WEEKLY MARKET REPORT
In an “ordinary’’ week the share market moves we have just experienced would be unbelievable.
However, in the post-coronavirus era the second largest weekly fall of 13% seemed almost like business as usual after a shuddering 10.9% fall the previous week.
The only bigger fall on the ASX 200 since the index was introduced was a 15.6% crunch in October 2008 at the peak of the GFC but arguably this time feels much worse because rather than just financial stocks facing perilous times, it is all of us as the Coronavirus pandemic inexorably tightens its tentacles around the whole world.
There are similar measures being taken such as the slashing of interest rates and money printing by central banks and the putting together of ever larger stimulus packages by governments around the world to try to stave off a recession or worse.
Wide areas of economy being hit
But this time it is wide slabs of the entire economy that are being hit as workers are essentially being told to stay at home and whole industries are dramatically slowed in their tracks.
Some, such as international tourism and airlines, are being reduced from a flow to just a trickle while others such as medical and retail sectors are running harder than ever.
And underlying it all are the coronavirus infection and death numbers, both of which have been rising steadily in Australia over the past week as the virus moves rapidly up an infection curve that is becoming all too familiar.
Whether that curve can be flattened and the situation can be brought under some sort of control or whether we become another Italy with the health system totally overrun is an open question, so market trading is dealing with a new level of uncertainty.
Not to mention what is happening in individual sectors with incredible uncertainty around what jobs will continue, how banks will deal with mortgages going into default and whether the already announced stimulus measures and central bank liquidity will be enough to cope with what occurs.
Aussie market still rises on Friday despite negativity
Despite all of the negativity, the Australian market did recover on Friday, at one stage being up almost 5% and above the 5000-point mark before weakening on an announcement by Prime Minister Scott Morrison of stricter social distancing rules to close up 33.7 points or 0.7% to 4816.6 points.
Even that modest gain was fairly remarkable in the face of some analysts such as Goldman Sachs’ chief Australian economist Andrew Boak who claimed the Australian economy will contract 6% in 2020 – “the sharpest annual GDP contraction since the great depression of the 1920s.”
If that eventuates, it will mark a dramatic end to Australia’s almost 30-year record of economic growth without a recession.
Banks mainly stronger
There were some standout performances including an improvement in the banking index as three of the big four banks recorded rises.
Commonwealth Bank (ASX: CBA) was the only one to fall, down 1.7% to $59.91 per share.
Another remarkable performance was a 51.1% rise in the price of CIMIC Group (ASX: CIM) to $19.65, reversing Thursday’s 31.3% plunge on the news that parent company HOCHTIEF Australia had increased its stake in the company to over 74%.
Buy now, pay later group Afterpay Touch (ASX: APT) also enjoyed incredible gains of 25.7% to $12.44 after tumbling earlier in the week.
Retailer Premier Investments (ASX: PMV) rose 15% on its impressive first half profit results, which showed record sales which rose 7.6% to $732 million while earnings also lifted by 10%.
Small cap stock action
The Small Ords index fell below the 2000 points threshold this week to close on 1999.7 points, down 11.69%.
ASX 200 vs Small Ords
Small cap companies making headlines this week were:
Wellness and Beauty Solutions (ASX: WNB)
Australian lifestyle company Wellness and Beauty Solutions has welcomed the first order from Chemist Warehouse for its new range of MICRO19 anti-bacterial sanitiser products launched in response to the community containment of coronavirus.
The company spent the last six weeks fast-tracking the development of the products to be able to launch the range this week and said it is also currently negotiating further retail partners in Asia.
According to Wellness and Beauty Solutions, its MICRO19 range is 100% Australian owned and manufactured and is deemed effective against 99.99% of germs.
Chemist Warehouse’s first purchase order is valued at more than $400,000 and discussions are underway on future supply requirements, the company stated.
Wellness and Beauty Solutions managing director Christine Parks said the “incredibly high” demand for anti-bacterial and sanitiser products is expected to be sustained for some time “given the likely protracted nature of the current response”.
Investors responded positively to the news with Wellness and Beauty Solution shares surging 200% in early morning trade on Wednesday.
Aeris Environmental (ASX: AEI)
Decontamination company Aeris Environmental confirmed its Aeris Active sanitisation product can kill 99.99% of bacteria after 60 seconds of contact time.
According to Aeris, this means the product provides rapid deactivation of various viruses including hepatitis – a member of the coronavirus family that has been used as a surrogate in published coronavirus disinfectant studies.
The company said it has been experiencing “unprecedented demand from multiple local and global customers, distributors and governments, and across several industrial, commercial, food service and consumer markets”.
This strong interest covers several of Aeris’ proprietary products including hard surface disinfectants, skin sanitisers and air-conditioning protection, as well as a range of environmental hygiene cleaners and treatments.
The company is now scaling up supply with multiple manufacturing sites now in production and is expected to come online in the United States, China and South East Asia.
Impression Healthcare (ASX: IHL)
Medical cannabis company Impression Healthcare has announced its first order for inhalers containing cannabidiol (CBD) from US pharmaceutical manufacturer Entourage Therapeutics.
Entourage has granted Impression exclusivity over its products to be sold in Australia and to “facilitate further discussions”.
CBD inhalers are considered by many medical professionals as the preferred delivery application for patients with certain conditions currently being treated with CBD oils.
According to Impression, inhaled CBD is delivered to the blood almost immediately with maximum blood concentrations achieved in about 10 minutes.
The company said there was “existing preliminary but promising” research that suggests CBD’s anti-inflammatory properties may be deployed to treat lung inflammation, with inhalation devices delivering CBD to the affected area.
Getting in on the COVID-19 response action, Impression also said it is investigating the potential of CBD inhalers to assist with the recovery of pneumonia and acute lung injury, which some patients with the virus have been known to develop.
TBG Diagnostics (ASX: TDL)
TBG Diagnostics announced its 46.65%-owned China-based company TBG Biotechnology Xiamen Inc has received CE Mark approval for its COVID-19 Nucleic Acid Diagnostics kit.
The certification means the testing kit meets all essential health, safety and environmental protection requirements to allow for its sale throughout Europe.
According to TBG, the ribonucleic acid (RNA) based diagnostic kit uses real-time technology with three-colour labelling to detect distinctive segments within genes of the SARS-CoV-2 virus – the coronavirus strain causing the COVID-19 disease.
The approval enables the test to be sold as an in vitro diagnostic for the identification of COVID-19 in all regions accepting CE marking. The kit is expected to be available for immediate validation and purchase.
Surging investor interest in the company this week prompted a price query from the ASX and TBG’s shares have since been suspended pending further enquiries.
OpenLearning (ASX: OLL)
Online education platform OpenLearning has teamed up with internet giant Alibaba Group to take advantage of the expanding need for online education in mainland China as a result of the coronavirus pandemic.
The company will utilise Alibaba Cloud technology to offer students in the region high-speed access to online courses through its learning platform – a move that is expected to give it a key competitive advantage in the Chinese market, where online courses have reported been “substantially slower”.
According to OpenLearning chief executive officer Adam Brimo, universities around the world are expected to suffer a “multi-billion-dollar combined revenue loss due to COVID-19 from the decline in international student enrolments and campus closures”.
As travel bans and social distancing measures have boosted the appeal of online courses, the company expects the Alibaba partnership to increase revenue by being a gateway into the market for education providers.
Jervois Mining (ASX: JRV)
Advanced cobalt explorer Jervois Mining has revealed final assay results from the drilling of copper-gold anomalies at its Kilembe project in western Uganda.
The results expanded the prospective areas and understanding of the property’s mineralisation with highlights including a 6.1m intersection grading at 2.1 grams per tonne of gold and 0.24% copper, including 1m at 11.5g/t gold and 1.36% copper.
The company also advised it has suspended all activity in Uganda in response to the COVID-19 spread. There is no fixed date for remobilisation.
The week ahead
The continuing coronavirus pandemic will obviously drive markets for the foreseeable future, with the only positives being the potential for more countries to get past the top of the pandemic curve as China appears to have done.
That is unlikely for some time with the US and much of Europe and Australia looking at rising infection and death rates for some time to come – not to mention developments in Asia, Africa and other parts of the world.
The first statistical readings on the early effects of the coronavirus will be released and give some idea of how various economies are responding.
Here in Australia those numbers will include consumer confidence, services and manufacturing gauges, engineering construction activity, wealth and detailed jobs data.
In the US, economic growth (GDP), housing, durable goods (business investment), spending and manufacturing data will all be revealed, along with the US Federal Reserve’s key inflation gauge.
In China, which is further along the coronavirus path, industrial profits data may give some illumination on the economic effects.
This week’s top stocks