Market wrap: Santa Claus rally gets market close to record high
WEEKLY MARKET REPORT
The Australian share market continued to hover close to a record high before the Christmas break after an extraordinary Santa Claus rally over November and December.
The ASX 200 index is now only around 120 points or 1.6% below the record high set in 2021 after rallying an impressive 9.8% during November and December.
It closed down just 2.5 points Friday to 7,501.6 points amid continuing strength in mining companies, with the index up 0.79% for the week – just 0.87% off of its 52-week high.
Market closing in on a record
The market will be closed on Monday and Tuesday for Christmas Day and Boxing Day before trading starts again on Wednesday so there is still a chance the record could be broken this year, although the chances look slim.
What can’t be underestimated though is the strength of the rally in share markets as optimism built that official interest rates may have finally peaked and could start heading down next year.
That bullish soft-landing scenario has somewhat reluctantly been confirmed by central bankers – most notably the US Federal Reserve – although it is yet to be seen if the slowing economy both here and globally manages to avoid an overshoot into recession.
That is churlish talk though and there was little sign of market fatigue on Friday as Australia’s mining sector continued to surf along nicely on the back of rising commodity prices.
Fortescue powers to a fresh high
Fortescue Metals (ASX: FMG) was a great example, powering to a record high on the back of resurgent demand for iron ore from China and a tight market with rising prices.
Iron ore is up more than 25% in the second half of 2023 which is the main factor driving the price of Fortescue up another $0.32 or 1.1% to $28.35.
That is a great run for a stock that was threatening to break below $19 a share back in May this year.
It was a similar, if more muted situation for the other iron ore giants, with BHP (ASX: BHP) shares fading just 1c to $49.73 and Rio Tinto (ASX: RIO) shares flat at an impressive $134.40.
It was a similar situation for some of the other mining categories such as lithium and gold, with the virtuous circle of US dollar depreciation and therefore relative upwards valuations on mineral prices helping to plump up mining share prices more generally.
Banks not as strong as miners
While the miners are firing along nicely, it is worth pointing out that the other half of the traditional Australian market dumbbell – the banks – have enjoyed big rises in November and December but overall have not been enjoying nearly as much action as the miners.
Looking at market leader Commonwealth Bank (ASX: CBA), it eked out a small fall of 6c to $110.5 on Friday but over the past year Commonwealth shares are still only 4.7% higher.
ANZ (ASX: ANZ) shareholders are also up about 7.5% for the past year but those in NAB (ASX: NAB) and Westpac (ASX: WBC) are looking at small annual losses.
Dividends for the banks are holding fairly solid but the rise in interest rates is not all good news for the banks, with investors worried that the small rises in distressed borrowers could leave a dent in earnings.
Stock specific news pushes through
Within those general moves there were quite a few stock specific changes as well.
Going against the generally firm mining trend were shares in Core Lithium (ASX: CXO) which plunged more than 22% before closing down 21.2% after the company announced it was reviewing its business strategy due to turbulent lithium prices.
Heading in the opposite direction were shares in taxi company A2B Australia (ASX: A2B) which surged 20% after it received a $182 million buyout offer from Singapore-listed transport company ComfortDelGro.
Shares in Synlait Milk (ASX: SM1) dropped more than 6% after it advised that increased borrowing costs and changes in margins would probably see its half-year net profit fall as its dispute with a2 Milk continues.
Meanwhile a2 Milk Company (ASX: A2M) shares rose 0.8% after the company said it should meet its 2024 guidance and also shrugged off its commercial disagreement with Synlait.
The healthy day on the Australian exchange followed on from a 1% rise in the S&P 500, which is now within 1% of its all-time high after it took a tumble earlier in the week.
Small cap stock action
The Small Ords index rose 1.04% for the week to close at 2,889.5 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Aguia Resources (ASX: AGR)
Aguia Resources has made an off-market takeover offer to acquire Andean Mining, a South American developer with high-grade gold, silver, and copper projects in Colombia, including the Santa Barbara gold mine.
The proposed deal involves Aguia offering approximately 453 million shares for 100% of Andean’s shares, making Andean shareholders owners of about 44% of Aguia’s capital.
Aguia sees this as an opportunity to gain a cash-generating asset, planning to expand the Santa Barbara mine’s capacity and explore adjacent areas.
Additionally, Aguia aims to progress Andean’s other projects, including the Atocha and El Dovio projects, while continuing its work on its Brazilian assets.
If the takeover succeeds, Andean managing director William Howe is set to join Aguia’s board, enhancing the company’s South American portfolio.
Entyr (ASX: ETR)
Environmental technology specialist Entyr signed offtake and collaborative agreements with Trafigura.
Trafigura is a leader in the commodities industry, focusing on solutions for tyre waste.
The agreements include Trafigura receiving all products derived from end-of-life tyres from Entyr after a six-month ramp-up period.
Additionally, Trafigura has committed to a minimum investment in Entyr shares and will collaborate on technology and infrastructure development.
Entyr’s chief executive officer views the partnership as a strategic step for the company’s growth and technology focus.
Earlier in the week, Entyr received a $9.34 million R&D tax incentive for its work on rubber waste processing.
HALO Technologies (ASX: HAL)
HALO Technologies appointed Douglas Boyce as chief executive officer of its UK subsidiary, HALO Invest, to drive the company’s European expansion.
Mr Boyce comes with over 30 years of financial services experience, previously having managed SS&C Hubwise, where he led the company’s growth in assets under administration from around $930 million to over $35 billion before the business was acquired by NASDAQ-listed SS&C Technologies in 2022.
His expertise aligns with HALO’s investment platform offerings and he has held prominent roles at FNZ and as a non-executive director at Investment Tribe.
The appointment is central to HALO’s strategy, following its acquisition of Resilient Funds Management for UK market entry.
HALO, known for its investment tools and services, has seen substantial growth in funds under management and client numbers, with Mr Boyce set to enhance its UK presence.
Sunstone Metals (ASX: STM)
Sunstone Metals continues to advance its Limon gold and silver discovery at the Bramaderos project in Ecuador.
Supported by a $5 million share placement completed a week prior, Sunstone is planning an aggressive exploration campaign.
Managing director Malcolm Norris highlighted Limon as a major discovery, with a potentially significant gold-silver system with shallow, high-grade mineralisation.
The company last month announced an initial exploration target for Limon, indicating a substantial gold equivalent resource, in addition to its existing gold-copper-silver porphyry mineralisation at Brama-Alba.
Sunstone has identified widespread epithermal gold-silver mineralisation within the Limon area, planning follow-up trenches in early 2024.
The company’s primary focus remains on exploring higher-grade epithermal mineralisation around the Limon, Brama, and Porotillo porphyry systems.
Radiopharm Theranostics (ASX: RAD)
Radiopharm Theranostics is preparing for a trial on non-small cell lung cancer (NSCLC) treatments, supported by $2.1 million in proceeds from a recent entitlement offer and a $4.8 million research and development tax refund.
Involving the novel radiotherapeutic 177Lu-RAD 204 from Radiopharm’s NanoMabs platform, the trial will target PD-L1-positive NSCLC and begins in January at Brisbane’s Princess Alexandra Hospital.
Radiopharm is also advancing a diverse pipeline of cancer treatments, including a phase II and three phase I trials.
The week ahead
With Christmas holidays and a long trading break there is little in the way of statistical releases, offshore markets or other market moving events to look out for.
Monday and Tuesday the market is closed.
It is hard to imagine private sector credit numbers out on Friday doing too much, although they are expected to show that credit continues to rise a little.
It is likely to be the New Year before any real sense of local or offshore direction starts to creep into trading, although the pattern of bullish moves followed by the odd pullback seems to have become entrenched recently.