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Perhaps of interest .. The Weekly Wrap | 14 April 2024 [email protected] ASX Changes Goodbye Staggered Opening The ASX is the only exchange in the world with a staggered opening. I’m sure we all know how it works – but here’s a refresher for the exact timings: • Opening takes place at 10:00 am Sydney time and lasts for about 10 minutes • Group 1 – 10:00:00 am +/- 15 secs 0-9 and A-B • Group 2 – 10:02:15 am +/- 15 secs C-F • Group 3 – 10:04:30 am +/- 15 secs G-M • Group 4 – 10:06:45 am +/- 15 secs N-R • Group 5 – 10:09:00 am +/- 15 secs S-Z In 2018, the ASX initiated a review of international exchanges and opening procedures. This week, they announced a proposed plan to remove the staggered opening and shift to a single opening time. The key reasons for this move include: • Minimise or shorten volatility and potentially increase liquidity at the open • Better alignment with global exchanges and simplify the opening for international investors • Increased efficiency in pricing by investors and market makers in ETFs and SPI futures • Computing power and network speed are no longer strong drivers of the stagger • Reduction of operational and technical complexity in the event of a market outage • You can read the full report here This move will introduce a new session state called ‘Opening Single Price Auction’ or OSPA to support an orderly open before the market transitions into continuous trading. This is how it will operate: • The transition to an OSPA state occurs at 9:59:00 +/- 15 seconds • The algorithm for calculating indicative prices is unchanged • New orders and order amendments will be rejected during OSPA but cancellation of orders are allowed • OSPA has a minimum duration of 30 seconds and a maximum of 60 seconds • The transition from OSPA to open occurs within a +/-15 second window What does this mean for us? It’s taken the ASX six years to report its findings, so I wouldn’t be surprised if it takes another decade to roll out any changes. As far as what it means for investors, I’ll break it down into a few key categories: • Scalpers: The five opening groups provide scalpers with a rich opportunity set. They would have fewer opportunities as everything opens at once (you can’t possibly trade everything at once) • Intraday traders: Stock selection becomes key (for example, it’s peak reporting season and ALL, COH, NHC, PLS and WTC have all reported major surprises: You must now select which present the best opportunities or get a headache trying to trade all of them at the same time) • Buy and hold (any holding period): The stocks you hold open around 10 minutes earlier. Who cares – this doesn’t really affect investors --- Thinking about AI I came across an interesting article from the Wall Street Journal, which references comments from Arm CEO Rene Haas. His key comments include: • AI models such as ChatGPT “are just insatiable in terms of their thirst” for electricity. • “The more information they gather, the smarter they are, but the more information they gather to get smarter, the more power it takes.” • Without greater efficiency, “by the end of the decade, AI data centres could consume as much as 20% to 25% of US power requirements. Today that’s probably 4% or less … That’s hardly very sustainable, to be honest with you.” • The article also noted that the International Energy Agency said a request to ChatGPT requires 2.9 watt-hours of electricity on average – equivalent to turning on a 60-watt light bulb for just under three minutes or almost 10 times as much as the average Google search. Poll of the Week With so many opportunities emerging from the AI boom, where would you want to be within ASX-listed companies (examples included)? • Utilities – AGL Energy, Origin Energy • ‘New’ power – Nuclear (e.g. Paladin, Boss Energy) • Data centres – NextDC, Megaport • Data centre services – Southern Cross Electrical • Data centre real estate – Goodman Group • Hardware – Dicker Data • AI players – Weebit Nano, Brainchip Vote Here .. Absolute Gold Gold was able to ignore all the factors that typically push prices lower (for example, soaring bond yields, hotter-than-expected inflation data and pushback on rate cut expectations) and scored four fresh all-time highs this week. UBS had an interesting take on the recent move – "The recent move in gold reminds me of a famous quote “There are decades where nothing happens, and there are weeks where decades happen.” Looking at history, gold price can stay in the doldrums for a long time but when it does breakout, the surge is usually fast and furious.” With gold absolutely surging, are investors preparing for a big geopolitical move, a rapid deterioration in economic conditions or perhaps it's just a push towards physical assets? Game of Trades – an independent investment research firm – has drawn some pretty interesting parallels between the current gold move and those experienced in the 1970s and 2007. It’s a pretty long thread on Twitter (X) but you should give it a whizz. Have a great week! Kerry & the Market Index team. Got a question or suggestion? 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