Weekly review: Market sell-off as G20 meeting approaches, banks finish in the red, interesting week ahead

Market sell-off ASX G20 meeting banks week ahead
WEEKLY MARKET REPORT

Safe havens were few and far between as the Australian share market sold off heading into the weekend.

Many investors seemed to be taking some cards off the table in the lead-up to the G20 Summit in Argentina with plenty of trepidation about what might eventuate.

The whispers that President Trump might be “about to do something” were not really the words of comfort markets needed with speculation centring around some sort of trade deal between China and the US.

Trump’s mystery move

Exactly what that might be is a total mystery with speculation ranging all the way from a trade accord, steps toward an agreement or crossed arms and a “no deal’’ all possible eventualities.

At the close the ASX 200 had shed 91 points or 1.6 per cent to 5667.2 points and was down 0.9 per cent for the week.

Banks drag market lower

Once again the banks dragged the market lower with the end of evidence before the Royal Commission just a reminder of what further pain might remain for the banks down the road.

Macquarie Group (ASX: MQG) was the worst of a bad bunch, shedding 2.04 per cent or $2.39 to close at $114.42.

Commonwealth Bank (ASX: CBA) was next worst falling 1.66 per cent or $1.20 to $71.23 while Westpac (ASX: WBC) shed 1.63 per cent or 43c to $25.99, NAB (ASX: NAB) fell 1.32 per cent or 33c to $24.58 and ANZ (ASX: ANZ) off 1.29 per cent or 35c to $26.80.

Beleaguered fund manager AMP (ASX: AMP) has fallen so far is shed a single cent or 0.41 per cent to $2.43.

All sectors in the red

It was a tough day to find any other glimmers of hope with every other sector of the market in the red.

Indeed for the past year the only two sectors to show reasonable gains are healthcare and IT, with earlier gains in other sectors just a distant memory after a terrible October and a volatile November.

By the close on Friday the ASX 200 had shed 0.9 per cent for the week, despite some strong days on Tuesday and Thursday.

Things not better with Coke

There were some stocks that performed even worse than the overall market with Coca-Cola Amatil (ASX: CCL) falling 14.55 per cent or $1.47 to $8.63 after warning investors that 2019 would be another transitional year – transitional being the usual code word for lower profits.

Coca Cola Amatil has also decided to sell its SPC operations after a review, which will no doubt bring a whopping capital loss to book.

Pokies group Aristocrat Leisure (ASX: ALL) disappointed investors with a lacklustre profit report leading to a number of broker downgrades and a 7 per cent price fall by $1.78 to $23.66.

Coles loses value

Coles (ASX: COL) continues to lose steam after floating off from Wesfarmers, losing another 68c or almost 5.5 per cent to close at $11.71, well shy of its listing price of $12.75.

There were some signs of life in the retail sector with Myer (ASX: MYR) lifting 2.5c or 5.8 per cent to 45.5c on optimism flowing from its combative AGM with investors in which a board spill was averted.

Small cap stock action

Despite the overall market sell off on Friday, the small cap index gained 2.02% this week to close at 2,573.8 points.

Small cap companies with notable news out this week include:

Cohiba Minerals (ASX: CHK)

Cohiba Minerals’ Olympic Domain iron-oxide, copper, gold project in South Australia will benefit from accelerated exploration plans in light of a major copper find in adjacent acreage by BHP.

BHP’s assays included a 425.7 metre intersection grading 3.04% copper, 0.59 grams per tonne gold, 346 parts per million uranium and 6.03g/t silver.

Cohiba said it will fast-track permitting at its Horse Well exploration licence with a view to commencing a drilling campaign targeting the IOCG trend from BHP’s discovery.

In other news, Cohiba announced the completion of a scoping study at its Pyramid Lake Gypsum deposit in WA, which proved the viability of a simple open pit mine development featuring an onsite gypsum processing plant.

The study demonstrated potential for robust sales for ameliorating sodic soils, salinity, aluminium toxicity and calcium and sodium deficiencies at Pyramid Lake over an initial 10-year production life.

Nuheara (ASX: NUH)

Australia-based Nuheara has been selected by the UK’s National Health Service to provide hearing solutions for patients within the agency’s healthcare system.

Nuheara’s patented IQbuds Boost smart hearing aids will be supplied to the NHS via the company’s UK distributor Puretone for patients with mild to moderate hearing loss and as an alternative to traditional hearing aids.

NHS is the largest sole buyer of hearing aids in the UK, and currently supplies to 75% of the domestic market.

Nuheara will begin supplying its product from mid-2019 for an initial two-year period, with possible extension to 2023.

Australian Vanadium (ASX: AVL)

A resource upgrade announced this week at Australian Vanadium’s flagship Gabanintha project has boosted the indicated mineral resource within the high-grade zone by 150%.

Gabanintha now hosts up to 183.6Mt grading 0.76% vanadium pentoxide of which 10.2Mt at 1.11% vanadium pentoxide is classified as measured, 40.7Mt at 0.66% vanadium pentoxide is indicated, and 132.7Mt at 0.77% vanadium pentoxide is inferred.

The project’s cobalt-nickel-copper potential has also been upgraded by 1.8Mt in the inferred base metal resource, for a total byproduct resource estimate of 14.3Mt grading 208ppm cobalt, 666ppm nickel, 217ppm copper.

A final pre-feasibility study for Gabanintha is due next month, and the project’s definitive feasibility study will be progressed in the new year.

Redflow (ASX: RFX)

It was a week of wins for Queensland-based energy storage company Redflow, which announced contracts for the supply of its new generation ZBM2 zinc-bromine flow batteries to telecommunications companies in Australia and South Africa.

Six of the scalable 10 kilowatt-hour batteries were ordered by Optus to power a mobile phone tower in Queensland’s Daintree Forest region, while another 32 will be supplied under contract to a South African telco for use as standby energy storage for the country’s remote towers.

Redflow said its batteries were selected by each telco for their sustained energy storage capacity, tolerance of warm temperatures, remote management capabilities and environment-friendly design.

The deals follow hot on the heels of a contract announced by Redflow earlier this month for the installation of 32 ZBM2 batteries and 200 kilowatts of photovoltaic solar panels in two new Melbourne-based childcare centres due to open next year.

Qantm Intellectual Property (ASX: QIP) and Xenith IP Group (XIP)

The two IP specialist groups Qantm Intellectual Property and Xenith IP agreed to join forces this week in a $285 million merger to produce one of the largest service providers of its kind for markets in Australia, New Zealand and Asia.

The companies will merge in April through an all-scrip scheme of arrangement where Xenith shareholders will receive 1.22 Qantm shares for each Xenith share held.

At the close of the deal, Qantm and Xenith shareholders will own 55% and 45% respectively of the new entity.

The merger follows Qantm’s rejection this week of a repeated takeover bid by IP giant IPH Limited (ASX: IPH), which culminated in a proposal with an equivalent value of $1.80 per Qantm share.

Qantm favoured the merger with Xenith on the basis that it was in the best interests of Qantm shareholders and was “significantly less conditional” than the IPH proposal.

De.mem (ASX: DEM)

Singapore-based water treatment company De.mem has confirmed plans to enter the European market with the $865,000 partial acquisition of a German water treatment technology company.

The acquisition target supplies services and solutions for industrial wastewater treatment, with a focus on the plating and metals processing industries – significant sectors in Germany and many Asian countries including China.

The deal will be funded by a rights issue to existing De.mem shareholders and the issue of a further 15 million shares at $0.135 per share.

Completion of the deal – which will see De.mem own 75% of the acquisition target – is subject to the finalisation of due diligence, the execution of definitive agreements and the raising of sufficient funds via a forthcoming entitlement offer to existing De.mem shareholders.

Anteo Diagnostics (ASX: ADO)

Anteo Diagnostics is another step closer to commercialising its AnteoCoat nano-coating technology after it inked an agreement with a European-based battery material supplier to advance the nano-coating technology in lithium-ion battery anodes.

The nano-coating technology has been used to coat silicon, which is then tested in the lithium-ion battery anode.

As part of the materials transfer agreement with the European battery material supplier, the parties will collaborate by combining the products and assessing the combined performance in a battery anode.

Results from the testing will remain confidential with the parties looking to expand the collaboration in the future.

IPOs this week

Small Caps readers who want to view upcoming IPOs or see the stocks that have listed in 2018 and how they are performing can now do so.

The latest companies to make their way onto the ASX this week were:

Qaulitas Norwest Minerals Nanoveu Redcape ASX IPO

Qualitas Real Estate Income Fund (ASX: QRI)

In one this year’s larger IPOs, Qualitas Real Estate Income Fund joined the ASX club after raising $231 million at $1.60 per share.

The investment vehicle started trade on Tuesday after issuing more than 144.5 million shares, and will use the fund to pursue its investment strategies in senior and stretch senior debit as well as mezzanine debt. The company’s preferred equity investments are in real estate development.

The company’s share price gain 3.12% in the days after listing to close Friday at $1.69.

Norwest Minerals (ASX: NWM)

Mineral explorer Norwest Minerals debuted on the ASX this week after raising $6.6 million at $0.20 per share.

Norwest is the spin-off of Australian Mines (ASX: AUZ) and holds gold and base metal tenements in WA.

Funds raised from the IPO will go towards advancing the Bali, Warriedar, Arunta West, Marymia and Marriotts projects.

Marriotts is the most advanced project possessing a mineral resource of 662,000t at 1.3% nickle.

The company ended Friday at $0.175.

Nanoveu (ASX: NVU)

Singapore-headquartered Nanoveu joined the ASX club on Friday after seeking to raise up to $6 million by issuing 30 million shares at $0.20 each.

Nanoveu will use the IPO funds to launch its EyeFly3D product and advance its EyeFyx technology.

EyeFly3D is a nanoimprint-based screen protector that allows people to view clear, distortion-free 3D content with the naked eye. First sales of the product will be targeting the US.

Nanoveu opened its first day of trade at $0.185 before closing at $0.13.

Redcape Hotel Group (ASX: RDC)

Another Friday ASX newcomer was Redcape Hotel Group which raised $50 million after issuing 44.4 million shares at $1.13 each.

The same day it listed, the company announced it was starting an on-market buy-back of its shares to collar back a 5% stake.

Redcape is a hospitality group which operates 29 venues across Australia’s east coast, as well as 21 bottle shops, The Australian Brewery and three accommodation venues.

The company opened at $1.10 per share before closing at $1.04.

The week ahead

On top from the G20 meeting, we are in for a very busy week of economic indicators in Australia and around the world.

Locally, the Australian Bureau of Statistics (ABS) kicks off the week on Monday with its Business Indicators publication for the September quarter, some of which feeds directly into economic growth figures which will be released on Wednesday.

Economic growth has been running at 3.4 per cent, above the longer term average, but might slow a little on this reading.

Building approvals are also out on Monday, together the AiGroup and CommBank surveys on manufacturing activity and the CoreLogic November results for home prices which are likely to show some price weakness in Sydney and Melbourne.

Tuesday brings us the ANZ and Roy Morgan reading on consumer confidence, the ABS data on government spending and the Balance of Payments.

The Reserve Bank Board will meet on Tuesday but it would be an absolute shock if a change to the official interest rate emerged.

Wednesday brings us new vehicle sales figures from the Federal Chamber of Automotive Industries and the AiGroup and CommBank publish their purchasing manager survey results for the services sector.

Thursday sees the ABS release the International trade data on exports and imports for October and retail trade data while the Reserve Bank Deputy Governor Guy Debelle is giving a speech.

Offshore the US-China trade war will be uppermost in most people’s minds but there is plenty else on including the testimony of the US Federal Reserve chair on Wednesday and the OPEC oil ministers meeting on Thursday.

The US November jobs data will be the biggest economic indicator but there are a host of others including the manufacturing purchasing managers survey in the US and China and data on construction spending, new car sales, retail sales and the US trade deficit.

Weekly top stocks

John is a highly experienced business journalist and formerly chief business writer for the Herald Sun. He has covered Federal politics in Canberra, was Los Angeles Bureau chief for News Limited and was also chief of staff for the Herald Sun. He has covered a wide range of small and large cap ASX stocks and has a special interest in mining, technology and biotech.