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Weekly review: SVB banking dramas cause big ASX slump

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By John Beveridge - 
SVB Silicon Valley Bank bank drama ASX slump March 2023

WEEKLY MARKET REPORT

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The Australian share market slumped hard on Friday in its biggest one day fall since 14 September last year.

The greatest impact was on the banking sector after a shock crisis for small Silicon Valley Bank SVB Financial Group which saw its shares drop 60%.

Technology focussed SVB Financial had sought to raise US$2.25 billion – more than a third of its market capitalisation – after reporting a US$2 billion loss from selling assets following a larger than expected fall in deposits.

Bank shares bear the brunt

That smashed bank stocks globally and Australia was no exception with Commonwealth bank (ASX: CBA) shares falling 3.3%, National Australia Bank (ASX: NAB) down 3%, with Westpac (ASX: WBC) and ANZ (ASX: ANZ) both falling 2.6%.

Local factors also played into the banking fall with ASIC reporting that six of Australia’s financial giants had paid $4.7 billion to compensate customers who suffered loss or detriment after being charged fees for no service or receiving non-compliant advice.

The Federal Court also handed down a $10 million penalty to ANZ in relation to its “home loan introducer program”.

Investors are worried that bank margins might be squeezed in the coming year, despite rising interest rates.

Growth stocks set to suffer

While the damage to the global banking sector was significant, the technology focus of SVB Financial is expected to flow through to technology companies and could hit the financing of technology and the value of growth stocks.

Overall the Australian market as measured by the ASX 200 shed a significant 166.4 points or 2.3% to 7144.7 points.

The damage was quite widespread with the worst performances by the energy sector down 3.4% and the materials sector falling 3.4% as well.

Even market leading miners such as BHP (ASX: BHP) were slammed, with its shares falling 3.4%.

Five losing weeks in a row

The widespread losses saw the ASX 200 index lose 2% for the week and suffer its fifth weekly decline in a row.

The banking shock wasn’t the only thing forcing markets lower. After two days of testimony before Congress by US Federal reserve bank chair Jerome Powell, the Fed will raise its benchmark interest rate by 50 basis points on 22 March rather than the expected 25 basis points.

Investors are now worried that the Fed will hike too hard and for too long, pushing the US economy into a recession.

They are also concerned that the strong labour market will keep upwards pressure on wages, forcing inflation higher and fuelling the problem.

These concerns have led to greater interest than usual on reports next week on consumer and wholesale inflation and retail sales data.

Small cap stock action

The Small Ords index fell 1.79% for the week to close on 2810.0 points.

Chart March 2023 ASX 200 small ords

ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Surefire Resources (ASX: SRN)

Junior explorer Surefire Resources has revealed a significant exploration target for its Victory Bore project in Western Australia.

The project’s exploration target estimate is between 682-1,190Mt grading between 0.2-0.43% vanadium oxide.

Surefire managing director Paul Burton said the new target had propelled Victory Bore to world-class status and follows a JORC resource that was announced last month.

Victory Bore covers approximately 87.5sq km across two exploration licences, securing an approximate 25km strike length of near-contiguous vanadiferous magnetite.

BBX Minerals (ASX: BBX)

Brazilian-focused precious metals explorer BBX Minerals is testing a bioleaching process that uses natural microbial techniques to extract minerals sustainably.

The company will send 200kg of material from four drill holes to EcoBiome Metals for pilot testing and optimisation.

These further tests are expected to improve on the initial pilot plant testing results until the process is fully optimised, which the company anticipates will happen by Q3 2023.

BBX’s assets are the Três Estados PGM and Ema gold projects in the Apuí region of Brazil’s southern Amazon.

Pentanet (ASX: 5GG)

Australian cloud gaming provider Pentanet has partnered with Optus Mobile to offer the NVIDIA GeForce NOW cloud gaming service to Optus customers.

As Australia’s exclusive distributor of the cloud gaming service, Pentanet aims to enhance the GeForce NOW user experience on Optus SubHub using the CloudGG user management platform for GeForce NOW and focusing on 5G technology.

The partnership will grant Optus customers in Australia access to the service via the Optus SubHub subscription management platform. Pentanet will leverage Optus’ network to strengthen its position in the gaming market and expand its reach across the country.

Pentanet also announced this week that it has partnered with Cambium Networks to deploy 5G services through a Network-as-a-Service agreement, enabling Pentanet to spread its capital expenditure for 5G network expansion over future years.

Prescient Therapeutics (ASX: PTX)

Prescient Therapeutics has received an orphan drug designation from the US FDA for its lead candidate PTX-100 to treat T-cell lymphomas, including cutaneous TCL.

This designation provides a guaranteed market exclusivity of seven years from regulatory approval, and a waiver of Prescription Drug User Fee Act fees.

PTX-100 is a first-in-class compound that blocks the cancer growth enzyme geranylgeranyl transferase-1 and has shown promising results in a phase 1b expansion cohort study.

Sayona Mining (ASX: SYA) and Piedmont Lithium (ASX: PLL)

Joint venture partners Sayona Mining and Piedmont Lithium have produced their first spodumene concentrate at the North American Lithium operation in Quebec, Canada.

The operation is 75% owned by Sayona and 25% owned by Piedmont. The first shipment of spodumene concentrate is scheduled for July 2023, with four shipments planned for the first half of the 2024 financial year. The partners are aiming to produce between 85,000t and 115,000t of lithium from the restarted project in that initial period.

The week ahead

As mentioned, the inflation picture in the US will get a solid dose of information in the coming week, with consumer prices, producer prices and export and import prices plus continuing speeches from the US Fed all updating how the market views what is happening.

Here in Australia there are a few offerings, although they will struggle to beat the US inflation news for impact.

Among the releases are figures on household spending, consumer confidence, business confidence, jobs data and testimony before the House of Representatives Standing Committee on Economics in Canberra by Reserve Bank of Australia Governor Philip Lowe.

This week’s top stocks