Investors should prepare for significant share price volatility as the February reporting season commences next week, according to Morningstar market strategist Lochlan Halloway. The August reporting season saw unusually large price movements, with stocks in Morningstar’s ASX coverage experiencing an average swing of approximately 6 per cent on results days. Around a quarter of these stocks saw swings exceeding 10 per cent.
Notably, blue-chip companies such as CSL, James Hardie, and Woolworths experienced outsized sell-offs, a phenomenon more commonly associated with smaller capitalisation stocks. Morningstar provides independent investment research. Morningstar analysts collect and analyse financial data on companies, investments, and markets.
Halloway suggests that the spike in volatility could be attributed to algorithmic trading and index flows. Regardless of the underlying causes, he cautioned investors to anticipate similarly sharp market reactions during the upcoming reporting period. He also noted that for investors with a long-term focus, such price swings can present opportunities, as market prices often deviate from fundamental values during reporting season’s intensity.
In the basic materials sector, Morningstar analyst Jon Mills noted the strength of iron ore, currently priced around $US105 a tonne. However, he anticipates that declining Chinese steel production coupled with increasing supply, particularly from Simandou and Vale, are likely to exert downward pressure on prices over time. Morningstar projects a mid-cycle price of approximately $US75 from 2030. Mills added that investors should closely monitor the impact of China’s centralised iron ore buyer, CMRG, while acknowledging that broader supply-demand dynamics will likely be the primary driver.
