Investing In Australian And Foreign Stocks

Determine the percentage increase or decrease in each of your stocks

List of Stocks

My portfolio comprises four stocks which have been taken from different industries such as mining, aviation, etc. In the first week, my portfolio earned 0.12% which is lower than the return earned by some of the portfolios of other students. However, my portfolio hit back with the outstanding return of 1.18% in the second week. In this week, my portfolio performed better than others and the main reason for this outstanding performance was diversification of my portfolio. In the third and fourth week, my portfolio incurred losses with the negative return of -2.31% and -2.85% respectively. The other portfolios of the class also incurred losses in these weeks. In the last week, my portfolio ended up with 0.54% return which was better than most of the other portfolios in the class.      

BHP Billiton Vs ASX 200

Figure 1: BHP Billiton Vs ASX 200

From the chart presented above, it could be observed that there the trend in BHP’s stock is largely independent of the trend in ASX 200 (market index). This is due to wide spread business of the company in many countries across the globe. However, the BHP’s stock is still affected by the moves in the market index (ASX 200) but the stock has capacity to play on its own that is without waiting from the market to move.

Qantas Airways Limited Vs ASX 200

Figure 2: Qantas Airways Limited Vs ASX 200

From the chart presented above, it could be observed that the stock is moving upward and downward without the market index moving in the same direction. In the month of July, stock moved upward but the market was stagnant with minor upside movement.  Further, in the month of December, the stock went down, but the market was again stagnant with some minor upside movement. This shows that the movements in the stock’s price are not purely driven by the Australian stock market. 

CYBG PLC Vs FTSE 100

Figure 3: CYBG PLC Vs FTSE 100

It could be observed that the stock’s price went down in the month of August with overall market being down in the UK as shown by the downward trend in FTSE 100. From the month of October, the market conditions started improving as shown by the upward trend in FTSE 100 and with the improvement in the overall market, the stock also showed rising trend. The continued with ups and downs in tandem with FTSE 100 till the month of December. This shows that the market price of the stock is driven to a large extent by the local market conditions in the UK.   

Compare your portfolio’s performance to other students

Iron Mountain Incorporated Vs FTSE 100

Figure 4: Iron Mountain Incorporated Vs FTSE 100

From the month of July to the end of August, the stock was falling down however FTSE 100 could be seen to be moving slightly upside. In the month of September, the stock showed rising trend but the FTSE 100 showed declining. However, from October to December, the stock showed same trend as that shown by FTSE 100. This implies that the price of stock is affected to some extent by the local market conditions.

CYBG Vs IRON MOUNTAIN INCORPORATED

Figure 5: CYBG Vs IRON MOUNTAIN INCORPORATED

The chart shows that Iron Mountain was increasing at higher speed compared to CYBG in the months of August and September. In the month of November, both the stocks increased at similar pace but from the month of December Iron Mountain started falling down severely. CYBG also fell down in later part of December but it was not that severe.  Therefore, it could be interpreted that CYBG and Iron Mountain are positively correlated with each other.  

CYBG Vs ASX 200

Figure 6: CYBG Vs ASX 200

It could be observed that CYBG was down from July to September. During this period, the Australian stock market was also down as depicted from the downward slope of ASX 200. From the month of October, the ASX 200 started rising and it continued till the end of December with minor downfalls. Somewhat similar trend could be observed that the stock of CYBG. This implies that the stock price of CYBG (foreign stock-UK) is affected to a great extent by the Australian Stock Market.

Iron Mountain Incorporated Vs ASX 200

The stock is showing volatility in the months of July and August making several ups and downs. However, the ASX 200 started rising after mid July and it continued till mid August. The ASX 200 went down from mid August and it continued till the start of October. Iron Mountain was severely down at the end of August but it recovered awesomely and rose sharply in the first week of August. It could be observed the market (ASX 200) was down but the stock kept rising. In the month of November, market also got on the rising trend and then after that market continued with the same trend but the stock fell down severely in the month of December. Thus, it reflects that the stock’s price is largely independent of the movements in ASX 200.         

Determine whether Australia-based MNCs is driven by the Australian market

BHP Billiton operates its business in many counties across the globe thus it is exposed to foreign currency risk against many currencies. However, the most of sales of the company is realized in US dollar so it can be interpreted to it is most exposed to US dollar (BHP Billiton, 2017).

Figure 8: BHP Stock and Exchange Risk

From the chart presented above, it could be observed that the USD appreciated against AUD in the first and second week of December. The appreciation in USD against AUD affects receivables of the company positively (Prochazka, 2017). The impact of appreciation in exchange rates could be seen on the stock price in the week-3 and 4 December. It was observed that on 29^th December, the USD depreciated by 1.26% which caused the percentage change in stock price to go down from 5.02% to 1.62%. From this analysis, it could be articulated that there exists positively relationship between the exchange risk and the price of stock.   

Qantas provides passenger and freight transport services in many countries internationally apart from Australia so naturally the company is exposed to the risk of foreign current. The most of the sales of the company is realized in US dollar so it could be interpreted that the company is most exposed to US dollar.

The impact of change in the currency exchange rates on Qantas could be observed to be more severe than BHP Billiton. The stock’s price has been highly volatile with decreasing trend over the period. The depreciation of USD against the AUD in the later part of December has affected the price of stock more badly.  

CYBG Vs Exchange Rate GBP to AUD

Figure 10: CYBG Stock and Exchange Rate GBP to AUD

CYBG is basically a UK based company; therefore the exchange rate between GBP and AUD has been taken for analysis. On 01 December 2017, the exchange between GBP and AUD showed positive movement. On this date, the stock of CYBG could also be observed to be showing movement in the same direction. After that, the exchange rate showed downward moves, the stock price also fell down. Further, same trend between the stock price and exchange rate was observed towards the end of the portfolio period. This implies that a positive relationship exists between the stock price of CYBG and exchange rate between GBP and AUD.  

IRON MOUNTAIN Vs Exchange Rate USD to AUD

Iron Mountain was established in the United States, therefore, the exchange rate between the USD and AUD has been considered for analysis. From the chart, it could be observed that Iron Mountain does not bear any specific relationship with the exchange rate of USD and AUD. At the start of the period, the stock could be observed to be falling down but the exchange rate is showing positive movement. Further, the same trend could be observed at the end of the period.  

References

BHP Billiton. 2017. BHP Billiton annual report 2017. [Online]. Available at: https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf [Accessed on: 15 January 2018].

Chang, S. 2018. Iron Mountain to buy IO Data Centers for $1.32 billion. [Online]. Available at: https://www.marketwatch.com/story/iron-mountain-to-buy-io-data-centers-for-132-billion-2017-12-11-1791044 [Accessed on: 15 January 2018].

Financial Review. 2018. Qantas Airways stock flies as index funds make a move. [Online]. Available at: https://www.afr.com/street-talk/qantas-airways-stock-flies-as-index-funds-make-a-move-20171129-gzvolg [Accessed on: 15 January 2018].

Procházka, D. 2017. The Impact of Globalization on International Finance and Accounting: 18th Annual Conference on Finance and Accounting (ACFA). Springer.

Surran, C. 2018. BHP Billiton nixes further exploration of two deepwater Trinidad blocks. [Online]. Available at: https://seekingalpha.com/news/3322656-bhp-billiton-nixes-exploration-two-deepwater-trinidad-blocks [Accessed on: 15 January 2018].

Woodhouse, A. 2017. Australia’s Qantas Airways warns of slower growth. [Online]. Available at: https://www.ft.com/content/e2868510-b9ea-11e7-8c12-5661783e5589 [Accessed on: 15 January 2018].

Yahoo finance. 2018. CYBG PLC: Income Statement. [Online]. Available at: https://au.finance.yahoo.com/quote/CYB.AX?p=CYB.AX [Accessed on: 15 January 2018].

Yahoo finance. 2018. Qantas Airways Limited: Income Statement. [Online]. Available at: https://au.finance.yahoo.com/quote/QAN.AX/financials?p=QAN.AX [Accessed on: 15 January 2018].

Yahoo finance. 2018. Qantas Airways Limited: Income Statement. [Online]. Available at: com/quote/BHP.AX/financials?p=BHP.AX”>https://au.finance.yahoo.com/quote/BHP.AX/financials?p=BHP.AX [Accessed on: 15 January 2018].

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