ASX Trading Wrap: Inflation woes and rate hike pain for tech stocks, lithium names and REITs

With the US, UK and Australian central banks all raising interest rates this week amid warning signs concerning inflation, and the potential for a global economic slowdown, investors spent this week rotating out of tech and lithium stocks, plus REITs.

 

Which shares excelled?

For the second week running, coal stocks have outperformed the rest of the broader market. While the long-term outlook for the commodity may be murky amid the transition to green energy sources, momentum has been building in recent weeks following news India is ramping up its coal imports, and with expectations wholesale electricity prices could accelerate from here. 

A strong surge in coal prices this week has supported the likes of Stanmore Resources (ASX: SMR), which also closed out its $1.7 billion acquisition of BHP’s coal assets, as well as Yancoal (ASX: YAL), New Hope Corporation (ASX: NHC) and Coronado Global Resources (ASX: CRN).

There were some signs of life in the funds management space, with Hub24 (ASX: HUB) and Magellan Financial (ASX: MFG) among the short list of winners this week.

In the case of Hub24, there was no news from the company, but heightened volatility across the market may be a tailwind for the wealth management platform if it prompts a rethink among other investors seeking a home for their funds.

Meanwhile, Magellan’s Funds Under Management (FUM) update proved a talking point this week. The company, which has been under fire in recent months amid a major decrease in FUM, continued to see a fund outflow in April, but the result was far less than some of the benchmark US indexes. With that said, favourable currency movements proved one of the biggest catalysts for this relative outperformance, although shareholders still greeted the news warmly. 

One other stock making a run, but saving it til Friday morning, is Brainchip (ASX: BRN). The company defied a broad-based sell-off today, and which hit other tech stocks particularly hard. The ASX-listed head stock followed the lead of its Nasdaq ADR, but investors may be left to wonder what is behind the move with no news announced.

 

ASX Trading Wrap: Inflation woes and rate hike pain for tech stocks, lithium names and REITs

 

Which shares dragged on the market?

Internet service provider Aussie Broadband (ASX: ABB) had a troubled week, with the company coming unstuck after downgrading its EBITDA guidance. Releasing its quarterly trading update earlier in the week, the company revised its earnings forecast from $27-30 million to $27-28 million, while its connections guidance was also narrowed. Shareholders overlooked growth in other areas, particularly ABB’s wholesale and white label sector, instead selling shares on missed expectations.

Imugene (ASX: IMU) was another name in the spotlight for the wrong reasons after encountering a major setback. The biotech company, which is working on a therapeutic cancer vaccine for the treatment of gastric cancer and breast cancer, was dealt news that its partner, Merck Sharp and Dohme, has terminated a supply agreement with Imugene. The two parties were intending to collaborate on a clinical trial to assess the safety profile and efficacy of IMU’s HEr-Vaxx immunotherapy, but now it will be forced to go it alone.

Another name handing its shareholders disappointing news was ARB Corporation (ASX: ARB), with shares in the 4×4 automotive accessories manufacturer and light-metal engineering works firm slumping sharply on Wednesday. The firm is dealing with a number of headwinds including foreign exchange movements, logistics constraints, new vehicle shortages, and limitations sourcing skilled labour. Expectations of a 12% increase in revenue for FY22 did little to arrest the concerns of shareholders, with higher expenses likely to eat up some of that growth.

It was a volatile week for AVZ Minerals (ASX: AVZ), with the lithium miner at the centre of a wild trading session on Wednesday. After reporting news that it has been awarded a mining licence for its Manono lithium and tin project in the Democratic Republic of Congo (DRC), shares in the company soared as much as 19% higher. However, by the end of the same session, the stock was 20% below its opening price amid a dispute centering on a joint venture partner’s decision to transfer some of its interest in the project to another company that AVZ believes it has rights to. 

Costa Group Holdings (ASX: CGC), which is Australia’s largest horticultural company and a major food supplier, tumbled mid-week. There was no price-sensitive news out of the company, but short interest has been steadily growing in the stock over recent months. This is potentially being driven by concerns about how accelerating inflation might impact the agriculture segment, including prices for fertilisers, labour costs, and the like.  

With the market sell-off picking up pace to end the week, there were no shortage of companies caught up in the brutal sell-off, with ASX names like Lake Resources (ASX: LKE), Sayona Mining (ASX: SYA), REA Group (ASX: REA), Nanosonics (ASX: NAN), Silver Lake Resources (ASX: SLR) all coming under pressure. There was also pain for real estate trusts, plus high-profile names in the tech sector such as Xero (ASX: XRO), Megaport (ASX: MP1), NextDC (ASX: NXT) and WiseTech Global (ASX: WTC).

 

We’ll be back next week with another Weekly ASX Trading Wrap Up – until then, have a great week!

 

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