There’s light at the end of the tunnel this week, with 111,000 Aussies returning to work rather than the projected further loss of 35,000 jobs. Plus, the Aussie share market followed the U.S. blue-chip rise, closing 0.4% higher (Mon-Thu).
In this week’s wrap, Jessica covers:
Thanks for tuning into the weekly wrap this Friday the 18th of September, I’m Jessica Amir a Market Analyst with Bell Direct.
Well the downward spell was broken this week with investors waving their buying wand, sending stocks higher for the first time in six weeks up 0.4% as at close of trade Thursday. Sentiment was high from the get-go this week as we saw U.S. blue chip stocks rise about 0.9% as investors in the U.S. snapped up low-hanging fruit and play to the theme that the global economy is expected to only improve from here.
Sparking interest locally, new home sales surprisingly rose 3.6% in August when the market expected a fall that helped building material stocks like Brickworks (ASX:BKW), CSR (ASX:CSR) and Boral (ASX:BLD) rally. Now all three of those stocks are backed by UBS as Buys, given the economy is likely to rebound in the fourth quarter of this year, and secondly this week we saw the RBA report an uptick in applications for home loans. That’s the chart on the left, a trend that has been growing despite COVID-19. However, what’s noteworthy is that people have been spending more of their disposable income paying down their mortgage principles and have been paying less on interest. That’s the chart you can see on the right.
As for how the ASX sectors behaved, well the underperforming local property sector got a kick, while miners got a kick too after the gold price shone, rising to a three week high before it cooled its heels. As for stand out stocks, mining services company Perenti (ASX:PRN) rose the most in the ASX200, up 13% hitting a three-month high after winning an 18-month $140 million dollar contract extension with one of the world’s biggest underground mining companies called Barminco. Now Perenti also confirmed it’s got an $8.8 billion dollar tender pipeline and $540 million dollars in underground contracts bagged this financial year. PRN’s earnings margin are above its peers and PRN also has one of the best debt to equity ratios in the industry as well. Now before this week’s rally, consensus was already bullish for PRN. UBS has PRN as a buy with a $190 target implying 47% upside. Other front-running stocks this week included car dealership giant Eagers Automotive (ASX:APE) up 11% and gold stocks like Northern Star, Perseus, Silver Lake as well.
Moving to what to consider going forward, well this week we learned that Aussie employment surprisingly rose and improved marginally right in the thick of lockdowns with 111,000 folks returning to work, far outpacing the 35,000 jobs they were expected to be lost. So who went back to work? Well part-time workers, a large amount of self-employed and sole traders and more women returned to work than men. Now this sensational lift in employment saw Australia’s unemployment rate fall from 7.5%, a 22-year high down to 6.8% in August, a stunning victory given the market was expecting unemployment to worsen. Unsurprisingly, Victoria the outlier saw employment worsen as August stage four lockdowns kicked in but Victorian cases are trending lower on a seven seven-day average and cases are likely to continue to fall given how severe lockdowns are in Victoria compared to say Western Europe. Home restrictions and curfews likely to end on the 26th of October and life could start to look a lot more normal from the 23rd of November.
So what does that mean when thinking about your investments? Well banking stocks are likely to remain under pressure but with Victoria employment likely to improve after November, you could start to think about that private consumption makes up 60% of the economy and think about the stay at home stocks that could benefit from now to then and thereafter. Two stocks to consider, Aristocrat and AX1. Aristocrat was upgraded by Credit Suisse to an outperform with a $30 target. The broker says ALL has built critical systems for the future in online gambling with strong growth already seen in the U.S. Now Credit Suisse upgraded its long-term cash net profit growth and if you looked at Trading Central’s chart on Bell Direct, there are more bullish signals than bearish
indicating its shares could rally, supporting Credit Suisse’s Buy recommendation for AWL. Secondly, you could look at Accent (ASX:AX1), it’s kicked off the financial year quite strongly. It owns Hype, Platypus, Vans, Sketchers, etc and sales are up 70% on last year. Now, that’s amid the rise of casual shoe sales. AS1 also looks cheap as it’s trading about 14 times earnings and it’s due to roll out new stores and online brands. AX1 backed by Bell Potter as a buy, a $1.85 target. Looking at AX1’s chart on Trading Central, there’s also a lot of bullish signals suggesting AX1 shares could hit $225 to $240 in over nine months. To access more of the technical analysis trends that we’ve spoken about head to Bell Direct, Research and Tools then click Technical Insight.
So, there’s plenty to consider. From all of us here at Bell Direct thanks for your company, happy trading and stay safe.Close Transcript