Weekly review: share market struggles to climb the wall of worry
WEEKLY MARKET REPORT
Uncertainty has continued to grip the Australian share market as it once again struggles to climb the wall of worry in front of it.
Many investors are casting a worried eye at the US market and particularly the tech heavy NASDAQ, concerned that it might continue to shed value as technology stocks stumble after an astonishing run upwards.
Have the tech stocks fallen enough yet or is there is a long way still to go?
It is the sort of question that has no answer from a fundamental perspective given the multiples that apply to the tech stocks already presuppose future growth that is inherently unpredictable.
Bank stocks continue to deflate
It doesn’t help that Australia’s once dominant dividend machine – the banking sector – continues to deflate gradually and the big miners seem to be captive to iron ore prices that can oscillate wildly from day to day.
Still, there is room for some guarded optimism as the share market just managed to avoid a fifth straight weekly fall – an occurrence that hasn’t happened for four years.
However, it was a really close-run thing with the market initially ignoring a weak lead from Wall Street on Friday and rising 0.7% in the morning before wilting as the day went on an eventually ending up just 5.1 points ahead for the week
By the end of trade, the ASX 200 was down 18.7 points or 0.3% to close at a humble 5864.5 points.
Technology and miners ride to the rescue
It was only a reasonable performance by technology stocks, mining stocks enjoying one of their up days and a rise from investment bank Macquarie Group (ASX: MQG) that got the market just across the line for a weekly rise.
Still, the ASX 200 is still down 3.2% for September and there is a dearth of information for a while from here apart from the hopeful gradual emergence of Melbourne from lockdown and perhaps some continuing signs that the Australian economy is recovering from recession somewhat faster than the pessimists have predicted.
Internationally, the continuing US election campaign is hardly an encouraging backdrop for the US market, which has continued to play an outsized role in directing our own market, albeit with our unit moving in a more muted way in both directions
The other thing to remember is that the share market has come a long way from the “ides of March’’ so even a straight line from here to the end of the year would mean the market is up 29% from its lows – not a bad performance during a global pandemic.
Macquarie breaks the trend
The major banks were once again a negative force on Friday with ANZ (ASX: ANZ) the worst of them falling 1.4% to $17.07.
The two big Sydney headquartered banks, Westpac (ASX: WBC) and Commonwealth (ASX: CBA) dropped an identical 1% while NAB (ASX: NAB) was the best performer, shedding just 0.1%.
Despite its recent earnings woes, investment bank Macquarie Group (ASX: MQG) managed to row hard in the opposite direction with a 2.5% jump to $122.56.
The big miners had an up day on their recent iron ore see-saw with BHP (ASX: BHP) and Rio Tinto (ASX: RIO) adding a nice, uniform 1.3%, while Fortescue Metals (ASX: FMG) was up 1%.
It was a reasonable day for some of the smaller lithium miners too with producer Galaxy Resources (ASX: GXY) up an impressive 7.2% and Pilbara Minerals (ASX: PLS) up 6.9%.
Gold stocks also did well with Saracen Minerals (ASX: SAR) up 4.2% and St Barbara (ASX: SBM) up 1.5%.
It was also a recovery session for the technology stocks with Afterpay (ASX: APT) enjoying a 2.7% rise to $75.80, Xero (ASX: XRO) up 1.6% to $92.12 and NEXTDC (ASX: NXT) up 2.1% to $11.79.
Blood products giant CSL (ASX: CSL) helped to pull the index lower with a 1.1 % drop to $282.62.
Also acting like an anchor on the ASX 200 were the big retailers with Wesfarmers (ASX: WES) down 1.6 % to $44.08 and Woolworths (ASX: WOW) down 1.2 % to $36.05 while toll road group Transurban (ASX: TCL) fell 3.1 % to $13.86.
Gas gets a boost
Prime Minister Scott Morrison’s announced this week a plan to boost gas production and supply within Australia.
Mr Morrison pledged to re-set the east coast gas market and create a more transparent and competitive Australian gas hub by unlocking supply, delivering an efficient pipeline and transportation market, and empowering gas customers.
The federal government will set new gas supply targets for states and territories.
It will unlock five key gas basins, beginning with Beetaloo and the two Queensland basins, at a cost of $28.3 million to develop plans for the basins.
The news sent energy juniors soaring whether their projects are based in Australia or not.
Small cap stock action
The Small Ords index outperformed the larger indexes, adding 2.15% for the week to close on 2780 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Kingston Resources (ASX: KSN)
The latest round of assays from Kingstone Resources’ Livingstone gold project have kept up the company’s positive news flow, with drilling intercepting high grades within broader zones of gold mineralisation.
A 1m section in one hole at the Kingsley prospect graded 31.24g/t gold and follows hot on the heels of promising drilling results announced in August from the Misima gold mine in Papua New Guinea.
Kingston has confirmed it is positioning itself to be the next low-cost, large-scale gold producer in the Asia Pacific with both projects to its name.
Digital Wine Ventures (ASX: DW8)
Digital Wine Ventures is preparing to launch Wine Ark temperature-controlled storage facilities nationwide in an effort to improve the buying experience for WineDepot’s wholesalers and their customers.
Wine Ark was first introduced to private collectors in 1999 by chief executive officer Dean Taylor and will be adapted to a commercial scale before being rolled out to Brisbane, Sydney, Melbourne, Adelaide and Perth.
WineDepot will gear up its logistics fleet to cater to an expected increase in sales once the new facilities are in place.
Digital Wine has also this week announced its entry into the New Zealand market with the appointment of a regional business development manager.
The company also recruited six new faces to join its Australian team in the key wine-producing regions of Margaret River and Yarra Valley.
Kairos Minerals (ASX: KAI)
Pilbara explorer Kairos Minerals announced it had identified a large gold target at its Kangan project, in the same region as De Grey Mining’s giant Hemi project.
The target comprises four new gold finds discovered from recent soil geochemistry and aeromagnetic data, one of which sits close to Hemi.
It is believed to sit in a “geologically-favourable” position for potential intrusive-hosted gold deposits.
Heritage surveys and drill testing will begin next quarter.
TNG Limited (ASX: TNG)
Mineral processing technology company TNG told the market this week that it would be developing carbon dioxide-neutral technology to produce green hydrogen energy in partnership with German strategic engineering company SMS Group.
TNG believes substantial quantities of carbon dioxide emissions could be eliminated with the introduction of green hydrogen as a reduction agent at its planned processing plant.
The technology could also be applied to the production of hydrogen and syngas from various fossil, biogenic and waste materials, opening up potential opportunities for the two partners in the hydrogen and e-fuels economy space.
Southern Gold (ASX: SAU)
South Korean explorer Southern Gold has been given the go-ahead for a five-hole drilling campaign at its Weolyu gold-silver project.
The company aims to determine if grade continues at depth to establish an exploration target framework.
Regulatory approvals have also been received for planned drilling at the Dokcheon project, to begin after or concurrently with work at Weolyu and exploration at the nearby historic Aphae project – also in South Korea.
Osteopore (ASX: OSX)
Medical technology company Osteopore has signed a research agreement with the National University of Singapore for a preliminary in-vivo study to determine if Osteopore’s 3D-printed bioresorbable products combined with bone marrow aspirates could be used to regrow bone following mandibular reconstruction surgery.
It will provide pre-clinical data for the evaluation of future studies, and be used to support first-in-man studies.
Osteopore will guide the work and retain commercialisation rights relating to any intellectual property developed through the collaboration.
Tesoro Resources (ASX: TSO)
Tesoro Resources confirmed this week that two step-out drill holes at Ternera prospect within the El Zorro project in Chile had encountered a wide zone of sporadic visible gold.
The results are believed to be “game changing” for the prospect, extending the mineralised footprint by 300m.
Drilling was designed to target a geophysical anomaly north and south of the Ternera zone.
Interviews
TNG Limited (ASX: TNG) managing director Paul Burton discusses the latest news from the company’s 100% owned Mount Peake vanadium-titanium-iron project in the Northern Territory.
Including the planned use of it of the company’s carbon-neutral hydrogen technology (TIVAN) with German engineering company SMS Group
Montem Resources (ASX: MR1) managing director Peter Doyle discusses the company listing on the ASX this week with the aim to establish itself as a supplier of Canadian coking coal to the global steel industry.
Southern Gold (ASX: SAU) managing director Simon Mitchell tells us about the company recently receiving approval to commence drilling for gold and silver in South Korea.
Earlier this month Southern Gold raised $10.2 million and welcomed Dr Quinton Hennigh’s Crescat Capital to the register.
The week ahead
There are a few domestic things to watch for this week but in the main the global picture on the pandemic and the US election will continue to be the main drivers.
Reserve Bank Deputy Governor Guy Debelle is delivering a speech on Tuesday and the main statistical releases for the week cover wages, consumer confidence, credit and debit card spending, retail trade, total household wealth for the June quarter, labour force and international trade.
Internationally, the New Zealand Reserve Bank interest rate decision on Wednesday is of some interest although a rate change is unlikely and US numbers in home sales, manufacturing, house prices and sales and testimony by the US Federal Reserve chair Jerome Powell will all be watched carefully.