Share market losses accelerated last week as the economic impact of the Coronavirus occupied the thoughts of investors. Even though the US Federal Reserve and RBA both unveiled their own respective measures to stimulate the US and Australian economies, and the big banks gave mortgage holders and small businesses some relief, several companies withdrew their earnings forecasts while others tapped the market for funds. By the end of the trading week, the ASX 200 declined 13.1% to close on 4,816.6 points, with the ASX now down around a third from its peak.
Which shares excelled?
Despite the sharp fall across the market last week, there was actually an increase in the number of stocks that otherwise bucked the trend and advanced strongly across the trading week. What’s more, the diversity of these opportunities was quite broad, with winners from various sectors.
Metcash (ASX: MTS) shares were on a tear thanks to an upgrade from a leading Australian broker, while investors also began to speculate that the wholesaler and distributor would see its sales swell much like its rival peers, Coles (ASX: COL) and Woolworths (ASX: WOW), both of which edged higher last week. Metcash climbed 31.7% to reach $3.20, its highest level in nearly two years.
Although there was no news to come out of the company, shares in NIB Holdings (ASX: NHF) raced higher last week by 24.9%. The Coronavirus could actually underpin the company’s results if it leads to lower claims, something that one prominent Australian broker has cited as an unforeseen boost for NIB’s listed competitor, Medibank Private.
Next, Nufarm (ASX: NUF) enjoyed a stellar week, jumping 19.7%. Although the company’s share price had fallen in line with the broader market sell-off in recent weeks, it appears that investors took a contrarian view in the wake of weather patterns stabilising across the country.
Elsewhere, there was strength from the gold sector, with the likes of Kirkland Lake Gold (ASX: KLA), Anglogold Ashanti (ASX: AGG), Silver Lake Resources (ASX: SLR), Regis Resources (ASX: RRL) and St Barbara (ASX: SBM) all recording impressive gains throughout the trading week. It came as the USD price of the precious metal drifted lower by around 2%, however, a terrible week for the Australian dollar meant that local gold miners stood to gain from currency movements.
The strong USD also worked in favour of various other companies that earn sales in the form of the greenback, including iron ore exporters Fortescue Metals (ASX: FMG), Rio Tinto (ASX: RIO) and BHP (ASX: BHP), as well as the likes of Amcor (ASX: AMC) and Treasury Wine Estates (ASX: TWE).
Which shares dragged on the market?
With the travel and tourism sector facing an unprecedented crisis, it was a tough week for the likes of Flight Centre (ASX: FLT), which went into a trading halt eyeing fresh capital, as well as Air New Zealand (ASX: AIZ), which received a NZ$900m bailout loan from the New Zealand Government. The two shares slumped 49.5% and 46.8% respectively, although not to be forgotten were significant falls from Qantas (ASX: QAN), Auckland International Airport (ASX: AIA), The Star Entertainment Group (ASX: SGR) and Crown Resorts (ASX: CWN).
Another segment of the market that was under significant pressure was the real estate sector, with the prospect of diminished foot traffic at retail shopping centres and potential commercial vacancies leaving shareholders in disarray. This was compounded by low demand for bonds that pushed yields higher during the week. Stockland (ASX: SGP), Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX) headlined the worst-performing shares from this sector, falling 46.2%, 37.9% and 35.1% respectively.
Oil stocks also came under fire, with the subdued price of the commodity weighing on the outlook of many companies, particularly those laden with debt. Santos (ASX: STO) and Oil Search (ASX: OSH) fell by 33.4% and 32.8% respectively, however, Worley (ASX: WOR), a global engineering services company that focuses on the energy sector, was the hardest to be hit, with its share price sinking 40.1%. These results included a sharp rebound on Friday, otherwise the losses would have been even more profound.
Our summary wouldn’t be complete if we didn’t touch on one stock that was the talk of the market last week. Shares in Afterpay (ASX: APT) plummeted 46.5%, and at one point, were down as much as 57%. After its dour performance the week prior, things didn’t fare any better last week, with the company’s attempts to calm shareholders nerves failing to arrest its share price decline. Afterpay cited over $400m in cash, $1bn of warehouse facilities and no material impact on its operations to date, but investors seem to be wary of the risk that the retail sector could fall off a cliff and consumers may face a harder time meeting repayment obligations during a recession.
This week’s trading outlook
As has been the trading pattern in recent weeks, the ASX is poised for a large drop at the opening bell on Monday morning, with Friday’s offshore trading session resulting in US shares erasing all their gains and plunging into negative territory.
If last week is any indicator, the main shares that could see buying attention are those exposed to a strengthening US dollar, however, investors will need to exercise some discrimination in their buying activity. In addition to those we mentioned earlier, some other companies that benefit from a falling Australian dollar include ResMed (ASX: RMD), CSL (ASX: CSL), Ansell (ASX: ANN), Computershare (ASX: CPU) and QBE (ASX: QBE).
As we’ve detailed in prior editions of our weekly wrap, investors banking on another weekly fall for markets might be eyeing off BBOZ and BBUS, or even some of the ASX-listed gold ETFs.
This week’s schedule of economic indicators from around the world is somewhat light, which means that observers are more likely to be paying attention to any movements in the oil and gold markets, as well as the rate at which the Coronavirus continues to spread across key geographies.
Cochlear (ASX: COH) will trade ex-dividend on Tuesday, with the hearing implant business set to pay a dividend of $1.60 per share in the coming weeks. Other companies set to pay dividends throughout the week ahead include Seek (ASX: SEK), Webjet (ASX: WEB), Flight Centre, Viva Energy Group (ASX: VEA) and Unibail-Rodamco-Westfield (ASX: URW). With Webjet and Flight Centre both in a trading halt as they battle to raise capital to secure their futures, some speculation has focused on whether their dividends could be withheld as Corporate Travel Management (ASX: CTD) elected to do.
With few, if any shares trading at their highs, momentum trading has only been pointing in one direction, however, ‘bargain’ hunters might be tempted by certain well-known names trading at their 52-week lows. These include Insurance Australia Group (ASX: IAG), Sonic Healthcare (ASX: SHL), Ramsay Healthcare (ASX: RHC), Cochlear, Aurizon Holdings (ASX: AZJ), Orica (ASX: ORI), Qube Holdings (ASX: QUB), Ansell (ASX: ANN) and Carsales (ASX: CAR).
We’ll be back next week with another Weekly ASX Trading Wrap Up – until then, have a great week!
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