While we’re still a long way from hitting the 7,000+ points the ASX 200 was trading at prior to COVID February, it has certainly been a good week to have an ASX stock portfolio.
As seems commonplace these days, it was ASX Tech stocks that led gains last week. The S & P / ASX All Technology Index (ASX: XTX) gained 3.7% over the week, supported by the main ingredients Afterpay Ltd. (ASX: APT) prints another new all-time high of $ 98.68 on Wednesday. It looks like the countdown to a three-digit Afterpay stock price is close to midnight. The Xero Limited The share price (ASX: XRO) was also on fire last week, printing a new all-time high of $ 119.88.
On rare occasions, the gains in ASX Tech stocks have not been accompanied by their American counterparts. Most important is, Apple Inc (NASDAQ: AAPL) was on the nose with investors after details of its new iPhone 12 range were released. The “fresh design” and 5G capability of the new phone apparently didn’t impress investors, who sent Apple stock down more than 4% between Monday and Friday last week.
What was the trigger for the week’s double wins? Two words: easy money.
RBA known QE
On Thursday, Reserve Bank of Australia (RBA) Governor Dr. Philip Lowe told Australians that the RBA is currently considering further easing, which could include buying longer-term bonds (e.g. 5 or 10 year bonds). . So far, the RBA has intervened in the bond market, but by buying shorter-term bonds. However, if the RBA does actually expand this program, Australia will almost certainly be described as entering the official area of quantitative easing.
Further intervention by the RBA in these markets is generally viewed as conducive to higher stock prices. So I believe these comments fell in part behind the ASX 200’s surge over the past week. Dr. Lowe did nothing to dampen speculation that the RBA will initiate another rate cut from 0.25% to 0.1%, which likely helped as well.
Also worth mentioning is the impressive IPO of Aussie Broadband Ltd. (ASX: ABB). The price of Aussie Broadband stock rose 90% on its first day on the ASX boards when it closed at $ 1.90 after trading at just $ 1 per share. It was even better within a day too – at one point, stocks were up more than 122%.
How did the markets end the week?
The markets ended the week well, as we discussed earlier. But here is the long version of the story. The week started strongly on Monday with a plus of 0.5%, which was underpinned on Tuesday by a further 1% charge. On Wednesday that streak ended in a 0.3% loss, but this was quickly forgotten on Thursday with a 0.5% gain due to comments from the RBA. There was another 0.54% cool on Friday, but it wasn’t enough to stop the ASX 200’s substantial gain for the week.
Meanwhile it is All Ordinaries Index (ASX: XAO) also had a strong week, starting at 6,312.85 and ending at 6,385, up 1.1% for the week.
Which ASX 200 stocks have been the biggest winners and losers?
It’s now gossip time (fool style) as we look at the week’s biggest winners and losers. So put the kettle on and, as always, we’ll start with the losers first.
The biotech company Mesoblast followed with an increase of 7.7%. There hasn’t been any major news from mesoblast for the past week either, but investors have been selling mesoblast stocks continuously since the 42% plunge in late September. I suspect that last week’s moves represented an exit from some burned shareholders.
Another travel share at Webjet was next up, and just like the other two, the decline in this stock wasn’t triggered by company announcements. I suspect that this company’s sell-off was driven by similar factors as Flight Center.
After all, with Zip we had a rare participant in the loser column. Zip stocks have been on the rise in the past few weeks. Last week, it seemed like a bad reaction to the company’s first quarter update that sparked that selling pressure. It’s hard to see how an investor would be deterred by a 96% increase in sales volume, but the numbers don’t lie!
Now the losers are out of the way, let’s take a look at last week’s winners:
Best ASX 200 Gainer | % Profit for the week |
| Unibail-Rodamco-Westfield (ASX: URW) | 23,3% |
| Link Administration Holdings Ltd. (ASX: LNK) | 21,55% |
| GUD Holdings Limited (ASX: GUD) | 12,5% |
| Super Retail Group Ltd. (ASX: SUL) | 9,9% |
An unusual presence in last week’s winners column was our ASX 200 winner, the owner of the Unibail-Rodamco-Westfield shopping center. URW eventually got goodwill from investors after the company announced an office sale in Paris. Despite last week’s gains, Unibail’s share price has still fallen more than 70% since the start of the year.
Next we had the administration service provider Link Administration. Link received a takeover bid from a private equity consortium last week for $ 5.20 per share in cash. This led to a quick re-evaluation of the market towards that price.
The less-than-elegantly named GUD Holdings was also in shape last week after the company released a strong quarterly update to the market. With sales up 14% versus the corresponding prior quarter, it was no surprise that investors felt generous with this quarter.
Finally, the Super Retail Group (the name behind Super Cheap Auto and Rebel) was in shape too, although the company didn’t reveal any major news. Maybe it was a few aftershocks out of budget two weeks ago, maybe it was the performance of fellow auto parts supplier GUD, or maybe it’s Maybelline. In any case, investors were undoubtedly grateful.
What does this week look like for the ASX 200?
After the breathtaking performances of the past two weeks, it will be interesting to see whether the ASX 200 holds the line and keeps the winning streak alive or gets cold feet and pulls back to 6,000 points this week.
We had a very decisive result in the New Zealand election on Saturday, in which Jacinda Ardern was given a second term by the Labor Party with a rare parliamentary majority. This might come to investors’ minds earlier in the week, given the tantalizing prospect of a trans-Tasman travel bubble Ms Ardern previously announced.
In other political news, I suspect that with the US elections approaching, investors will become increasingly preoccupied with the various possible outcomes. I’ll be on the lookout for important, potential market-moving developments from across the Pacific this week.
Before we get started, here’s a look at what the ASX 200’s top blue chip stocks look like:
- S & P / ASX 200 (XJO) at 6,176.8 points
- All ordinaries (XAO) at 6,385 points
- Dow Jones Industrial Average at 28,606.31 points after a 0.39% increase on Friday night (our time)
- Gold (Spot) trades hands for US $ 1,899.04 an ounce
- Iron ore charges $ 120.37 per ton
- Crude oil (Brent) trades at $ 42.93 a barrel
- Crude oil (WTI) is priced at $ 41.12 per barrel
- Australian dollar buys 70.8 US cents
- 10 year Australian government bonds with an annual yield of 0.72%.
Stupid takeaway
With the ASX 200 hitting a high after March, it was certainly a good week for ASX investors. Who knows what twists this week will bring! I still expect great volatility in world markets when the US elections finally start early next month.
So I think ASX investors should take the last two weeks of gains with a pinch of salt and be at least mentally prepared for some ups and downs. So, as always, stay safe out there, stay rational and stay stupid!
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