Weekly review: market steadies as it prepares for a volatile future
WEEKLY MARKET REPORT
The share market levelled out on Friday after a rugged week as the Russian invasion of Ukraine ushered in a big serving of volatility for world markets.
After suffering a hefty $73 billion of falls on Thursday, the ASX 200 failed to mirror the positive US recovery lead and closed short of the 7000-point target.
The ASX 200 index ended up by 0.1% to 6997.8 points but still shed a solid 3.1% for the week after ignoring a 1.5% rally on the US S&P 500.
There were some interesting bright points in the market that reversed that trend though, with shares in Afterpay owner Block (ASX: SQ2) rallying an impressive 40% in early trade after reporting earnings of US27c a share – well above analyst estimates of US22c.
Block shares boom in Australia
Block shares were down in the US but closed at $153.75 in Australia, up $37.70 or 32.5%, with cryptocurrency trading gains behind some of the outperformance.
Profit results caused some other share movements as well in the midst of an overall shell-shocked market that is racked with uncertainty about how the Ukraine crisis will develop as many investors flocked to safe havens such as gold, commodities and oil.
Magellan Financial shares (ASX: MFG) fell $2 or 10.1% to $17.78 as investors reacted to a further fall in funds under management to $77.2 billion – an 11.4% drop from the last update on 11 February due to a combination of institutions and individual investors withdrawing funds and falling asset prices.
Retailers struggling with inflation
Retailers also reported some interesting results with Harvey Norman (ASX: HVN) shares up 16c or 3.2% to $5.15 despite reporting the first drop in sales since the start of the COVID-19 pandemic.
Underlying net profits also fell 22% to $340 million, but revaluations of the group’s extensive property portfolio caused profits to fall just 6.7% to $430 million.
Online retailer Kogan (ASX: KGN) shares plunged 6.2% to $5.26 after continuing supply chain disruptions created havoc with product availability.
Kogan reported an underlying loss of $11 million for the December half as rising inflation in items, including shipping containers caused problems.
However, founder Ruslan Kogan remained confident that the retailer’s agility and determination to maintain keen pricing would improve the outlook.
Small cap stock action
The Small Ords index fell 3.17% for the week to close at 3187.7 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
EMVision Medical Devices (ASX: EMV)
The half year ending December 2021 saw EMVision Medical Devices progress development and commercialisation of its portable brain scanner, which has been created to detect stroke occurrences.
Keysight Technologies has created a bespoke vector network analyser for EMVision’s device – enabling it to be “dramatically” shrunk for use in the pre-hospital space.
While refining its technology during the period, EMVision continued building industry and public awareness of its capabilities, along with engaging with large imaging and accessory companies to create long-term commercial relationships.
The Agency Group Australia (ASX: AU1)
Real estate group The Agency Group Australia posted a strong financial results for the half year ending December, with the result attributed to continued growth into new states across the nation.
A 33% increase in underlying EBITDA was revealed for the period to $2.14 million, while 2,910 properties were sold for a combined value of $3.1 billion.
The Agency managing director and chief executive officer Geoff Lucas says he expects this revenue growth to continue from expanded agent numbers and new geographical markets.
RooLife Group (ASX: RLG)
Another small cap with a positive December half year was China-focused e-commerce and digital marketing company RooLife Group, which posted a 304% increase in revenue from operations to $8.1 million compared to $2 million in the previous corresponding period.
Underpinning this was a 723% growth in product sales as its direct-to-consumer sales platforms continued expanding.
Propelling this strong growth was RooLife’s continued investment in technology and customer acquisition strategies.
Cash Converters (ASX: CCV)
Cash Converters has a strong balance sheet to pursue inorganic growth opportunities including acquisitions after a positive H1 FY2022.
Despite COVID-19 lockdowns, the company’s revenue grew 23% to $115.2 million compared to H1 FY2021 levels.
This was boosted by increases to the Cash Converters loan book which expanded to $192.1 million, with the company focused on attracting new customers with different loan products.
The company declared a fully franked interim dividend for the period of $0.01 per share.
Resource Base (ASX: RBX)
Aspiring rare earths developer Resource Base will begin drilling its wholly-owned Mitre Hill project next month.
The company has pegged up 1,509sq km of tenements in the southern margin of the Murray Basin that spans South Australia and Victoria.
With recent discoveries in the region at nearby tenements, Resource Base believes the area is an emerging REE precinct that is potentially of “global significance”.
Carawine Resources (ASX: CWX)
Shares in Carawine Resources rocketed this week on the back of an unsolicited on-market all-cash takeover bid from QGold that valued Carawine at $0.21 per share.
The bid was a 27.27% premium to Carawine’s last trading price of $0.164.
Carawine’s board advised its shareholders to “take now action” regarding the takeover, while it evaluates the bid.
QGold’s broker Ord Minnett lodged the bid on its behalf on Tuesday, with the offer due to close towards the end of April.
Perth-based Carawine has a portfolio of projects prospective for copper, gold, nickel and cobalt. Three projects are in WA and a fourth is located in Victoria.
The week ahead
Naturally the progress or otherwise of the Ukrainian invasion will be the dominant influence on world markets but there are quite a few Australian releases to watch out for as well.
The main one is GDP figures to be released on Wednesday, which are expected to come in at around the 3.3% mark, which would be a reasonable result given the continuing impact of COVID-19 lockdowns and restrictions.
Other local data to watch out for includes retail trade, private sector credit, house prices, the balance of payments, international trade, building approvals and retail sale.
The other big event for the week is the meeting of the Reserve Bank board on Tuesday, although there is little chance of any changes to interest rate settings given the fairly relaxed stance on inflation so far.
Overseas, the big question remains how tough the US Federal Reserve will be about raising interest rates in March in light of the Ukrainian situation.
Some economists are forecasting a lower-than-expected rise due to the uncertain international situation while others think the Fed will not be distracted from its task of controlling inflation and will continue with a substantial hike in March.
On Wednesday, US Fed chairman Jerome Powell is due to testify before Congress so there will be no shortage of interpretations flowing from that testimony.
The State of the Union address by US President Biden on Monday will also be keenly watched for any economic ramifications.
Other releases of note in the US include jobs numbers, manufacturing and construction figures, factory orders, services and non-farm payrolls.
Chinese manufacturing and services numbers round out what is sure to be a very busy week for world markets as they react to events in the Ukraine and elsewhere.