Market down 3.9% for the week as lockdowns return in China
A somewhat dreary week in the Australian stock market slipped to a lower close on Friday, shedding 0.3% or 16.9 points to end the ASX 200 index at 6,828.7 points.
This means that the index gave up 3.9% for the week and deliberately ignored a little positive advance from Wall Street, as the S&P 500 and Dow closed higher.
It wasn’t too hard to look around and see what’s dragging our market down with commodity prices dropping dramatically after the Chinese government decided to force the 20 million people living in Chengdu to shut down for four days under the COVID-0 approach.
Iron ore stockpile
Unsurprisingly, this was a tough remedy for the heavily China-dependent mining sector which was down 2% with BHP shares ASX:BHP alone slipping most points off the index as it fell 77 cents, or 2.1%, to $36.74.
The same situation applies to other big iron ore players as they reacted to an 8% drop in the iron ore price with Rio Tinto (ASX:RIO) and Fortescue Metals (ASX:FMG) down 2.5% with their previous dividend case. of BHP leading to a weekly decline in the mining index of 10.3%.
The technology looked good but then fell out
The tech sector kicked off Friday as a potential counterpoint, as the day started off strong but after Nasdaq futures started turning south, stock price rallies were wiped out and replaced by declines.
Some of the more notable tech declines included Novonix ASX:NVX, where shares fell 8.4% to $2.06, while accounting software firm Xero ASX:XRO tumbled 2.3% and WiseTech (ASX:WTC) shares fell 2.3%. 2.1%.
There were two sectors that helped stem corruption, with the main sector being major banks, with the defensive consumer goods sector being the only sector that finished in positive territory for the week, up 0.3%.
The recovery of the big banks
Fiscal rebounded 0.7% as investors grew more used to the decline in new home loans as Commonwealth Bank (ASX:CBA) shares rose 0.9% to $96.95, NAB (ASX:NAB) and Westpac (ASX:WBC) shares rose 0.8% while ANZ ASX was up 0.7%. : ANZ is late, up 0.5% to $22.75.
One stock that disappointed was AMP ASX:AMP, which fell 1.7% as management of AMP Capital Retail Trust lost $2.7 billion after the majority of unitholders opted for outside controllers.
GPT Group ASX: GPT, believed to be in a fund position to dominate retail confidence in AMP, was the best performer in the sector as its shares rose 2.7%.
small stock actions
The Ords Small Index fell 4.46% this week to close at 2,862.6 points.
Small cap firms made headlines this week:
AD1 Holdings (ASX: AD1)
AD1 Holdings reported that group revenue rose 12% for the 2022 fiscal year to $6 million, driven by the company’s massive investments in technology, product development, sales and marketing.
“By moving into fiscal year 2023, we are well positioned to take advantage of our robust contract-winning pipeline that is currently 200% stronger than the same period last year,” explained Brendan Kavina, CEO of AD1.
The company followed up its strong fiscal year 2022 performance with news of its acquisition of Scout Talent Group for $65 million.
Mr. Kavina said the acquisition is in line with AD1’s strategy of acquiring growing SaaS companies with rapidly expanding markets.
The Hydration Pharmaceuticals Company (ASX: HPC)
Revenue was up 80% for Hydration Pharmaceuticals Company (which trades as Hydralyte America) for the first half of the year ending June (first half of fiscal 2022).
The company generated $4.1 million for the period, buoyed by a 95% increase in net e-commerce revenue, which was $1.8 million for the period.
Traditional retail net revenue is also up – up 69% to $2.3 million.
Over the next half-year period, Hydralyte America expects further growth in online sales – driven by its continued marketing investments.
Archer Materials (ASX: AX)
Archer Materials has achieved its long-term technology goal and development to manufacture biochip components below 10 nanometers (nm).
The company has been able to manufacture sub-10nm features “frequently and reliably”. It has done this by developing a number of advanced lithographic processes on a silicon wafer in a clean room environment.
Dr. Mohamed Choucair, Archer CEO, said achieving this goal was a “significant technical achievement” for the company.
“We are developing semiconductor devices that push the boundaries of modern technology,” he said.
Credit Clearinghouse (ASX: CCR)
Another small capital with a significant increase in revenue in fiscal year 2022 was Credit Clear, which revealed a 95% increase for the period.
Revenue rose to $21.5 million for the period, of which $3.1 million came from a record monthly performance in June.
Credit Clear also hit profitability in May and June and this is expected to continue throughout fiscal year 2023.
Since fiscal 2018, Credit Clear has expanded at a compound annual growth rate of 183%.
The company closed the 2022 fiscal year with an average annual turnover of $37.4 million and with $10.2 million in the bank to fund its ongoing growth plans.
TZ Limited (ASX: TZL)
Smart Locker and software technology company TZ Limited reported its first net profit after tax for the 2022 fiscal year.
The net profit after tax of $42,896 was significantly higher than the loss of $1.66 million in fiscal year 2021.
Adjusted EBITDA for fiscal year 2022 increased to approximately $1.3 million from $137,364 in fiscal year 2021.
Supporting higher EBITDA and first earnings was a 31% increase in revenue to $21.4 million.
TZ’s non-executive chairman, Peter Graham, said the company’s transformation has been facilitated by its software platform’s income stream.
RLF AgTech (ASX: RLF)
Another small capital that has generated record revenue is RLF AgTech which reported that its revenue rose 26% to $10.7 million in fiscal 2022.
RLF AgTech Managing Director and CEO Ken Hancock said the company has established stepping stones in fiscal 2022 to build revenue and expand the company internationally.
“We have invested a lot of time and resources, which will qualify us for a strategic and robust expansion as a leading provider of high-value crop nutrition products,” he said.
RLF AgTech ended the period with $8 million in the bank to fund its growth strategy.
Looking forward to this week, there is one element that absolutely dominates.
The Board of Directors of the Reserve Bank meets on Tuesday to decide on the latest cash rate level that will have broad repercussions across the real estate and stock markets.
If you believe pundits will raise the headline cash rate by 50 basis points to 2.35% – a decision that will be followed by a set of rate increases on floating home loan rates as is certain as the night goes on.
A slow decline in the exchange rate will cause deposit rates to rise, although this part of the monetary policy transition has been slow for some time now.
Higher official interest rates are also bad news for stocks and property because they increase the risk-free rate of return and make the current dividends and available rental returns appear less generous.
This often results in a downward adjustment in real estate and stock prices to adjust returns to a more favorable level.
If there is a 50bp rise, it will be the fourth straight hike of that volume and a lot of focus will turn to reading the tea leaves to try to see how far the RBA will go before deciding it will take a pause in raising rates.
This speculation will also extend to Thursday’s speech by RBA Governor Dr Philip Lowe on “Economic Outlook and Monetary Policy”.
Other releases to watch include Wednesday’s National Accounts which is expected to show that the Australian economy expanded by 0.8% in the June quarter.
Other domestic releases include consumer confidence, new car sales, job announcements, and balance of payments.
Internationally, major things to watch include Chinese inflation, international trade, US consumer credit, and Chinese services.
US markets will also be closed on Monday for the Labor Day holiday.
Top stocks this week