Weekly review: US election drives market selldown
WEEKLY MARKET REPORT
Joe Biden or Donald Trump?
We should hopefully have a definitive answer to the question of who the next American President is in the next week – barring a close or contested election result.
In the meantime, investors are taking their money off the table to ward off a period of possibly extreme volatility, which is why the Australian share market sold down fairly heavily on Friday.
After October started so strongly with solid gains of 6% on the ASX 200, the past two weeks have undone most of that good work with the Friday close of 5927.6 points representing a fairly skinny 1.9% gain for the month.
Election outcome and potential transition will be crucial
Now we are set for what promises to be a very eventful week on the political scene as the vote finally happens and the wild rhetoric and partisan cheering make way for the harsh reality of vote counting and either a continuation or transition of power as the US map turns shades of red and blue.
The biggest risk for the share market, of course, would be a contested election in which Trump refused to yield and claimed some votes had been “rigged”, with the US system usually relying on the goodwill of the participants for a concession and an orderly transition.
We’ll just have to wait and see what eventuates with the lack of polling accuracy in the last election leading to some scepticism about what appears to be a clear Biden win using the current polling but also a very close Senate race.
ASX 200 wilts near the close
All of this led to a 34-point drop on the ASX 200 in the last 15 minutes of Friday’s session to record a 0.5% drop to 5927.6 points, with the market down for six of the last seven sessions and 3.8% for the week.
Of course, there is more happening than the US election with the renewed growth in COVID-19 infections across much of Europe and the US also playing into investor fears and doubts about the global economic recovery.
RBA decision more important than Melbourne Cup winner
Locally, investors are eagerly anticipating Tuesday’s Melbourne Cup Day rate decision by the Reserve Bank of Australia, which is almost certain to cut official rates to a new record low 0.1% and accelerate its bond buying.
There were a few scattered gains on Friday with the most notable being a 20% rise by wealth manager AMP (ASX: AMP) after news that it had received a takeover offer from US private equity firm Ares Management Corporation and was effectively now on the sales block.
ResMed (ASX: RMD) continued to do well, rising 9.5% on news that the medical device maker was still benefitting from increased ventilator sales due to COVID-19.
Commonwealth Bank (ASX: CBA), Rio Tinto (ASX: RIO), ANZ (ASX: ANZ) and Fortescue Metals (ASX: FMG) also gained but other heavyweights including CSL (ASX: CSL), BHP (ASX: BHP), Woolworths (ASX: WOW) and Afterpay (ASX: APT) all fell.
The highly restricted opening of the Queensland border was really bad news for the travel and leisure stocks, with the big markets of Victoria and Greater Sydney still not able to head off to Queensland for some much needed rest and recreation.
Qantas (ASX: QAN) fell 3.7% while Webjet (ASX: WEB) dropped 4.4%.
Small cap stock action
The Small Ords index fell a further 4.27% this week to finish on 2736.4 points.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
E2 Metals (ASX: E2M)
E2 Metals has revealed the initial gold and silver results from its recent drilling program at its Mia prospect within the Conserrat project in Argentina.
The best result was 18m at 47g/t gold and 208g/t silver from 66m. This included a bonanza 1m interval grading 424g/t gold and 1,489g/t silver from 68m.
E2 said the results confirmed Mia as a “genuine new greenfields discovery”.
Pan Asia Metals (ASX: PAM)
South East Asia focused Pan Asia Metals has completed three diamond drill holes at its Khao Soon tungsten project in Thailand’s south.
XRF readings from the drill core revealed average values of 0.2% to 0.3% wolfram oxide (or tungsten).
Pan Asia Metals identified a higher-grade zone in the mineralisation that is believed 4m thick and XRF readings returned 0.5% to 0.6% tungsten.
Strategic Elements (ASX: SOR)
Pooled development fund Strategic Elements’ subsidiaries have made great strides in advancing their respective technologies.
Subsidiary Australian Advanced Materials agreed to fast-track its self-charging battery ink technology in collaboration with UNSW.
The cells will be created with printable ink and are designed to self-charge from humidity in the air or skin surface – eliminating the need for manual charging.
To fund its subsidiaries’ projects, Strategic Elements raised $5.1 million in an oversubscribed share purchase plan.
Crowd Media (ASX: CM8)
Ecommerce entity Crowd Media revealed $3.8 million in revenue for the September quarter, with earnings from its Crowd Direct division growing 136% to $317,000.
The $3.8 million revenue was in line with the June quarter and was despite strong regulatory and market headwinds in the legacy Mobile division which was down 9%.
Also during the September quarter, Crowd Media made several acquisitions and launches to advance its growth with the current December period predicted to be a “record” quarter for the Crowd Direct division.
Fatfish Group (ASX: FFG)
Tech venture firm Fatfish Group raised $1.5 million in a heavily oversubscribed placement, with proceeds to go towards advancing the company’s ventures in fintech, ecommerce and gaming.
Fatfish chairman Larry Gan also said the capital would also be used to seek “new exciting opportunities” across Australia, Asia and Europe.
Investors were offered Fatfish shares at $0.015 in the placement, with Fatfish originally hoping to raise $1 million but receiving more than $7 million in bids.
Golden Rim Resources (ASX: GMR)
West Africa focused explorer Golden Rim Resources debuted an updated resource for its key Kouri project in Burkina Faso.
The updated resource included a 43% increase to contained gold which now totals 2Moz. The average grade of the indicated and inferred resource was 1.3g/t gold.
Golden Rim will focus on infill drilling the higher-grade areas to define mineralisation for processing in the early years of operation.
De.mem (ASX: DEM)
Water treatment company De.mem achieved its highest ever quarterly cash inflows for the three months ending September 2020.
The September period cash receipts of $3.7 million were 7% higher than the June quarter.
De.mem now anticipates a record December quarter and updated its guidance for 2020 to $15-18 million – up from the previously advised $14-18 million.
Respiri (ASX: RSH)
eHealth company Respiri made several advances with its wheezo asthma management device and platform, filing a new patent and revealing it was “very pleased” with initial feedback to its staged launch through this quarter.
The new patent filing relates to Respiri’s optimised intellectual property for processing the recordings of a patient’s breathing patterns to detect wheeze.
Meanwhile, initial sales and market of the wheezo device and technology in Australia has generated “very enthusiastic and encouraging feedback” from pharmacists.
Interviews
Aldoro Resources (ASX: ARN) managing director Caedmon Marriott updates investors on the company’s exploration plans at Narndee with an airborne EM survey to begin next month, and drilling targeted for next year.
Tietto Minerals (ASX: TIE) executive director Mark Strizek discusses the company’s development strategy for its advanced Abujar 3.02Moz gold project in Cote d’Ivoire.
Pan Asia Metals (ASX: PAM) managing director Paul Lock discusses the company’s maiden drilling program at the Khao Soon tungsten project located in southern Thailand.
The week ahead
As mentioned earlier the US election and the Reserve Bank rates decision are both keenly awaited for the coming week but there are other things to look out for as November begins.
The US Federal Reserve is also meeting the day after the election and while there is unlikely to be any announcements on rates, the commentary could be interesting.
Locally, there is a swag of property announcements which should build a better picture of the surprising resilience of this market, including home values, home loans, building approvals and consumer confidence numbers.
Job advertisements will be interesting due to the patchy national picture and filling out the economic picture will be releases on new car sales, job figures and retail trade.
Internationally, there are a swag of US releases which will be totally overshadowed by the election but Chinese trade numbers are expected to show a strong and continuing economic recovery in the Middle Kingdom.