Weekly review: stocks cautiously coming out of lockdown

WEEKLY MARKET REPORT

The gradual emergence of Sydney and Melbourne from crippling lockdowns has pushed the Australian share market higher for the second week in a row.

The surprise announcement that NSW will scrap home quarantine requirements for vaccinated offshore travellers and that Melbourne won’t require quarantine for vaccinated travellers returning from NSW after a negative test was all investors needed to hear so that they could snap up travel and aviation stocks.

Index pushing cautiously higher in October

By the end of trade on Friday the ASX 200 had risen 0.7% to 7362 points, pushing the index up 1.2% for the week and 2.5% higher for October.

You wouldn’t call trade ebullient but it is much better than a weak and volatile September, with the US market also helping with some positive earning news.

Rising base metal, oil and gold prices were also helping the market, pushing up share prices in a range of companies.

Qantas set to fly faster

Following the announcement by New South Wales Premier Dominic Perrottet that home or hotel quarantine for double-vaccinated travellers arriving in the state would not be required from 1 November, Qantas brought forward its international flight restart by two weeks.

Qantas (ASX: QAN) shares finished up 2% on Friday, also buoyed by an announcement that it had sold 14 hectares of land held at Mascot for $802 million to a consortium led by property group LOGOS.

Other travel and aviation stocks were also higher, with online booking company Webjet (ASX: WEB) jumping 4.1% to $6.43, Flight Centre (ASX: FLT) up 3.8% to $22.56 and Regional Express Holdings (ASX: REX) adding an impressive 6.1% to $1.56.

Technology stocks were also broadly higher with the index up 1.4% on Friday and sector leader Afterpay (ASX: APT) up 1.8% to $122.78.

Of course, there were areas of weakness due to disappointing news and Rio Tinto (ASX: RIO) shares were soggy, falling 0.9% through the important $100 barrier to $99.60 after a quarterly update saw it once again cut back on iron ore shipments due to severe staff shortages.

Small cap stock action

The Small Ords index gained an impressive 1.90% this week to close on 3526.4 points.

October 2021 ASX 200 small ords chart
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Envirosuite (ASX: EVS)

Environmental technology company Envirosuite secured a contract with NASA to take part in the X-59 Community Response Testing project.

Under the deal, the company will provide a software platform to collect, process and visualise data from the US space agency’s low-sonic boom flight tests involving the experimental X-59 Quiet Supersonic Technology (QueSST) aircraft.

The first phase of testing will run to the end of 2023 with the contract expected to generate about $100,000 in annual recurring revenues for Envirosuite.

NASA’s project involves the design and construction of a piloted, single-seat supersonic X-plane with technology that is intended to reduce the volume of a sonic boom.

The agency aims to collect data that would allow supersonic flight over land, which would dramatically reduce travel time within the US or to anywhere in the world.

Tietto Minerals (ASX: TIE)

West Africa-focused gold explorer Tietto Minerals returned more high-grade gold intercepts from an ongoing infill drilling program at its Abujar gold project in Côte d’Ivoire.

A total of 30,000m of diamond drilling is being undertaken across the project with a view to convert  a portion of Tietto’s 1.65 million ounces of indicated resources to measured status. The company expects to mine these measured resources within the first two years of production.

The latest assays include a 22-metre intersection grading at 5.62 grams per tonne gold from 97m including 5m at 17.87g/t, along with two higher grade 2m intercepts grading 59.77g/t and 50.35g/t gold.

Assays are pending for a further 66 holes and the remaining 5,755m of infill drilling is expected to be completed by the end of the month. A resource update is anticipated by the end of December.

The drilling results came a day after Tietto announced its managing director Dr Caigen Wang had exercised options to invest $1 million in the company as a demonstration of his commitment to bringing Abujar into production.

Nova Minerals (ASX: NVA)

Another gold explorer, Nova Minerals announced “spectacular” broad zones of high-grade gold at the new RPM North target within its Estelle gold project in Alaska, US.

Drilling highlights included an impressive 400m intersection grading 3.5g/t gold, containing several higher-grade intervals including 287m at 4.8g/t, 132m at 10.1g/t and 3m at 97.8g/t gold.

Nova chief executive officer Christopher Gerteisen said the RPM target is shaping up to be a very large high-grade gold system that remains “wide open”.

The company aims to deliver a maiden resource for RPM North by late 2021.

Plenti (ASX: PLT)

Fintech lender Plenti accelerated the timeframe in which it aims to achieve a $1 billion loan book following a record September quarter that saw loan originations grow 140% year-on-year.

The company has set a new target of December 2021, rather than March 2022, to reach this loan book value and also expects to be cash flow positive in this timeframe.

Plenti hit a new monthly record with $95.5 million in loan originations in September, up 159% on September 2020.

Strong performance was achieved across all three of the company’s lending verticals – automotive, renewable energy and personal.

Although accounting for the lowest value of loan origins, the renewable energy division experienced the highest quarter-on-quarter growth of 26%.

Heavy Minerals (ASX: HVY)

ASX newbie Heavy Minerals has uncovered visible garnet and ilmenite in initial holes of a maiden drilling program at its Port Gregory garnet project in Western Australia.

The company’s 12,000m, 300-hole aircore drilling program aims to extend the mineralised footprint beyond the current exploration target of 3.5-4.5Mt of contained garnet, as well as define a JORC-compliant mineral resource.

Heavy Minerals chief executive officer Nic Matich said the early drilling results are “highly encouraging” and bode well for the remainder of the program. Drilling is scheduled for completion in eight weeks.

In parallel, the company has completed a passive seismic survey with “encouraging results” to map basement depth and assist in optimising the drilling program.

Heavy Minerals floated on the ASX last month following an oversubscribed $5.5 million initial public offering.

The week ahead

Continuing progress, or otherwise, in the battle to contain COVID-19 infections and open up further will obviously be vital in helping to continue the market momentum in the coming week.

There will also be some interest in the Reserve Bank with the release of the minutes from the 5 October board meeting potentially including some commentary on the Financial Stability Review and the decision by the Australian Prudential Regulation Authority (APRA) to tighten home lending rules.

Other things to watch out for during the week include the Commonwealth Bank’s Household Spending Intentions report for September, weekly credit and debit card spending, consumer confidence figures, September skilled job vacancies, labour force estimates, payroll figures, and flash estimates of manufacturing and services activity.

Overseas, Chinese quarterly economic growth numbers should give an indication on how quickly the economy is slowing due to a range of issues including the ongoing fight against COVID-19, the government crackdown on several industries and ongoing issues in the highly leveraged property market.

There is a range of US measures to check on including industrial and manufacturing production, chain store sales, housing starts and building permits, mortgage applications, unemployment benefits, existing home sales, manufacturing and services.

The US profit reporting season continues in full swing in the coming week with just some of the bigger names reporting including State Street, Halliburton, Johnson & Johnson, Philip Morris, Procter & Gamble, Netflix, United Airlines, Abbott Labs, IBM, Tesla, American Airlines, AT&T, Dow, Whirlpool, Mattel and Intel.

This week’s top stocks

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