Weekly review: perfect storm lashes Australian market
WEEKLY MARKET REPORT
Like a perfect storm a range of different factors conspired to drive the Australian share market to its fifth straight loss and the worst weekly fall since January.
One of the biggest factors behind the loss was a terrible week for BHP shares (ASX: BHP), which once again dropped by 0.7% to just $44.34, bringing its weekly loss to a thumping 16%.
Investors certainly haven’t warmed to the Big Australian’s plans to decarbonise by rolling its oil and gas portfolio into Woodside, even though BHP’s strong $23 billion underlying profit and stellar dividend were impressive and plans to end its dual listed structure were seen as a positive.
Fast slumping iron ore prices have whacked all of the big iron ore miners, which hasn’t helped either.
Rio Tinto (ASX: RIO) shares lost 10.9% for the week while Fortescue Metals (ASX: FMG) fell 8.7% for the week.
US futures, longer lockdowns and taper tantrum all issues
Other influences that helped to drive the ASX 200 down by 0.1% on Friday to 7460.9 points – 2.2 % for the week representing about $50 billion – included weak US futures, a worsening Delta wave of COVID-19 which drove a series of longer and tighter lockdowns, the turmoil in Afghanistan, a continuing costly regulatory crackdown in China and minutes from the US Federal Reserve which confirmed that the tapering of bond purchases is closing in.
Not even a continuation of fairly solid profit results could protect the market from a feeling that this was as good as it gets with shares in bionic ear company Cochlear (ASX: COH) down a hefty 7.4% to $237.05 a good example.
Mixed reaction to profit reports
While the bulk of the ASX 200 companies have now reported, the reactions to their results were more mixed, with some companies selling down despite strong profit results and dividends.
One issue with investors was the predicted rise in costs due to inflationary pressures, which caught up stocks such as Seven West Media, Netwealth, Breville and Bendigo Bank while others reported excellent results but were still below expectations, which included companies such as Cochlear, Sims and Sezzle.
Supply chains groaning
Global supply chains are still struggling with the pandemic which has closed the major Chinese port of Ningbo-Zhoushan and also saw Toyota slash its car production forecast by 40% due to chip supply issues.
Shipping in general has been difficult for many companies with Breville another one struggling with rising shipping costs and price inflation for components.
After the ASX 200 remained strong last week through the worsening COVID-19 pandemic, a series of ever higher case numbers out of NSW which extended its lockdown until the end of September and also Victoria weighed heavily on sentiment.
In specific news on Friday, shares in TPG Telecom (ASX: TPG) fell 0.5% on its first half results, with net profit down 7% to $76 million for the half even as revenue improved 71% to $2.63 billion.
TPG is looking to follow in the footsteps of Telstra which sold 49% of its mobile tower assets, reviewing strategic options for its towers as well.
Poultry producer, Inghams (ASX: ING) lifted 4.6% after net profit more than doubled to $83.3 million and poultry volumes and revenue rose slightly by 4%.
Showing the impact of the lockdowns, Sydney Airport (ASX: SYD) fell to a first half after tax loss of $97 million and will not pay an interim distribution.
Small cap stock action
The Small Ords index fell 1.29% to close at 3472.7 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
SRJ Technologies (ASX: SRJ)
SRJ Technologies will supply its BoltEx inventory to Qatar Petroleum’s facilities in the offshore Qatar region.
SEMBCORP Industries granted the contract to SRJ and its local partner EnerMech.
Under the deal, SRJ and EnerMech will deliver flange management services including hot-bolting scopes using SRJ’s BoltEx.
This work will be carried out in the Al-Shaheen oil field as part of the phase two Gallaf project comprising a number of tie-ins prior to shut downs in October.
K-TIG (ASX: KTG)
High-speed welding technology company K-TIG has inked an agreement with Key Plant Automation, which will see K-TIG’s products distributed in the UK.
The companies plan to establish an advanced manufacturing demonstration facility in the country with in-house capabilities.
This facility will showcase a turnkey solution for the world’s nuclear decommissioning efforts.
As part of the UK expansion effort, K-TIG will establish a local sales force to work with its distribution partners to build brand awareness and generate new sales opportunities.
Envirosuite (ASX: EVS)
After more than doubling its revenue in FY 2021, Envirosuite is anticipating a bright future for its environmental intelligence solutions.
The company’s total revenue for FY 2021 ending June was $48.6 million, which was 104% higher than the previous corresponding period’s figure of $23.8 million.
Envirosuite is expecting an even stronger performance in FY 2022 with chief executive officer Jason Cooper noting the company plays a “vital role” in adhering to environmental, social and governance regulations with its environmental intelligence technology that produces real-time, predictive and optimisation value.
“Globally, the growing importance of ESG, the advancement of the United Nation’s Sustainable Development Goals, and the recent US$1 trillion Biden infrastructure bill, all create strong tailwinds for Envirosuite in FY 2022 and beyond,” he added.
Barton Gold (ASX: BGD)
Barton Gold now has the required permits to begin phase one drilling at its Tunkillia gold project in South Australia.
The South Australian Department for Energy and Mining granted Barton approval for its Exploration Program for Environment Protection and Rehabilitation (E-PEPR).
This was the last permit required to begin drilling with Barton managing director Alexander Scanlon saying the company had planned a “robust program”.
Drilling kicked-off on Friday and will comprise 39 reverse circulation holes for 6,000m with the company targeting extensions to known mineralisation.
Argent Minerals (ASX: ARD)
Gold mineralisation has been intercepted during Argent Minerals’ phase two drilling program at its Pine Ridge project in New South Wales.
Drilling hit numerous gold intersections with highlights being 6m at 10.52g/t gold from 60m, including 2m at 27.94g/t gold from 62m; 6m at 3.67g/t gold from 64m, including 1m at 12.50g/t gold from 68m; 6m at 1.99g/t gold from 64m; 11m at 1.93g/t gold from 136m; and 5m at 2.44g/t gold from 94m, including 1m at 9.55g/t gold from 94m.
Argent managing director George Karageorge noted the second batch of assays indicate gold at the project is open at depth and in most directions.
“We are confident this project will deliver more gold mineralisation with a view to commencing maiden resource estimation once the remaining holes have been completed,” he added.
Invex Therapeutics (ASX: IXC)
Invex Therapeutics has reached another milestone this week after the company was granted the European patent for its elevated intracranial pressure (ICP) treatment Exenatide.
This latest patent means Invex’s IP is now protected in Europe and the US – covering the company’s GLP-1 receptor agonists, including Exenatide, in reducing elevated ICP that is associated with idiopathic intracranial hypertension (IIH).
Invex executive director Dr Tom Duthy said the latest patent will protect Invex’s IP in Europe until August 2035.
The company has repurposed and trademarked Exenatide as Presendin to treat ICP associated with IIH.
The week ahead
There is every chance that the remaining profit results out in the coming week could be of the gloomier variety, with disappointing results often bunching up near the end of reporting season.
Some of the better-known companies set to report include Ampol, Boral, Ansell, Scentre, SEEK, Nine Entertainment, Medibank Private, Afterpay, Woolworths, A2 Milk, Qantas, Wesfarmers, Crown and Fortescue Metals.
Another very important thing to monitor is the release of some of the key inputs into the June quarter economic growth (GDP) calculations – business investment and construction work activity.
Overseas, the big thing to watch out for is the key meeting of central bankers, economists and policy makers at the US Federal Reserve’s Jackson Hole symposium.
There will also be data releases on US economic growth and personal income and spending.
Naturally, the progress of the Delta variant of the COVID-19 across Australia will also be of great interest for market watchers, with the extensive and economy harming lockdowns obviously a strong negative that market watchers are no longer willing to look past.