Weekly review: market puts in Olympic effort to hit a new record high

Olympic Games Australian share market ASX 2021
WEEKLY MARKET REPORT

The Olympic Games is not the only place where records are being broken with the Australian share market completing its best week since May to close at a new record high.

Even some significant headwinds in the form of most of the country being in lockdown and iron ore miners following the iron ore price lower was not enough to stop the ASX200 adding 0.4% on Friday for a new peak of 7,538.4 points.

A strong performance from buy now pay later (BNPL) takeover target Afterpay (ASX: APT) and some excellent results from Rupert Murdoch’s News Corp (ASX: NWS) were helpful in getting the market to put in a gold medal performance.

For the week the market added an impressive 1.9% for the strongest rise since late May, with the banks and tech sector both enjoying strong gains.

The big news of the week was Square’s impending acquisition of buy now, pay later firm Afterpay, which added an extra dimension to trading.

Buy now, boom later

Afterpay added a lazy 5.5% to its share price on Friday to close at $132.15 – its highest price since February which brought its weekly gains to an impressive 36.7%.

On its own that rise added $10 billion to Afterpay’s worth and pushed the technology sector as a whole to its biggest weekly gain for 18 years.

News Corp shares flew up by 7.9% to a record high of $35.20 after the company reported excellent full year results with once struggling pay-tv group Foxtel doing well with more than two million subscribers after adopting a multi-channel approach.

Dow Jones profits were strong and digital subscriptions were generally on the rise for the media company.

ResMed has room to breathe

Sleep apnoea and breathing device company ResMed (ASX: RMD) also delivered better than expected results with a 7% profit lift in profit to US$198.4 million with a 14% rise in revenue to US$876.1 million.

ResMed was helped by product recalls from competitor Philips and around $20 million in COVID-19 related ventilator sales.

Other good profit results that helped to buoy the market during the week included Nick Scali (ASX: NCK), GUD Holdings (ASX: GUD), Pinnacle (ASX: PNI) and REA Group (ASX: REA), although forecasts were generally more cautious than usual due to effects of continuing lockdowns.

Miners steel themselves for lower iron prices

Not everything was sweetness and light on the market with the iron ore miners that were hitting record highs last week coming off strongly with the falls in the iron ore price.

On Friday BHP (ASX: BHP) fell 2% to $52.10, Rio Tinto (ASX: RIO) down 1.6% to $130.05 while Fortescue Metals (ASX: FMG) was down 1% at $23.05.

In the see-sawing battle between China and the miners, the Chinese finally got the upper hand after stressing the need for their steel industry to reduce emissions.

It is a fascinating battle and one that will continue well into the future.

Also, the Reserve Bank probably had a neutral effect on the market with its forecast that the country will avoid a recession – something that seems unlikely now that most of the population is in lockdown.

The RBA sliced economic growth forecasts for the calendar year 2021 and 2021/22 but lifted forecasts for 2022 and 2022/23, remaining positive about a strong rebound when restrictions finally ease.

Small cap stock action

The Small Ords index rose a stellar 1.71% this week to close at 3464.7 points.

ASX 200 chart Olympics 2021
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Hot Chili (ASX: HCH)

Junior copper explorer Hot Chili attracted the interest of one of the world’s largest miners this week – announcing LSE listed Glencore will acquire an almost 10% stake.

Glencore has agreed to acquire the 9.99% interest in Hot Chili for $14.4 million, giving it the right to nominate a director to the board.

Under the binding agreement between the companies, Glencore will also appoint members to a technical steering committee which will advise on Hot Chili’s operational matters.

Glencore can also purchase up to 60% of the concentrate produced from Hot Chili’s Costa Fuego project based on “arms length” commercially competitive benchmark terms.

This investment was part of a broader $40 million capital raising that Hot Chili announced on Friday, with funds to go towards cementing ownership of the Cortadera deposit and completing a pre-feasibility study.

Aldoro Resources (ASX: ARN)

Aldoro Resources has heralded early drilling success at its flagship Narndee Igneous Complex project in Western Australia – revealing it had unearthed semi-massive and massive sulphides in the first diamond hole at its VC1 target.

The main zone of semi-massive and massive sulphides was intersected from about 212.7m with the company now looking at measures to expedite exploration at the target and other priority anomalies.

Aldoro also expanded its landholding in the region after agreeing to acquire all the interest in an exploration permit at the Windimurra Igneous Complex, which is adjacent to Narndee Igneous Complex.

QMines (ASX: QML)

Recent ASX debutant QMines has continued its exploration success at Mt Chalmers in Queensland – revealing it had identified look-a-look anomalies to the historic Mount Chalmers mine.

The anomalies were identified from a review of soil sampling data and sit within the Permian Beserker Beds, which also host the historic mine.

QMines chairman Andrew Sparke noted that VHMS systems usually occur in a cluster and that this was what the company was seeing at the project, adding the significance of this new data cannot be underestimated.

Montem Resources (ASX: MR1)

Aspiring coking coal producer Montem Resources has updated the resource for its Chinook project in Canada’s Alberta Province.

The update represents a 23Mt increase with the resource now totalling 172Mt of coking coal.

Of that, 108Mt is classified as indicated, and the remaining falls into the inferred category.

Montem also revealed a fresh exploration target for the Chinook Vicary deposit within the project of an additional 125-450Mt of coking coal.

Osteopore (ASX: OSX)

With an expected increase in elective surgeries due a decline in COVID-19 infections across some regions, Osteopore said its “robust capital position” will enable it to take advantage of the improved conditions for its 3D printed scaffolds.

Osteopore has developed and sells a range of 3D printed bioresorbable scaffolds for bone regeneration and ending the June quarter with $7.1 million in case after achieving $301,237 in revenue for the period.

The revenue was a 13.5% decrease on the previous corresponding period but 37.4% higher than the June 2019 quarter.

Osteopore anticipates the backlog of elective surgeries across many countries will begin to be addressed as COVID rates come down and this will lead to a jump in sales.

The week ahead

We are in for a big week with profit results likely to be the biggest impact on the market.

Some of the company reports to watch out for include Commonwealth Bank, IAG, Suncorp, QBE, Telstra, Transurban, Aurizon, Suncorp, Challenger, AMP, Downer EDI, AGL Energy, Mirvac, Goodman Group and Baby Bunting.

Overseas, the biggest things to watch for will be inflation reports in both the US and China, with markets still skittish about the chance of higher inflation feeding through to raise interest rates and hamper share prices.

This week’s top stocks

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