While a selection of big-name companies shocked the market with severe downgrades, and the growing outbreak of the Coronavirus has weighed on offshore markets, last week the ASX managed to continue its strong run since the turn of the year. Up until last Friday, the local market has been one of the best-performing global indexes in 2020, with a year-to-date rise of 6.1%. That comes as the ASX 200 churned out a weekly gain of 0.4% to close at 7090.50 points.
Which shares excelled?
Continuing its remarkable run of late, PolyNovo (ASX: PNV) was again the best-performing stock last week. After recently advising shareholders that it had received EU sales approval, the company has rapidly begun distributing its products into Germany, Switzerland and Austria. The news was cheered by the market, with shares trading 15.5% higher.
Buy-now-pay-later stocks were a hot sector last week, as the key players soared higher. Afterpay (ASX: APY) led the gains, charging ahead 11.4% across the trading week. That came after the company announced significant oversubscription and scale-backs following the closure of its Share Purchase Plan (SPP). Zip Co (ASX: Z1P) was also a beneficiary of the strong positive sentiment, with its own shares racing higher by 6.8%, even though no news was delivered during the week.
Elsewhere, the quarterly activities report delivered by Silver Lake Resources (ASX: SLR) spurred its shares higher by 11.4%. Thanks to strong production output at its Deflector and Mount Monger projects, the gold miner increased its sales guidance for FY20, much to the delight of the market.
Fortescue Metals Group (ASX: FMG) also headlined the list of best-performing stocks, with the iron ore miner leaping 9.4% across last week’s trading sessions. Although no news was released, it appears that shareholders are building their expectations for strong profits and dividends amid high iron ore prices.
Finally, the retail sector got a shot in the arm thanks to news that German supermarket operator Kaufland is abandoning its entry into the Australian market. Shares in Woolworths (ASX: WOW) and Coles (ASX: COL) traded higher as a result.
BNPL companies were on the rise, once again
Which shares dragged on the market?
Kogan (ASX: KGN) was last week’s worst-performing stock, shedding 29.5% of its value. The drop followed news that the company’s profit growth slowed during the final quarter of last year, leaving investors reeling.
The industrials sector was hammered by two downgrades to well-known contractors, Cimic Group (ASX: CIM) and Downer EDI (ASX: DOW).
In the case of Cimic, the Spanish-controlled business slumped 18.2% to a four-year low after revealing that it would be exiting its Middle East joint venture. It also meant that the company would be burdened by a $1.8 billion impairment, pushing the contractor to abandon paying a final dividend.
Meanwhile, Downer’s shares plummeted 13.7% after it slashed its full-year profit guidance by $65 million to $300 million and announced cash flow would also take a big hit. The business attributed rapidly-growing costs and a delay to some of its projects as key reasons behind the poor trading update.
Another stock that disappointed its shareholders with a profit downgrade was NIB Holdings (ASX: NHF). Shares in the Australian health insurance business dropped 16.4% after reporting that its operating profits could be up to $30 million below forecast. It wasn’t the only insurer to fall foul of the market, with IAG (ASX: IAG) diving 7.7% after reigning in its guidance for insurance margins.
Jumbo Interactive (ASX: JIN) and AP Eagers (ASX: APE) were also under selling pressure despite no news coming out of each company. They declined 9.2% and 9.1% respectively.
Last but not least, the travel sector was hit by fears surrounding the Coronavirus, as Qantas (ASX: QAN) dropped 6.2%, Sydney Airport (ASX: SYD) lost 6.8% and Corporate Travel Management (ASX: CTD) fell 8.9%.
The biggest names to drag on the market last week were both major construction companies
Other trading developments
Last week’s IPO debutants saw mixed fortunes, with Happy Valley Nutrition (ASX: HVM) and COSOL (ASX: COS) both listing on the ASX at the back end of the week.
Happy Valley slumped heavily on its first day of trading, down as much as 35% at one point. However, the company’s shares rebounded on the second day of trading to close 17.5% below their IPO issue price.
On the other hand, Cosol shot out of the gates on listing day, with investors embracing the stock. By the end of its inaugural day of trade, the stock closed 90% higher.
The race is on to find a vaccine for the Coronavirus. Will any local companies play a role?
This week’s trading outlook
Australian shares are set to fall sharply at the open of the shorter trading week. The move comes after heavy selling pressure in US markets in response to the accelerating spread of the Coronavirus.
While this may lead to some broad-based selling across the market, if investors do shift towards a risk-off mentality then gold stocks like Newcrest Mining (ASX: NCM) may fall into favour, not to mention specific biotechnology or pharmaceutical businesses that have expertise in the area of infectious diseases. On the other side of the coin, tourism stocks could continue to feel the heat, while mining and banking stocks are among those most likely to see a potential slide.
Inflation will be the biggest economic news item on the local calendar this week. It could provide further indication as to whether another interest rate beckons, with last week’s better-than-expected employment data easing expectations in some quarters.
Adding to the mix is the US Federal Reserve’s interest rate decision at the end of the week, however, most pundits expect there to be no change to rates. With US GDP data following on the Friday, that may better serve as a barometer as to whether global markets, including the ASX, can resume trending higher.
Among corporate news, this week is set to be dominated by a barrage of small-cap stocks that report their fourth-quarter activities and cash flow from last year. Stay tuned for our guide on how to interpret quarterly cash flow reports, otherwise known as an Appendix 4C or 5B.
Last week’s long list of stocks that are currently trading at their 52-week high or all-time high has seen some of those names continue their strong run, including the likes of CSL (ASX: CSL), Macquarie Group (ASX: MQG), Ansell (ASX: ANN), James Hardie (ASX: JHX) and Fisher & Paykel Healthcare (ASX: FPH).
For the contrarian investors out there, Whitehaven Coal (ASX: WHC) and New Hope Corporation (ASX: NHC) are two mid-cap stocks that are currently trading at a 52-week low, however, recent trading updates from each company have only served to fuel their respective downtrends.
We’ll be back next week with another Weekly ASX Trading Wrap Up – until then, have a great week!
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