Just when we were least expecting it a sudden lurch upwards on the Australian share market has completed a roller coaster ride of epic proportions.
While most of the week was made up of sickening falls due to rapidly increasing worries around the coronavirus, the staggering comeback on Friday from losses of more than 8% to a market close of up 4.4% is one of the fastest and strongest moves in living memory.
Index trades through massive points range
By the end of the day’s trade the ASX 200 had gained an impressive 234.7 points, or 4.4%, to close at 5539.3 points.
The whipsaw trading saw the index tumble as low as 4873.7 points in early trade, which represents a drop of more than 30% from the record high of 7199.79 points set in what seems like a lifetime ago back in February.
At that point the index and many individual stocks were hitting levels as low as they had been since early 2016.
Then came the massive rally which saw the market gain an amazing 10% in just 90 minutes.
The biggest question was what caused the sudden turnaround and there is any number of reasons – the most likely being the sudden turnaround in US futures which pointed to a significant rise when US trade began.
Serious buying pressure re-emerges on massive turnover
However, there were many rumours that there had been some significant buying from financial institutions which had been sitting on the sidelines waiting for an opportunity to pounce.
Once that buying began it caused a rush of other buying as traders began following the trend of one of the biggest turnarounds ever seen.
The scale of the buying and selling was shown by the total value of trading from the session which reached a staggering $18.2 billion, the highest on record.
Still down for the week despite a massive rally
Even with the late rally, it was not a week that brought a lot of cheer to investors with the ASX 200 still shedding 10.9%, which only takes second place to the is not too far behind the 15.6% fall which was experienced in October 2008 during the peak of the GFC.
The coronavirus is a very unusual health event which has brought a lot of uncertainty to the future performance of the world economy and individual stocks due to its capacity to act as a brake on trade, the free movement of people and employment and other economic activity.
Uncertainty is driving extreme volatility
From here on the volatility should continue to be severe as the coronavirus continues its relentless march across the world and government of all persuasions try to contain its effects as best they can.
Markets hate uncertainty and a viral scare such as this creates uncertainty at an almost industrial scale because nobody is quite sure how many infections are going unreported and what path the virus will take from here on.
Earlier hopes that it may be contained to China have certainly been dashed and sudden infection increases such as the one in Italy that caused a lockdown and other radical prevention strategies such as the US ban on European travellers could well become more common.
What is really unknown is how long the virus transmission will run and when the world might begin to emerge out the other end.
One thing the rapid share market rally did prove though is that there is some buying pressure when stocks get to what is seen as an oversold position, even if that buying pressure will remain susceptible to further news flow.
Small cap stock action
The Small Ords index was pounded this week, down 13.18% to 2,283.2 points.
Small cap companies making headlines this week were:
Galan Lithium (ASX: GLN)
This week, Galan Lithium revealed its much anticipated maiden resource for the high grade Pata Pila and Rana de Sal tenements at its Hombre Muerto West lithium brine project in Argentina.
Even with high prospects, the inferred resource still managed to “significantly exceed” Galan’s expectations across grade impurities and size.
The maiden resource totals 1.08Mt of contained lithium carbonate equivalent with an average grade of 946mg/l lithium.
It has also boosted the company’s total combined mineral resources in the region by 158% from 685,000t of LCE at 672mg/l lithium to 1.77Mt LCE at 837mg/l lithium.
Galan managing director Juan Pablo Vargas de la Vega said the results add to the more advanced Candelas project which is undergoing scoping and pre-feasibility study evaluation.
“With the new combined resource of 1.8Mt of LCE and the flexibility of two solid projects, our strategy now is to advance towards commercial development and to demonstrate the economic product viability,” he added.
Tesoro Resources (ASX: TSO)
Chile focused gold explorer Tesoro Resources received the full results from its first drill hole at the El Zorro project in Chile’s Coastal Cordillera region.
Final assays for the drill hole revealed 86.45m at 2.29g/t gold, including 50.50m at 3.63g/t gold from 182m.
The final result builds on initial assays for the drill hole reported last week that included 23m at 7.2g/t gold, 15m at 10.82g/t gold, 5.3m at 25.31g/t gold and 2.3m at 46.41g/t gold.
Tesoro managing director Zeff Reeves said the full suite of assays for the drill hole demonstrate the mineralisation’s thick and high-grade nature.
“We are encouraged by the strong mineralisation well into the footwall sediments, which demonstrates that proximity to the wide controlling structures can provide the right ingredients for gold mineralisation regardless of rock type.”
The company will use the latest information to fine tune its exploration model and identify new drill targets.
To-date four holes have been completed under the current 10-hole campaign.
RooLife Group (ASX: RLG)
Small World Brands has contracted RooLife Group to sell its Nuria Beauty range into China’s $33 billion skin care market.
The US and Singapore-based beauty and wellness company has appointed RooLife as its official digital marketing and e-commerce distributor for Nuria Beauty.
RooLife will be responsible for social media, key opinion leader and content channel management across WeChat, Weibo, Douyin, YouKu and Baidu.
The company will also distribute the products to be sold throughout China’s TMall, Taobao, Kaola, VIP, JD, Little Red Book and Pin Duo Duo stores.
If minimum performance requirements are met, the contract is anticipated to generate revenue of $1.3 million to RooLife over the initial two-year contract period.
Nuria Beauty is the first of numerous brands Small World is looking to launch into China.
“We look forward to the opportunity to continue to build on this relationship,” RooLife managing director Bryan Carr said.
Fluence Corporation (ASX: FLC)
Water treatment company Fluence Corporation has agreed to sell an Aspiral unity to Beijing China Railway Science New Technology Co Ltd, with the unit to be used in a project involving the Chinese railway system in Inner Mongolia.
Based on Fluence’s proprietary MABR technology, an Aspiral unit can treat 35 cubic metres per day of highly concentrated wastewater that is unusually high in nitrogen.
Once treated, the water will meet standards equivalent to China’s class 1a effluent requirements.
“This initial contract is strategically important to Fluence and is anticipated to rapidly prove MABR’s effectiveness in this new application, similarly to the experience with three existing volume partners in China,” Fluence managing director and chief executive officer Henry Charrabe said.
“As we’ve seen in the past, once our MABR technology has proven itself to a new partner via an initial order, and Fluence is able to significantly contribute to the economic value proposition, meaningful commitments often follow.”
The unit will be shipped from Fluence’s factory in China’s Jiangsu Province.
MedAdvisor (ASX: MDR)
The UK’s National Pharmacy Association has officially endorsed MedAdvisor’s digital medication management platform by recommending it to its UK-based community pharmacy market.
National Pharmacy Association represents eight out of 10 UK independent pharmacy members – exceeding Australia’s entire pharmacy market.
Under the deal, National Pharmacy Association’s sales team will “proactively promote” to its members MedAvisor’s digital pharmacy solution as an approved medication management.
The solution includes MedAvisor’s software PlusOne and the MedAdvisor app.
“The UK market is a highly attractive market given the size and similarities to the Australian market,” MedAdvisor chief executive officer Robert Read said.
Twenty Seven (ASX: TSC)
Gold explorer Twenty Seven kicked-off drilling this week at its Rover project in WA.
Drilling is expected to take up to four weeks to complete and will comprise 2,000m across the Creasy 1 discovery and the Harmonic prospect.
Creasy 1 previously returned 4m at 4.3g/t gold, including 1m at 51g/t gold; and 5m at 9g/t gold, including 1m at 44.1g/t gold.
Meanwhile, drilling at Harmonic uncovered 14m at 1g/t gold, including 2m at 3.3g/t gold and 21.2g/t gold from 26m; and 9m at 1.4g/t gold, including 1m at 7.25g/t gold from 58m.
Additionally, Twenty Seven received the results from a recent airborne electromagnetic survey, which has identified 13 conductors at the project.
While drilling is underway, Twenty Seven said its geology team will reconcile the AEM survey results with field observations to prioritise new targets for drilling.
Impression Healthcare (ASX: IHL)
Impression Healthcare has beefed up its advisory and management teams yet again with the latest addition involving drafting former professional AFL player Liam Picken to its advisory board.
Mr Picken will assist Impression with developing the IHL-216A drug for treating concussion and traumatic brain injury.
As part of his role, Mr Picken will help develop real world aspects of the Impression’s upcoming clinical trial for IHL-216A and liaise with the media about the study’s progress.
Mr Picken has first-hand experience with head injuries and persistent concussions, which led to an 18-month long headache, combined with blurred vision and sensitivity to light and noise.
The former AFL player said his career and personal experience had motivated him to raise awareness around brain injuries.
Impression’s IHL-216A is a neuroprotective agent that is designed to be administered after a concussive event to ameliorate symptoms and damage.
Impression chief executive officer and managing director Joel Latham said that having Mr Picken on board would help raise the company’s profile and promote its endeavours to commercialise IHL-216A.
The week ahead
Due to the extreme uncertainty, news on the spread of the coronavirus will continue to dominate market trading for the foreseeable future.
In the coming week many will be keeping an eye on central banks to see how they react to the evolving situation with the US Federal Reserve and the People’s Bank of China possibly moving rates down again.
Here in Australia investors will also be keeping an eye out for any news out of the Reserve Bank and also look for economic data releases on employment, tourism and population.
However, once again it will be health information that dominates trade with infection and fatality rates unusual indicators of where markets could be heading next.