Weekly review: big miners give the ASX a late boost

Big miners iron ore ASX November 2021 inflation APRA
WEEKLY MARKET REPORT

Signs of a rebound in the price of iron ore was all the excuse the Australian share market needed to end its four day losing streak and push through for a 0.8% gain on Friday.

The ASX 200 index finished up 61 points at 7,443 points as iron ore prices jumped more than 5% to rise above US$90 per tonne.

That pushed the price of the big iron ore miners higher, with BHP (ASX: BHP) jumping by 2.8% to $37.70, Fortescue (ASX: FMG) shares up 1.9% to $15.75 and Rio Tinto (ASX: RIO) closing up 3.4% to $92.21.

High US inflation led to market caution

Despite that iron backed strong finish, the market still shed 0.2% for the week, although that was possibly a good result given the way high US inflation numbers have been rattling offshore investors.

One of the other positive currents that helped the Australian market was an easing of fears about heavily indebted Chinese property developers, after construction giant Evergrande made some required interest payments.

The market was also helped by rises in the share prices of all of the big four banks, which overcame speculation that tougher curbs on mortgage lending are on the way.

APRA preparing banks for tighter controls

The Australian Prudential Regulation Authority (APRA) released an information paper preparing the banks for the possibility of tougher curbs on mortgage lending, saying it could impose limits on higher-risk loans if they raised risks for the financial system.

While there have been no further changes since APRA last month put the brakes on higher risk lending by requiring banks to use a more cautious interest rate assumption, the regulator did indicate the sorts of changes it would consider if it needs to act to constrain credit growth, leverage or rising prices.

Possible policy curbs include moves to put the brakes on loans with high debt-to-income ratios, loans with high loan-to-valuation ratios and investor and interest-only loans.

Jobs market still weaker than before pandemic

Those moves could be a while away though, with the job numbers released this week showing employment is yet to recover fully from COVID-19 lockdowns in Sydney and Melbourne, with October jobs dropping by 46,000 across the country.

Total employment is still 1.2% below its pre-coronavirus peak in 2020, so APRA and the Reserve Bank will want to be careful before they take any measures that might tighten conditions for the economy.

Technology stocks were another strong sector on Friday, with accounting software provider Xero (ASX: XRO) up a healthy 3% to $142.26 while Afterpay (ASX: APT) was also up 1.96% to $116.42.

In stock specific news glove maker Ansell (ASX: ANN) saw its shares shed 2.6% to $30.61 and Ramsay Health Care (ASX: RHC) shares were down 1.3% after a trading update which showed that elective surgery restrictions had cut back on first quarter revenues.

Shares in Fisher & Paykel Healthcare (ASX: FPH) also sank 3.2%, helping to send the healthcare sector down 0.18% for the day and 3.43% for the week.

Link Administration Holdings (ASX: LNK) shares closed up 3.5% to $4.77 after it receiving a conditional non-binding indicative proposal from a syndicate led by Pepper European Servicing for its Banking and Credit Management business.

Link said the syndicate has proposed buying the whole of its BCM unit for up to 55 million euros.

Perth-based disability services provider APM Human Services (ASX: APM) fell 6.2% to $3.33 on debut after the company raised $982 million in its float which was priced at $3.55 per share.

APM has businesses across 10 countries, with 52% of its revenue coming from Australia and the rest spread across Europe (27%), North America (12.5%) and AsiaPacific (8.5%).

Shares in Calix (ASX: CXL) surged $1.22 or 20% to $7.34 after the green technology company announced it had filed a patent for a new method of making iron and steel that delivers zero emissions.

Calix is conducting tests which could lead to a scaled-up program at the company’s local facility.

Small cap stock action

The Small Ords index fell 0.17% this week to close at 3567.6 points.

November 2021 ASX 200 chart Small ords
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

King Island Scheelite (ASX: KIS)

Emerging tungsten miner King Island Scheelite achieved another milestone this week in its plans to redevelop the Dolphin project on Tasmania’s King Island.

The company’s $10.2 million equipment hire purchase facility was approved, which will be used to finance the mobile mining fleet for redevelopment and construction at Dolphin.

Earthworks at the project site will begin next month, after King Island Scheelite confirmed it was fully-funded to redevelop Dolphin.

It has now secured the targeted $88 million in financing and shareholder approval at the annual general meeting.

This news was then followed up with a name change, which will see King Island Scheelite rebranded as Group 6 Metals.

Culpeo Minerals (ASX: CPO)

After listing on the ASX in September, Culpeo Minerals has intersected visible copper in the first four holes at its Las Petacas project in northern Chile.

The company has completed 1,520m of drilling at Las Petacas over four holes with a fifth underway.

A GAIP geophysical survey was completed at the project and has led to numerous new drill targets.

Culpeo is anticipating the copper and gold assays from the first four holes within four weeks.

Dundas Minerals (ASX: DUN)

Nickel and gold focused Dundas Minerals made its ASX debut this week after raising $6 million in an oversubscribed IPO.

The company kicked off its first week on the boards with news it will begin drilling its namesake Dundas project before the end of the month.

Dundas is prospective for nickel and gold and is located in WA’s southern Albany-Fraser Orogen, which the company describes as one of the state’s “most sought-after mineral districts”.

Drilling at Dundas will begin at the Jumbuck prospect and target nickel. The rig will then move to the Kokoda prospect where it is chasing gold-copper mineralisation.

The company closed out the week with news it had been granted one of the exploration licences that make up Dundas.

All-up the project comprises 11 tenements with seven now granted and the remaining under application and expected to be awarded early next year.

Credit Clear (ASX: CCR)

Under a deal made this week, Credit Clear will roll-out its account receivables digital technology across select portfolios of global financial company Centricity Techub’s (Techub) multi-billion-dollar client base.

Credit Clear and Techub have signed a global partnering and teaming agreement, which will see uptake of Credit Clear’s technology across Techub’s select blue chip clients in the US, UK and South Africa.

Additionally, the companies will work together to pursue business opportunities in international markets.

Credit Clear chief executive officer David Hentschke says the partnership enables the company to expand internationally without the cost of a significant set-up.

“Applying our technology to Techub’s multi-billion-dollar portfolio of account receivables is exactly how we envisaged the pathway to global expansion and scale,” Mr Hentschke added.

iTech Minerals (ASX: ITM)

After unveiling the potential for rare earth elements at its South Australian kaolin project last month, iTech Minerals has now confirmed the minerals are present.

Located on the Eyre Peninsula, iTech had identified the rare earth element cerium after reviewing historical drill data from the Ethiopia prospect within the project.

The drill samples were submitted to a laboratory for re-analysis with the company now receiving the first assays from 10 samples.

iTech noted “significant” total rare earth element oxides (TREO) were present in all 10 samples.

Critical REE minerals neodymium and praesidium were also found with an average grade of 23%.

A highlight hole was 6m at 896ppm TREO from surface.

The week ahead

Once again central banks will be the focus of the coming week with the minutes of the Reserve Bank board meeting released on Tuesday.

These minutes will be more important than usual because they may help to explain the RBA decision to scrap the three-year bond yield target, which allowed that bond yield to rise higher.

On the same day the RBA Governor, Dr Phillip Lowe, is delivering a paper on “Recent Trends in Inflation” which is highly topical at the moment as prices have been rising inexorably.

Other things to watch out for during the week include consumer confidence numbers, credit and debit card spending and the Wage Price Index, which may show signs of upward pressure in areas which have been hard hit by border closures and labour shortages such as hospitality and construction.

Two senior Reserve Bank officials are also delivering speeches which will be worth monitoring, including Tony Richards, Head of Payments Policy and Luci Ellis, Assistant Governor (Economic).

Overseas there is plenty of action to come with a forest of new data coming out of China and plenty of new figures out of the US as well.

Among the Chinese figures to watch out for will be retail sales, production, investment, the jobless rate and the house price index.

China has been hit hard by higher raw material prices, elevated freight costs, electricity shortages and environmental curbs, with strong exports the saving grace.

US figures to watch out for include manufacturing, retail sales, industrial production, export & import prices, business inventories, capital flows, the housing market index and chain store sales.

All of these figures will be checked for indications of where inflation might be heading, with doubts about how high and enduring the current bout of higher prices will be.

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