Weekly review: Friday droop still not enough to erase bullish week

Bullish market May 2020 ASX COVID-19 China
WEEKLY MARKET REPORT

The now traditional Friday droop saw the Australian share market shed 1.63% for the day but it was still a very positive week that saw some astonishing gains in heavyweight stocks.

The banks were the biggest recovery story with the gradual easing of COVID-19 lockdowns around the country being reflected in some very strong upward movement for financials.

That optimism saw the overall market up 4.7% for the week with the rally since the March low now 30.7%, leaving the ASX 200 just 13.9% behind the February high.

Big banks lead the market higher

The big banks were the key to that weekly rise with some extraordinary double-digit percentage rises during the week.

Commonwealth Bank (ASX: CBA) shed a whisker over 3% on Friday but was still up 8.8% for the week as bad debt concerns faded, which is an excellent performance by our biggest retail bank.

Westpac (ASX: WBC) was even stronger, losing 6.4% on Friday but adding an exceptional 14.7% for the week.

NAB (ASX: NAB) lost 5.2% on Friday but still gained 16.1% for the week and ANZ (ASX: ANZ) dropped 4.5% on Friday but rose 17.4% for the week.

China tensions still a worry

While investors were nervous about US President Donald Trump’s proposed action on China’s stronger control over Hong Kong, worries that the banks were heading for a horrific welter of bad debts due to COVID-19 have receded since revelations that the Federal Government’s JobKeeper payments were covering 3.5 million workers rather than 6.4 million.

That still leaves September as a crucial month when most of the six-month mortgage holidays end and the real damage to the bank’s balance sheets will slowly emerge.

Investors now obviously believe that the damage will not be as bad as expected and the banks might emerge in reasonable shape, which is why we have seen the very rare spectre of double-digit percentage rises in bank shares during the week.

Five weeks of gains

There have now been five straight weeks of market gains – despite the now regular Friday droop as profit takers move in – and nine out of the past 10 weeks have been up.

One of the big droopers this week was Freedom Foods (ASX: FNP) with shares down 14.7%, losing $0.64 to $3.72, after the health food company provided a COVID-19 trading update.

The update foreshadowed a material pandemic impact to its FY 2020 performance, including a write-down of about $25 million.

There were some glimmers of hope even among the Friday droop with some defensive stocks such as utilities and consumers staples rising – along with the tech sector – and gold also a standout, with Northern Star (ASX: NST) rising an impressive $1.05 or 7.6% to $14.80.

Shipbuilder Austal (ASX: ASB) was up as much as 20% in early trade before moderating to close up $0.31 or 10.2% to $3.34.

Austal had released an earnings upgrade for FY 2020 with the pandemic impacts not as severe as feared and a new contract with the Australian Navy and a weaker Australian dollar boosted earnings.

Small cap stock action

The Small Ords index continued to outperform, rising 4.7% this week to close on 2658.3 points.

ASX 200 Small Ords chart 2020 May
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Lithium Australia (ASX: LIT) and Australian Vanadium (ASX: AVL)

Under a letter of understanding, Lithium Australia and Australian Vanadium will work together with private entity Mercator Metals to unlock the nickel, copper and platinum group element potential at their adjoining tenements in WA along the Coates Mafic Intrusive complex.

Collectively known as the Coates project, the tenements are 55km from Perth (WA’s capital) and only 29km from Chalice Gold Mines’ recent “significant” PGE and nickel-copper discoveries at its Jupiter project.

Recent assays from Jupiter have returned 75.1m at 6.2g/t palladium, 1.7g/t platinum, 1.7% nickel, 0.7% copper and 0.10% cobalt from 34.9m.

Lithium Australia managing director Adrian Griffin said the discoveries highlighted the potential for more discoveries in the region.

The strategic alliance between Lithium Australian, Australian Vanadium and Mercator Metals will involve streamlining exploration processes through efficient use of capital, information and personnel.

Initial work will involve compiling and sharing data over the tenements including historical information with the objective of creating a single modern dataset.

Argent Minerals (ASX: ARD)

Following an oversubscribed $1.15 million placement, Argent Minerals has geared up to begin drilling at its four NSW projects in search of gold, copper, silver, zinc and lead.

In addition to the $1.15 million, a further $150,000 placement was taken up by Argent’s directors, with the company now holding $1.3 million in placement funds (before costs). Argent also collared $255,000 in drilling grants from the highly contested cooperative geosciences panel of the NSW Government.

With the cash injection, Argent plans to begin drilling immediately across its NSW projects including the flagship Kemp field asset, West Wyalong, Pine Ridge, and Loch Lily.

At Kemp field, Argent has planned a 3,000m reverse circulation program that will target where rock chips returned up to 4.95% copper, 0.96g/t gold, 40.02g/t silver and 1.56% lead across a 400m strike.

Drilling also aims to increase the existing resource which totals 52Moz of silver equivalent at 120g/t silver equivalent and 520,000t of zinc equivalent at 2% zinc.

Argent’s managing director George Karageorge was on the Small Caps podcast this week to discuss the recent raise and the company’s plan going forward.

Nyrada (ASX: NYR)

Novel drug developer Nyrada has achieved a milestone after it confirmed its lead candidate compounds can cross the blood-brain barrier in the intact uninjured animal brain.

The company’s brain injury program aims to develop a drug that can reduce secondary brain damage following trauma and stroke.

It aims to do this by reducing the build-up of calcium-ions in the brain’s cells, which causes the cells to die.

In a pre-clinical pharmacokinetic study, Nyrada’s NYX-242 and NYX-1010 can be detected in a healthy animal brain 30 minutes after a single intravenous dose.

Nyrada claims this is a “significant” finding because it shows its drug candidates can readily cross the blood-brain barrier.

The company noted a large proportion of drugs are unable to cross this barrier to reach the desired target brain tissue and are readily pumped out – making them ineffective.

Black Cat Syndicate (ASX: BC8)

Gold explorer Black Cat Syndicate has scooped up two projects from Silver Lake Resources for 8.4 million shares and a $50,000 non-refundable deposit.

Both projects are in proximity to Black Cat’s flagship Bulong gold asset, with the new Fingals gold project only 30km away and Rowe’s Find 110km from Bulong, but surrounded by one of Black Cat’s tenements.

Fingals and Rowe’s Find will boost Black Cat’s global resources with their combined estimate of 5.2Mt at 2.5g/t gold for 425,000oz.

This now brings Black Cat’s global resources to 8.7Mt at 2.6g/t gold for 719,000oz.

Black Cat managing director Gareth Solly said the Silver Lake assets had “clear synergies” to Bulong.

The two new projects comprise 44 tenements, with 28 of the tenements on granted mining leases.

A day later, on Friday, Black Cat revealed its was acquiring the Black Hills and South three packages to complement the Fingals and Rowe’s Find projects.

By the end of the week, the company’s landholding in the region stood at 268sq km.

Winchester Energy (ASX: WEL)

Oil and gas explorer Winchester Energy has upgraded its oil reserves and resources for its East Permian Basin assets in Texas.

The upgrade follows an independent review with the 17,560-acre leases estimated to hold 11.2 million barrels of oil equivalent in reserves and resource at the end of 2019.

Within that estimate are 3P (proved, probable and possible) reserves of 1.65MMboe, 2C (best estimate) contingent resources of 6.72MMboe and P50 (best estimate) prospective resources of 2.82MMBoe.

According to Winchester, this is a significant milestone and the company’s first official oil reserves and contingent resources. It also represents a 49% increase on the previous announced resources.

Winchester noted the upgraded reserves and resources estimate does not include the recent oil production from the White Hat 20#6 well in the Mustang field.

“With operational and overhead costs reduced, the updated reserves and resources estimate confirms Winchester as providing excellent exposure to any recovery in oil prices,” Winchester managing director Neville Henry said.

Raiz Invest (ASX: RZI)

Clients of Raiz Invest will now have exposure to Bitcoin following the company’s launch of its seventh investment portfolio Sapphire.

Raiz operates a micro-investing app and claims the new portfolio took 18 months to develop and was designed to meet its clients’ growing appetite for cryptocurrency exposure.

As part of this, the new Sapphire portfolio will allocate 5% to Bitcoin, with the remaining investments to comprise US, Australian, European and Asian large-cap stocks. It will also include Australian corporate debt and money markets – via exchange traded funds.

Although Raiz chief executive officer George Lucas noted the portfolio was “very high risk”, the company’s customers had “clearly shown they have an appetite for an investment strategy that has an exposure to cryptocurrencies”.

“The investment objective of the Sapphire portfolio is to provide exposure to Bitcoin in a managed, risk-adjusted way. The minimum suggested investment timeframe is more than five years,” Mr Lucas explained.

ASX floats this week

Small Caps readers who want to view upcoming IPOs or see the performance of stocks that have listed in 2020 can now do so.

The latest company to make its way onto the ASX this week was:

Intelicare Holdings ASX ICR IPO first week

InteliCare (ASX: ICR)

Western Australian technology company InteliCare is the latest small cap to float on the ASX after making its debut on Monday after raising $5.5 million via the issue of 27.5 million shares at $0.20 each.

The company’s AI-based monitoring technology aims to enable aged and disable people to continue living independently.

InteliCare chief executive officer Jason Waller told Small Caps the system essentially works by tracking common movements and behaviours within the home using passive sensors that connect to an internet of things.

The data is run through an AI engine over a week and builds an idea of what an individual’s normal domestic behaviour looks like.

Care givers and family can then receive regular updates on a person’s well-being via an app.

This week’s listing was boosted by an order from the WA Government for InteliCare’s radar sensors following a successful trial.

The radar technology tracks an individual’s vitals including heart rate, respiration, presence and level of activity. The order was from the Bennett Brook Disability Justice Centre and involved a $50,000 up front payment.

With its technology, InteliCare is targeting home care, aged care, hospitals and custodial facilities.

InteliCare closed out its first week on the ASX at $0.395 – a 97.5% premium to the offer price.

The week ahead

There is plenty to look forward to this week with a winter deluge of new economic data in Australia and a fair bit of activity offshore as well.

Add in the usual pandemic news and developments in the continuing trade issues between China and the US and also Australia as well and there is lots to keep an eye on.

Some of the Australian releases include measures of manufacturing, home prices, March quarter company profits, economic growth, balance of payments, building approvals, new car sales and retail and international trade.

Then there is plenty of action with the Reserve Bank with the board meeting on Tuesday almost certain to leave interest rates on hold at 0.25% and Assistant RBA governor Michele Bullock giving a very timely talk on Panic, Pandemic and Payment Preferences.

Internationally, there is a raft of US data covering manufacturing, construction, employment, factory orders, trade, consumer credit and unemployment.

Taken together, that should provide a solid understanding of how much damage the pandemic is causing to the US economy.

There is also some Chinese data to watch out for on services and trade.

This week’s top stocks

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