Weekly review: ASX 200 ends strongly after topsy turvy week
每周市场报告
After a really topsy turvy week the ASX 200 ended on a strong note – up 1.1% on Friday or 78.1 points to close at 7435 points.
While that was still not enough to come out up overall for the week, it was a far cry from earlier in the week when the market had fallen 4.5% in three days, with a two day spurt adding 1.4% to make things look more respectable.
There were a lot of confusing signals around markets with a sharp rise on the Chinese share market after the Politburo promised to increase stimulus to support economic growth – helping all sectors on the Australian market to increase.
The picture out of the US was more mixed with a strong daily rise followed by an after-market dive and then recovery on the bullish Chinese market.
Australia seen as a relative safe haven
Globally, the Australian market is starting to be seen as something of a safe haven with low exposure to technology and a high exposure to mineral and agricultural commodities, which are booming in price.
Foreign investors are definitely very active in Australia, which is also experiencing excellent terms of trade, high domestic savings and a tight labour market, all of which are seen to support equity valuations and put Australia in a better relative position than other share markets.
Kogan crunched by lower sales and evaporating profits
In individual share moves, online retailer Kogan (ASX: KGN) shares sank to a three-year low below $4 after reporting a poor start to the year with sales falling and the business swinging to a loss as consumer demand softens.
Heading in the opposite direction was PointsBet (ASX: PBH), with its shares up as much as 15% as the online bookmaker revealed strong quarterly turnover growth, driven by its expanding US operations.
Origin Energy (ASX: ORG) shares rose almost 2% after reporting that it more than doubled revenue from liquefied-gas exports in the past three months, courtesy of booming commodity prices.
The semiconductor chip shortage is still claiming victims with Resmed (ASX: RMD) shares down by more than 4% after the shortage will cap potential gains it can make from a recall at major competitor Philips.
Small cap stock action
The Small Ords index fell 1.41% for the week to close on 3298.7 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
TZ Limited (ASX: TZL)
The March quarter has heralded a “significant improvement” in revenue for TZ Limited, with net cash from operating activities reaching $400,000, compared to a $400,000-loss in the previous corresponding period.
Group revenue for the period was $5.05 million – bringing TZ’s year-to-date revenue to $13.2 million.
Underpinning the result was a monthly recurring revenue base of $235,000.
The company says its journey of bringing customers to a comprehensive set of TZ cloud subscription services was “well underway” with the company seeing “great uptake” of its cloud solution.
TZ expects the growth momentum to continue throughout 2022.
Argenica Therapeutics (ASX: AGN)
Recent in-life rodent and non-human primate toxicology studies have determined the maximum tolerated dose of Argenica Therapeutics’ novel therapeutic ARG-007.
The results bring Argenica a step closer to its phase 1 clinical trial of the neuroprotective peptide drug, which is being developed to reduce brain tissue death after stroke.
Argenica chief executive officer Dr Liz Dallimore says the latest study results gives the company added confidence in securing ethics approval to proceed with clinical trials.
“The results of the GLP toxicology data demonstrate that ARG-007 has a good safety margin from the efficacious dose to the maximum tolerated dose,” Dr Dallimore added.
RooLife Group (ASX: RLG)
The launch of RooLife’s TikTok store in China in co-operation with investment and sales channel Cross Border Trading Group (CCTG) is expected to bring in at least $300,000 in sales during its first three months of operation.
RooLife expects further growth as the store and customer base matures. The store will sell cross-border imported products, while leveraging short video content, advertisements and live-streaming campaigns to promote brands such as Dior, Lancôme, Givenchy, Kiehl’s, Estee Lauder, YSL, Clinique and SK-II.
These brands will be sold alongside RooLife’s own cosmetics partner brands to an online audience in China of more than 600 million.
The TikTok store launch was followed by RooLife revealing revenue of $4.7 million for the March quarter – up 39% on the previous corresponding period and 22% higher than the December 2021 quarter.
At the end of the March quarter, RooLife’s year-to-date revenue was $12.8 million, which was 133% higher than the full year revenue in 2021 (12 months ending June 2021) of $9.6 million.
NickelX (ASX: NKL)
Geophysical surveys have identified “significant” magnetic anomalies for NickelX across its recently acquired Cosmos South nickel project in WA.
A recent close-spaced drone survey has confirmed “very strong” conductors delineated by moving loop electromagnetic and fixed loop electromagnetic surveys at the project.
The project is within 20km of two known major nickel operations in the state and NickelX managing director Matt Gauci says it ranks “highly” on the company’s target list.
NickelX will undertake four drill holes to test the priority targets once it has secured access, permits and engaged a contractor.
Vonex (ASX: VN8)
Telecommunications service provider Vonex achieved record revenue during the March quarter.
The company saw its quarterly revenue rise to $10.2 million, up 96% year on year.
Annualised recurring revenue rose 102% year on year, up an estimated $35 million as at 31 March 2022.
Vonex is focused on a three-pronged growth strategy combining expansion in retail, in 2SG wholesale and via targeted acquisitions
The week ahead
The coming week is a really big one for markets in general, with the Australian Reserve Bank’s board decision on official interest rates due on Tuesday the obvious highlight.
While there is still some reluctance by some banks to call for a rate rise during the election campaign, I think the case is crystal clear for a rise – probably an increase of 0.4% to 0.5% – on the back of strongly rising inflation.
Waiting for a likely mythical increase in wages is not much of an excuse for not acting and the election campaign is even less of an excuse for indicating a tightening bias, but waiting for another month to implement it.
This sort of rise could hardly be seen as stomping on the brakes, given the extraordinarily low “emergency” rate at the moment – more like deciding to back off from having the monetary accelerator flat to the floor, which has surely got to be indicated by a 13 year high jump in inflation.
US Fed tipped to raise rates strongly
On Wednesday the US Federal Reserve hands down its interest rate decision with the likely result a 0.5% rise to a 0.75% to 1% range, which will probably also be accompanied by a shrinking of the Fed’s bloated balance sheet and indications of more hikes to come.
Jobs data on Friday in the US will also be closely examined, with the likely result being unemployment hovering around the 3.6% mark.
There are other things to watch out for in the US – particularly company profit results – but the central bank will be hogging the limelight.
Banks in the spotlight as their margins tell a story
Back here in Australia there are a string of economic releases but the most interest will be focussed on the banking sector.
ANZ (ASX: ANZ), NAB (ASX: NAB) and Macquarie (ASX: MQG) are announcing their results on Wednesday, Thursday and Friday respectively with the Westpac (ASX: WBC) result out on the following Monday and Commonwealth (ASX: CBA) to be published on the following Wednesday.
With most of the banks set to trade ex-dividend in the period after their results, it is a time of intense comparisons and post dividend switching with the main scrutiny being on net interest margins as a measure of relative performance.
Net interest margins are expected to rise strongly this year as the RBA continues to hike interest rates but higher interest rates also suppress lending, with the obvious caveat that around $250 billion of fixed interest loans maturing this year and need to be refinanced.
Investors will be looking to remain with the banks that are getting the best margins and they will also be keeping an eye on rising costs as a tight job market begins to flow through in the form of higher wages.