RBA Rate Cuts Crowns CSL Australia’s Biggest Firm

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Biotech firm CSL Limited [ASX:CSL] is officially Australia’s largest firm in terms of market cap. At time of writing the CSL share price is down 1.32% or $4.21 to trade at $308.88 per share.

bloomberg csl


CSL share price could shake off virus concerns

The decision by the RBA to lower the cash rate by a further 25 basis points to a historic low of 0.5% helped push former number one, Commonwealth Bank Limited [ASX:CBA], out of the top spot.

With the RBA cutting rates yesterday, bank margins could be squeezed even further, if you own CSL and Big Four bank shares, read this report to see why their dividend payouts are in danger…

CSL, with a market cap of $142 billion, now accounts for 8.2% of the ASX 200 Index, compared with 8.1% for Commonwealth Bank of Australia, whose market cap dropped to $140 billion as of Tuesday’s close.

The dethroning of CBA is notable for several reasons. Firstly, the ASX 200 is dominated by the finance sector, Australia’s Big Four banks alone account for about one-fifth of the market. The rise of a producer of blood-based therapeutic products like CSL could signal deeper unrest in the market.

Secondly, both CLS and CBA have recorded strong starts to the current financial year. CBA reported better than expected cash profit, while CSL lifted its profit target amid strong growth in sales. While CSL stock price is 11.58% higher since the beginning of the year, CBA is trading 2.27% lower over the same period.

It seems as fears around the impacts of global health issues, such as the corona virus (COVID-19), weigh on the markets, investors are seeking out new, safer avenues that are less exposed to global economic trends.

CSL’s core business brought it to number one on the ASX

CSL’s core business is the separation of human blood into components that can be converted to therapies used to treat diseases including immunodeficiency and autoimmune diseases, hereditary bleeding disorders and critical care.

Growing demand for immunoglobulin (a component of blood used in the company’s products) coupled with a global shortage late last year has helped lift the company into the number one spot on the ASX.

Second half performance this year could again see CSL lift profit guidance if anxiety about the impact of the COVID-19 virus continues to mount. Because CSL produces the medicines that are in need disruption to supply or importations around the world seem unlikely.

The company, who is now the largest importer of albumin (a blood product) to China, is currently transitioning to a direct distribution model in the China region, which will eliminate third party distributors and strengthen its supply chain in the region.


Lachlann Tierney,

For Money Morning

PS: The coronavirus portfolio — two types of investments that could outperform in a downturn. Download.

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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