Love the odd couple or hate them it doesn’t really matter – the combination of a returned Boris Johnson to lead Britain out of the EU and a trade dealing Donald Trump was the just the tonic share markets were waiting for.
News of a likely trade deal between the US and China and of a Tory victory in the UK election sent markets higher and saw safe havens such as gold fall as traders embraced risk once again.
On the trade deal, there was no official news from China or the US, but the strong rumour is that the US has agreed to suspend some tariffs on Chinese goods and cut others in return for a pledge by China to buy more US farm products in 2020.
The deal is seen as a face-saving way for both sides to scale back the trade war and would see the US suspend tariffs that were due to start on US$160 billion of Chinese from this weekend and roll back existing tariffs as well.
On the Chinese side, they would agree to buy US$50 billion in US agricultural goods in 2020, double what it bought in 2017 before the trade conflict started.
China would also not impose further retaliatory tariffs.
Pound and ASX 200 sent higher by Boris victory
Boris Johnson’s victory saw the pound soar by 2.3% to $US1.346 and it also strengthened by 2% against the euro.
Here in Australia the suite of Trump-Johnson news sent ASX 200 up 30.8 points higher on Friday to 6739.7 points, a weekly gain of 0.5%.
Commonwealth Bank (ASX: CBA) was up 0.4%, Westpac (ASX: WBC) 1.6%, ANZ (ASX: ANZ) 2% and NAB (ASX: NAB) up 1.4% as the financial sector led the market higher.
The mooted US-China deal was also a big positive for the mining sector, with the prospect of a continuation of raw material exports boosting share prices.
BHP (ASX: BHP) added an impressive 1.9%, Rio Tinto (ASX: RIO) gained 1.6% and BlueScope Steel (ASX: BSL) spurted upwards by 5.2%.
In wasn’t all great news though, with the increased appetite for risk causing investors to abandon the defensive gold sector in droves.
Gold miners take a hit as risk returns
Gold miner Silver Lake Resources (ASX: SLR) lost 9.2%, Evolution Mining (ASX: EVN) fell 7.8% and Gold Road Resources (ASX: GOR) dropped 7%.
The more bullish outlook for stocks also pushed up the prices of share market services companies with 3.2% gain in Computershare (ASX: CPU) and Link Administration (ASX: LNK) up 5%.
Small cap stock action
The Small Ords index closed 0.29% up for the week to 2880.3 points.
Small cap companies making headlines this week were:
Legend Mining (ASX: LEG)
It was a huge week for nickel explorer Legend Mining with the company revealing initial results from a nickel discovery in WA’s Fraser Range in what it claims was a “watershed moment”.
Legend emerged from a trading halt on Monday with drill results from the Mawson prospect (formerly Area D) within its Rockford project.
Within the third diamond drill hole of its program, Legend had uncovered 14.9m at 1.07% nickel, 0.75% copper and 0.06% cobalt from 114m, including 2.1m at 2.03% nickel, 1.34% copper and 0.11% cobalt from 115.5m.
Legend noted the 14.9m intersection occurred within a larger 70.15m disseminated sulphide halo – indicating the presence of a larger mineralised system. Assays are pending for 40.15m of the disseminated halo.
CCP Technologies (ASX: CT1)
CCP Technologies is looking to expand into China and has inked strategic agreements with three of its existing shareholders to help make this a reality.
Earlier this year in October the same shareholders partially underwrote CCP’s $3.4 million capital raising.
It is expected the shareholders Ray Malone, Xiaoniu Bao and Yi Zhang will provide a strong network of commercial, financial and corporate contacts as well as assist with establishing a wholly-owned China IoT operation.
“Securing the involvement of incentivised, connected, experienced and invested strategic partners of this calibre is an important pillar of [our] overall growth strategy,” CCP chairman Leath Nicholson said.
Zoono (ASX: ZNO)
It was a big week for Zoono, which revealed its proprietary microbe shield ZOONO Z71 was found “extremely effective” against African Swine Fever.
Researchers in the Netherlands discovered ZOONO Z71 inactivated the swine virus with 99.99% effectiveness and without toxic or other detrimental side effects.
This news was followed up with Zoono announcing it was establishing a distribution company to sell its products including the African Swine Fever treatment to farmers, food producers and processors throughout China.
The move into China will be a joint collaboration with leaders across the country’s agribusiness, animal feed and veterinarian sectors.
Respiri (ASX: RSH)
Medical device developer Respiri has collared CE Mark and Australian Therapeutic Goods Administration approval for its Wheezo device, opening the door for commercialisation activities.
Respiri will begin commercialisation in Q4 2020 and plans to market Wheezo as “the world’s first digital wheeze monitoring solution”.
The device comprises a sensor, smartphone application and platform to assist asthma patients with mitigating the disease.
Respiri has also executed a clinical agreement with Melbourne’s Swinburne University to investigate how wheezing and asthma symptoms can be effectively measured and determining small airway function.
This will enable Respiri to correlate wheeze rates against current asthma measures. The company expects the results will provide additional evidence of Wheezo’s effectiveness.
ASX floats this week
Small Caps readers who want to view upcoming IPOs or see the performance of stocks that have listed in 2019 can now do so.
The latest companies to make their way onto the ASX this week were:
Aerometrex (ASX: AMX)
Aerial mapping company Aerometrex started ASX life on Tuesday after a heavily oversubscribed IPO generated $25 million for the company.
Aerometrex managing director Mark Deuter told Small Caps the company was excited by its “ground-breaking new technologies”.
The company noted it is an established and profitable business that has been working in aerial mapping and spatial technology in Australia for 30 years.
Proceeds from the IPO will be allocated towards growing Aerometrex’s MetroMap subscription service, the 3D modelling business, expanding into the US, and research and development.
To raise the $25 million, Aerometrex issued 25 million shares at $1 each.
The company closed its first week on the ASX at $2.00 – up 100% on its $1 offer price.
M8 Sustainable (ASX: M8S)
WA-based waste recycling company M8 Sustainable made its ASX debut on Wednesday after raising $19.5 million via the issue of 97.5 million shares at $0.20 each.
The company’s strategy is to maximise value from gate fees, resources recovery and recycling in addition to its complimentary waste business.
IPO proceeds will go towards establishing the company’s waste facility in Gingin, working capital, offer expenses and paying down debt.
M8 finished its first week at $0.17, down 15% on its offer price.
MoneyMe (ASX: MME)
Another buy now pay later stock has made its way to the ASX with MoneyMe securities kicking-off trading on Thursday.
The company raised $45 million in its IPO via the issue of 36 million shares at $1.25 each.
MoneyMe offers unsecured personal loans up to $25,000 and a revolving line of credit up to $10,000.
The company will use its IPO proceeds to invest in its core business model, pursue growth strategies and repay corporate debt.
By close of trade Friday, MoneyMe’s securities were up 28% to $1.60.
Nitro Software (ASX: NTO)
Positioning itself as a rival to Adobe, Nitro Software was admitted to official quotation on the ASX on Wednesday.
The US-based company raised $110 million via the issue and transfer of 64.1 million shares at $1.72 each.
IPO proceeds will be used to provide capital and financial flexibility to underpin Nitro’s growth strategy and repay debt.
Nitro’s core offering is the Nitro Productivity Suite which provides PDF productivity and eSigning tools through a SaaS desktop solution.
The 14-year old company has more than 1.8 million licenced users – serving more than 10,400 businesses across 144 countries.
Nitro finished its first week on the ASX at $1.64 – a 4.6% fall on its IPO price.
OpenLearning (ASX: OLL)
Another SaaS company making its way onto the ASX this week was OpenLearning, which began trading on Thursday after raising $8 million via the issue of 40 million shares at $0.20 each.
The IPO strategy was to expand OpenLearning’s presence in Australasia and grow its portfolio of short courses that are delivered to education providers.
OpenLearning’s technology enables integrated end-to-end education delivery from student acquisition and payment through to assessment and certification within a Microsoft Azure-powered global platform.
By Friday end of trade, OpenLearning’s share price was down 17.5% to $0.165.
Terragen Holdings (ASX: TGH)
Agriculture-focused Terragen Holdings manufactures a range of biological products for soil health that assist with enhancing growth, quality and resilience of farm production animals.
The company has two products commercially available in Australia and New Zealand: Great Land, which is a biological soil conditioner; and Mylo, which is a microbial feed supplement.
According to Terragen, offer proceeds will be used to further commercialise the products across both countries as well as expanding into the US and EU.
Terragen’s shares starting trading on Wednesday after raising $20 million via the issue of 80 million shares at $0.25 each.
By the end of the week, the company’s share price had dipped to close at $0.195.
The week ahead
Given that it is nearing the end of the year, there are a surprising number of announcements as a final rush of data is released.
Here in Australia, the biggest news happens on Monday when the Federal Government hands down its mid-year budget update.
The big tips are that there will be some fine tuning by increasing government spending on aged care, drought and infrastructure.
There may also be some action on investment allowances and potential income tax cuts to encourage more business investment, but that is more likely to remain in the pipeline until the May budget next year.
Still heading for a surplus?
The statement will also be a good indicator of how the budget is tracking towards hitting a surplus.
Also out on Monday the CBA/IHS Markit release flash purchasing manager indexes for December, which will be an important indicator given that manufacturing and services both contracted in November.
On Tuesday, ANZ and Roy Morgan release the weekly consumer confidence data and the Commonwealth Bank publishes its Household Spending Intentions survey for November, both, of which, will provide a guide on whether the hard-bitten consumer is ready to start spending again.
There is the release of the Reserve Bank Board minutes expected on Tuesday, and measures of lending, skilled job vacancies, employment and unemployment for November and finance and wealth.
China and US to release an avalanche of figures
Internationally there is a lot of information out of China and the US as the world’s two biggest economies continue their negotiations over trade.
China is publishing data on production, investment, retail sales, house prices and industrial profits along with manufacturing and services.
For the US, the strength of economic growth is announced on Friday, while other announcements include manufacturing, housing, building permits, chain store sales, industrial production and jobs figures.
All told, it is a fairly busy roster as people wind-down near the end of the year, but the really big factors will remain progress on the US-China trade deal and more news out of the UK as Boris Johnson once again grabs the reins with a much larger than expected parliamentary majority.
