigm Group Inc (NYSE:TDG), BWX Technologies Inc (NYSE: BWXT) and Heico Corporation (NYSE: HEI), and it seeks to provide exposure to the Aerospace and Defence industry. XAR commenced on 28 Sep 2011 with an expense ratio of 0.35%. XAR’s 10-year annualised return as of 31 March 2023 is 13.97%.

XAR opened at US$ 111.05 and rose by 9.44% to close at US$121.53 in June 2023.

Technical analysis

Top traded counters in June 2023

Status: Neutral

Support: 116.85 – 117.00

Resistance: Psychological level at 128.00

Range-bound


Here are some of the more popular US stocks – not ranked in any order – traded by POEMS customers in June 2023.

NIO Inc (NYSE: NIO)

NIO reported earnings along with poor guidance in June 2023. EPS of -RMB2.51 (-US$0.36) was better than estimates of -RMB2.63 (- US$0.37), while revenue was reported at RMB10.68 billion (US$1.53 billion), lower than estimates of RMB11.93 billion (US$1.71 billion).

For the next quarter of 2023, the firm expects deliveries of 23,000-25,000 vehicles, which represent a drop of 0.2-8.2% from the same quarter in 2022. Revenues are expected to be RMB8.742 billion (US$1.273 billion) to RMB9.37 billion (US$1.364 billion), which represent a drop of 9-15.1% from the same quarter in 2022.8

Later in the month of June 2023, the firm also entered a share subscription agreement with CYVN Holdings, to subscribe to 84.7 million newly issued Class A shares at US$8.72 per share, which amounts to a total investment of US$738.5 million.9

In June 2023, NIO opened at US$7.24 and gained 33.84% to close at US$ 9.69.

Technical analysis

Top traded counters in June 2023

Status: Neutral

Support: 7.45 – 8.00

Resistance: 10.40

Range-bound


Adobe Inc (NASDAQ: ADBE)

ADBE reported earnings that beat estimates in June 2023. The EPS of US$3.91 exceeded estimates of US$3.79. Revenue was reported at US$4.82 billion, higher than estimates of US$4.77 billion. The better-than-expected results were largely contributed by the digital media business, which rose by 10% to US$3.51 billion.

The firm also raised its adjusted EPS full-year guidance from US$15.30 – US$15.60 to US$15.65-US$15.75. For the next quarter 2023, the firm’s expected adjusted EPS is in the range of US$3.95-US$4.00 and revenue is in the range of US$4.83 billion-US$4.87.10

Later in the month of June 2023, the firm faced an issue with European antitrust regulators over a US$20 billion buyout deal for cloud-based designer platform Figma as the action sparked anti-competition concerns. The EU authorities plan to push forward the investigation which could last for months and may ultimately stop the deal altogether.11

In June 2023, ADBE opened at US$412.29 and gained 18.6% to close at US$488.99.

Referring to the Phillip Securities Research report dated 21 June 2023, the recommendation for ADBE is to Reduce.

Technical analysis

Top traded counters in June 2023

Status: Neutral

Support: 443.50-455.62

Resistance: 518.60-540.00

Range-bound


Accenture PLC (NYSE: ACN)

ACN reported earnings that beat estimates in June 2023. EPS was reported at US$3.19, beating estimates of US$3.01, a 14.33% increase from the same quarter from a year ago. Revenue of US$16.6 billion was also higher than estimates of US$16.49 billion, a 2.7% increase from the same quarter a year ago.12

For the third-quarter in fiscal 2023, the firm expects revenues to be in the range of US$15.75-US$16.35 billion versus estimates of US$16.4 billion. The firm also raised the EPS full-year guidance from US$10.84-US$11.06 to US$11.52-US$11.63 while estimates expect US$11.58.13

In June 2023, ACN opened at US$305.73 and gained 0.93% to close at US$308.58.

Technical analysis

Top traded counters in June 2023

Status: Neutral

Support: 293.15-298.00

Resistance: 302.75

Minor range-bound


FedEx Corporation (NYSE: FDX)

FDX reported earnings in June 2023. EPS of US$3.41 beat estimates of US$2.73 , but revenue of US$22.17 billion missed estimates of US$22.74 billion, representing a 6% drop from US$23.6 billion in the same quarter from a year ago.

The better-than-estimated EPS was mostly contributed by the firm’s action on cost-cutting measures to counter weakened demand. These cost-cutting measures have helped the firm save US$1.2 billion on total enterprise costs year-over-year. The firm also said that in the next quarter, it expects to save another US$50 million and emphasises that it will make more than US$4 billion in cost reductions by the end of fiscal 2025.

The firm also raised its EPS for fiscal 2023 from US$13-US$14 to US$14.60-US$ 15.20 versus estimates of US$13.56.14 In June 2023, FDX opened at US$216.29 and gained 14.61% to close at US$247.90.

Technical analysis

Top traded counters in June 2023

Status: Bullish

Support: 236.00

Resistance: 265.00-267.00

It is bullish into the previous supply level. The price will have to sustain itself above 245.80 for more of an up move.


Oracle Corporation (NYSE: ORCL)

ORCL reported earnings that beat estimates in June 2023. The EPS and revenue of US$1.67 and US$13.84 billion were higher than estimates of US$1.58 and US$13.74 billion respectively. Revenue represented a 17% growth from the same quarter a year ago.

The better-than-estimated earnings were mostly contributed by the firm’s cloud services and licence support, which increased by 23% to US$9.37 billion. For the next quarter, the firm expects an adjusted EPS of US$1.12 to US$1.16 and a revenue growth of 8-10%, while forecasts are for US$1.14 in adjusted EPS on US$12.34 billion in revenue, which implies 7.8% growth.15

In June 2023, ORCL opened at US$104.88 and gained 13.55% to close at US$119.09.

Technical analysis

Top traded counters in June 2023

Status: Neutral

Support: 104.40 – 106.35

Resistance: 128.03

Range-bound


CONCLUSION

The recent developments in central bank policies and geopolitical events have captured attention in the financial landscape. The attempted mutiny by the Wagner Group in Russia has raised questions about President Putin’s hold on power and the political stability in Moscow. The Fed’s decision to hold back on a rate hike, while maintaining a hawkish stance for future hikes, has sparked debates among economists. Critics argue that the central bank may be making a policy mistake by not responding to positive economic reports and potentially tightening monetary policy excessively. On the other hand, the PBOC surprised the market by cutting its reverse repo rate, reflecting concerns about China’s economic recovery, signalling a shift towards further monetary policy support. These developments highlight the ongoing dynamics shaping global financial markets and geopolitical landscape. In the event that the Fed does overtighten, the economy would likely enter a recession.


Bloomberg analysts’ recommendations

The table below shows the consensus ratings and average ratings of all analysts updated on Bloomberg in the last 12 months. Consensus ratings have been computed by standardising analysts’ ratings from a scale of 1 (Strong Sell) to 5 (Strong Buy). The table also shows a number of analysts’ recommendations to buy, hold or sell the stocks, as well as their average target prices.

Security Consensus Rating BUY HOLD SELL 12 Mth Target Price (US$)
Nio Inc (NYSE: NIO) 4.21 22 (64.7%) 11 (32.4%) 1 (2.9%) 10.60
Accenture PLC (NYSE: ACN) 4.15 17 (63%) 9 (33.3%) 1 (3.7%) 332.85
FedEx Corporation (NYSE: FDX) 4.09 19 (54.3%) 16 (45.7%) 0 255.33
Adobe Inc (NASDAQ: ADBE) 4.05 21 (53.8%) 18 (46.2%) 0 540.84
Oracle Corporation (NYSE: ORCL) 3.59 12 (35.3%) 20 (58.8%) 2 (5.9%) 127.63



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Top traded counters in June 2023


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