Category: Stock Market

The S&P/ASX 200 Index (ASX: XJO) is on fire on Tuesday and is storming notably higher. In afternoon trade the benchmark index is up an impressive 2.2% to 6,086.3 points.

Four ASX shares that have climbed more than most today are listed below. Here’s why they are racing higher:

Laybuy Holdings Ltd (ASX: LBY)

The Laybuy share price is up 2% to $1.47. This follows the announcement of the launch of its “globally unique and innovative digital BNPL Mastercard card” in Australia. This allows customers to purchase goods and services in-store using Laybuy with a simple tap of their smartphone.

Oil Search Limited (ASX: OSH)

The Oil Search share price has jumped 7.5% to $2.74. Investors have been buying Oil Search and other energy shares following a rebound in oil prices. Prices dropped to five month lows last week. 

Pointsbet Holdings Ltd (ASX: PBH)

The PointsBet share price is up 6.5% to $10.44. The catalyst for this appears to have been a broker note out of Ord Minnett. Its analysts have upgraded the sports betting company’s shares to a buy rating with a $12.60 price target. It made the move in response to the release of it first quarter update. Based on the current PointsBet share price, this price target implies potential upside of over 20% for its shares over the next 12 months.

Webjet Limited (ASX: WEB)

The Webjet share price has stormed 8% higher to $3.74 despite there being no news out of the online travel agent. However, with its shares falling heavily in October, some investors may believe they had fallen into value territory. Webjet’s shares were among the worst performers on the ASX 200 last month after COVID-19 cases surged globally and led to concerns that travel markets might take longer to recover.

More reading

• ASX 200 has explosive start to trading ahead of RBA decision
• Why the Webjet (ASX:WEB) share price tumbled 12% lower in October
• 5 things to watch on the ASX 200 on Tuesday
• Meet Afterpay (ASX:APT)’s latest BNPL challenger
• These are the 10 most shorted shares on the ASX

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Pointsbet Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Pointsbet Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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A swell in new housing loans, combined with rising house prices, point to building momentum in the economic recovery. Accordingly, several ASX shares with exposure to residential housing have already shown signs of increased sales volumes. Moreover, investors will be waiting to see if this will be further fueled by the actions of the Reserve Bank of Australia today.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) chief economist, Paul Bloxham said.

We’ve got very low levels of COVID-19 and a reopening economy is a clear sign things are picking up. There’s rising consumer sentiment and a pick-up in timely indicators for the housing market.

Positive momentum in jobs

Yesterday, the ANZ job ads report showed a 9.4% increase month on month. ANZ senior economist, Catherine Birch, noted that the recovery in job ads had maintained a steady pace into October, having regained three quarters of the decline that occurred in April due to the pandemic. She went on to point out that job ads will need to exceed pre-pandemic levels to ensure jobs recovery. 

SEEK Limited (ASX: SEK) data shows its job ads are already above pre-pandemic levels in some states and the Northern Territory, but there is some way to go in the ACT, New South Wales and Victoria. So far, more than 450,000 jobs have been added to the economy in the past four months. This is likely to be boosted further as Melbourne reopens in November.

In its annual report yesterday, Westpac Banking Corp (ASX: WBC) noted that 66% of customers on deferrals are returning to repayments. This has reduced the ASX share’s peak home loans on deferral from $54.7 billion to $16.6 billion in October. Meanwhile, ANZ said last week that 79% of its customers were back on full repayments. 

Housing price improvement

Consumers committed to home loans at the fastest rate in 3½ years in September, according to The Australian Financial Review. In fact, CoreLogic data released last Sunday shows there were 604 auctions in Melbourne that week, up from 490 a week earlier and 255 this time last year.

Australian Bureau of Statistics (ABS) figures show that new home loans rose 5.9% from August. This is now the fourth straight month of new home loan increases and the highest monthly total since March 2017.

BIS Oxford Economics economist, Maree Kilroy, said.

Existing home demand continues to grow with no signs yet of momentum abating despite the clear headwinds facing the economy…For new dwellings, the [federal government’s] HomeBuilder program along with state level incentives are providing a considerable boost, which should continue in the December quarter.

ASX shares with residential exposure

During the first quarter of FY21, the two ASX shares below had considerable exposure to residential housing. In addition, both showed a significant sea change in relation to housing demand. 

In the Stockland Corporation Ltd (ASX: SGP) 1QFY21 presentation, the company showed net quarterly sales of 1,799 residential houses. This is the highest level of sales the company has had for three years. These record sales through June and July moderated somewhat in August, although still maintained levels above historical averages. As a result, this ASX share is focused on restocking to take advantage of surging demand. 

At Mirvac Group (ASX: MGR), Q1 leads were up by 34% and exchanges up 40% compared to the previous quarter and were above pre-COVID-19 volumes. This was due largely to projects benefitting from government stimulus as well as apartment projects in Western Australia and Queensland.

More reading

• Here’s how much Westpac’s (ASX:WBC) new dividend is worth
• ASX 200 has explosive start to trading ahead of RBA decision
• Glory days of ASX bank shares are gone: fundie
• What to expect from the NAB (ASX:NAB) FY 2020 result
• 5 things to watch on the ASX 200 on Tuesday

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The iSentia Group Ltd (ASX:ISD) share price is crashing lower today on news of a recent cyber incident. The iSentia share price is trading 29.7% down after the company update this morning. Shares in the company are currently sitting at 13 cents, trading closer to its 52-week low of 10 cents.

What does iSentia do?

iSentia is a media monitoring and analytics provider, with most of its revenue coming from software-as-a-service (SaaS) products. It operates in eight markets across the globe including Australia, New Zealand and Southeast Asia. The company has been listed on the ASX since 2014.

What happened?

On 27 October, iSentia advised that it was urgently investigating a cyber security incident which was disrupting services within its SaaS platform, Mediaportal.

The impact of this incident on the delivery of services to customers was significant as operations were severely compromised. The hack was contained and iSentia’s systems secured thanks to outside cyber security specialists. Furthermore, the majority of mediaportal is now operational and accessible. Some key services do remain affected.

So what?

The cyber attack will  immediate impact iSentia’s net profit before tax with a decline expected in the range of $7 million to $8.5 million.

The company’s transition to a new debt facility with Commonwealth Bank of Australia (ASX: CBA) will also be affected as a result of the incident. The transition will be delayed, but the company said it still has its current Westpac facility to draw from.

iSentia’s CEO Ed Harrison was optimistic as he said

Although it is difficult to fully assess the impact on FY21 pre-tax earnings, our estimate of $7- 8.5m reflects remediation costs and foregone revenues from services affected by the outage. While this has obviously been a challenging period for the company, I’m incredibly proud of our team who have worked tirelessly to support our customers and investigate the impact on our Mediaportal platform.

Despite his optimisim the iSentia share price remains 29.73% down today.

More reading

• Here’s how much Westpac’s (ASX:WBC) new dividend is worth
• Glory days of ASX bank shares are gone: fundie
• RBA taps bank partners for crypto Australian dollar project
• Buy CBA (ASX:CBA) and this ASX share for their dividends
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has recommended iSentia Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It seems today’s market is reflecting the impact of recent positive news on the economy, while anticipating further good news from the Reserve Bank of Australia. In particular, many ASX shares in the financial technology sector, fintechs, have seen solid share price rises since the opening of trading today. 

Best performing fintech ASX shares today

Lending ASX shares

At the time of writing, Credit Corp Group Limited (ASX: CCP) is leading fintech ASX shares up with an 8.14% increase since the start of trading today. Credit Corp is predominantly a debt purchasing and collection company. However, it also provides short term, unsecured loans via a range of subsidiary brands such as Wallet Wizard.

The WISR Ltd (ASX: WZR) share price is second with a rise of 5.26% so far today. The company’s Q1FY21 report showed revenue growth of 358% versus the previous corresponding period (pcp), as well as a 37% increase on the last quarter. Moreover, the company has seen its loan originations rise by 132% on the pcp, and 90+ day arrears are down by 0.43% to just over 1%. Lastly, the company is holding $32.1 million in cash as at the end of September.

Payments

Pushpay Holdings Ltd (ASX: PPH) is next with a 4.58% increase in its share price today. Pushpay is a church and not-for-profit sector donations organisation which provides technology for congregation management, as well as easy donation collection. The company holds its Q1FY21 briefing tomorrow. During the company’s AGM in June, it announced revenues had increased by 32% to that point. In addition, it announced an increase in the profit margin of 5% to 65%, as well as its first profit of $21.7 million.

Buy now, pay later (BNPL)

In the BNPL space, the Openpay Group Ltd (ASX: OPY) share price has risen by 4.23% so far today. Openpay announced on 28 October that it had seen active plans grow by 235% on the pcp, with 78% of new plans generated by repeat customers. Notably the company’s United Kingdom operations contributed 82% of all new active customers. 

Zip Co Ltd (ASX: Z1P) continues to grow as part of the great land grab by the two largest BNPL companies. In recent months, it has executed a number of moves designed to lock in growth. For example, the company introduced Tap and Zip. This enables Zip Pay users to shop using the platform anywhere that accepts Visa Inc‘s (NYSE: V) cards, thus entering the everyday payments market. 

Moreover, Zip recently completed the acquisition of Sydney-based tech company, The Urge. Its capabilities include expertise in search functionality, optimisation and indexation, all of which will be integrated into Zip’s platform globally, beginning with the QuadPay app in the United States. At the time of writing, the Zip share price has risen by 3.89% in today’s trade.

More reading

• Top broker names Openpay (ASX:OPY) shares as a buy
• 2 must-buy ASX growth shares to buy in November
• Why Zip Co Ltd (ASX:Z1P) share price is down 15% in one week
• Meet Afterpay (ASX:APT)’s latest BNPL challenger
• The Megaport (ASX:MP1) share price sank 16% lower in October: Time to buy?

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and ZIPCOLTD FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The iCollege Ltd (ASX: ICT) share price is flying today as the company announced the completion of its capital raising. The iCollege share price is currently trading 8.33% higher at 13 cents.

The iCollege share price has had a good year so far, increasing 125%.

What does iCollege do

iCollege is a holding company comprising 7 separate businesses that deliver training solutions throughout Australia and overseas.

The company is expanding its business offerings in both breadth and geographical locations. iCollege currently operates campuses in Brisbane, Gold Coast, Adelaide, Perth, Sydney and Canberra. These facilities offer the scope of training provided by all iCollege registered training organisations.

Capital raise completed

Today the iCollege share price has seen a sharp uptick as the company announced the completion of its $5.5 million placement to drive growth.

The company was pleased as it received binding commitments from new and existing shareholders and institutions to raise the money at an issue price of $0.10. While initially only aiming to raise $3 million, the company upped its amount due to the strong support.

iCollege believes this is a strong vote of confidence in its business model and growth strategy saying:

Investors clearly recognise the strong macro tailwinds driving the business which is partly underpinned by the State and Federal Governments’ $1 billion Job Trainer Fund. iCollege is a direct beneficiary of the funding.

What now for the iCollege share price

Recently, iCollege reported record revenue of $4.1m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $700,000 for the quarter. This has come from the company’s ability to capitalise on providing training packages to industries experiencing significant skills shortages.

As well as continuing to expand the existing domestic training operation, iCollege has started an aggressive marketing campaign to boost international operations.

The funds raised will help the roll-out of online coding bootcamps and a specialist business providing online training to children aged between 7 and 14.

Shares in iCollege are currently trading 8.33% higher at 13 cents for the day.

More reading

• iCollege (ASX:ICT) share price drops despite record performance

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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I recently took a closer look at two ASX shares with highly contrasting stories in 2020.

I’m talking about Treasury Wine Estates Ltd (ASX: TWE) and Elders Ltd (ASX: ELD) – both consumer staples players with fortunes that have gone in opposite directions this year. 

At the time of writing, the Elders share price is the best performing consumer staples stock so far in 2020, with its share price climbing by 74% year to date (YTD). By contrast, the Treasury Wine share price has been the worst performer in the sector – with its share price plunging by around 44%.

Why the Treasury Wine share price has plunged in 2020

Treasury Wine is an iconic Australian company which was established in 1843, and was split from its parent Foster’s in 2011. It’s a well-known, global wine producer with an international portfolio of wine brands such as Penfolds, Beringer, Lindemans, Wolf Blass, Rosemount Estate and more. The company owns over 13,000 hectares of vineyards.

Unfortunately, Treasury Wine has become collateral damage of two major events this year – the coronavirus pandemic and Australia’s political spat with China.

China is currently launching an antidumping investigation into Australian winemakers’ exports to the country. Although most analysts have regarded the investigation as politically motivated, it nevertheless could have a significant impact on Treasury Wine’s future growth. This is due to the fact that China alone contributed 25% of the company’s profits in FY20, making it an extremely crucial market for Treasury Wine.

In addition, Treasury Wine faces competition from big retailers in Australia, where liquor stores owned by grocery giants Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) still account for over 50% of total off-premises wine sales, a significant portion of which is the retailers’ private label brands. 

In its full-year results in August, Treasury Wine reported a 36% fall in net profit to $260.8 million, as the COVID-19 pandemic shut restaurants around the world, subsequently causing a United States wine glut. The company paid an 8 cent final dividend, fully franked, which is down 60% on the FY19 final dividend.

Why the Elders share price has sky-rocketed in 2020

Elders is an Australian agribusiness company that provides livestock, feed, wool agency services, grain, and real estate to rural customers primarily in Australia and New Zealand. It also operates red meat supply chains in Indonesia and China. It has 180 years of experience in the industry. 

The Elders share price is having a remarkable run in 2020 despite facing the impacts of drought, bushfire, and COVID-19. It managed to record a $52 million statutory net profit after tax according to its half year results announced in March. This represented a 90% increase from the previous year. 

The company’s revenue was also boosted by the recent acquisition of Australian Independent Rural Retailers (AIRR), which contributed $8.6 million to earnings before interest and tax (EBIT).

COVID-19 appears not to have had a significant financial impact on Elders, as prices of cattle and sheep continued increasing this year. The company’s FY21 earnings will partially depend on the winter crop harvest, which commenced in October.

Foolish takeaway

Both Treasury Wine and Elders are iconic Australian companies with long histories. The two businesses have had a contrasting year to date with regard to their financial and share price performance. External factors such as the pandemic and China appear likely to continue affecting Treasury Wine in the short term. Elders’ main markets are closer to home, and its fortunes have always been tied to Australia’s population growth and favourable weather patterns for its crops.

More reading

• Extreme levels of demand AND future growth prospects. Are you invested in these niche ASX shares?
• Why Rural Funds (ASX:RFF) is a great ASX dividend share
• Coca-Cola Amatil (ASX:CCL) share price jumps on M&A speculation
• New Chinese government threat leaves these ASX mining stocks on tenterhooks
• Top brokers name 3 ASX shares to buy next week

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool Australia has recommended Elders Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Resmed CDI (ASX: RMD) share price spiked more than 8.5% last Friday following an upbeat quarterly business update from the company. The strong result has attracted a series of share price upgrades from big brokers. Here’s the rundown. 

First quarter update

Resmed’s quarterly update reflected positive trends across the business and an all round solid performance. Its revenues increased 10% to $751.9 million, up 9% on a constant currency basis while net operating profit increased 27%. 

“During the quarter, we continued to support the global COVID-19 pandemic response, providing ventilators, masks, and circuits to countries in need around the world,” said Mick Farrell, Resmed’s CEO. The company’s 9% increase in revenue was driven by strong sales in its mask product portfolio and increased demand for ventilators, partially offset by a decrease in demand for its sleep devices. 

Revenue in combined Europe, Asia and other markets grew by 10% on a constant currency basis, primarily driven by sales across device and mask product portfolios, including increased demand for ventilators due to COVID-19. 

The business also experienced a 7% decrease in selling, general and administrative expenses for the quarter. These expenses improved to 21.1% of revenue compared to 24.6% in the same period of the prior year. These changes were mainly due to savings in travel and other cost management measures as a result of the pandemic. 

Broker upgrades 

The Resmed share price is in recovery mode following a disappointing FY20 result back in August. The positive Q1 update has enabled the ASX share to claw back most of its August sell down.

A series of broker updates came about on Monday after the quarterly was digested. Credit Suisse Group AG (NYSE: CS) raised the Resmed share price target from $28.00 to $31.00 and upgraded its rating from neutral to outperform. It anticipates a strong uptick in earnings growth as COVID-19 supports key healthcare segments where the company operates. 

Macquarie Group Ltd (ASX: MQG) also upgraded its rating from underperform to neutral and raised its Redmed share price target from $20.00 to $27.25. It notes a significant rebound in the underlying business in September and upgraded earnings forecasts. 

Finally, Morgan Stanley (NYSE: MS) raised its Resmed share price target from $25.90 to $27.00 and retained an equal weight rating. The quarterly trading update came out ahead of its expectations. 

More reading

• Top brokers just upgraded the ResMed (ASX:RMD) share price and this other ASX stock
• These were the 5 best performing ASX shares last week
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• These were the best performing shares on the ASX 200 last week
• Why AMP, Fortescue, JB Hi-FI, & ResMed shares are charging higher

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Westpac Banking Corp (ASX: WBC) share price is having another nasty day today, falling 0.42% to $17.72 a share at the time of writing. This might not come as much of a surprise – Westpac shares have been trading pretty much at this level since early June.

The Westpac share price remains depressingly low in 2020, still down 26% year to date. In fact, you’d have to go back to the depths of the global financial crisis in early 2009 to find a time before 2020 that Westpac shares were this low.

The move yesterday comes after Westpac released its full-year results for the 12 months ending 30 September. You can see our full coverage here, but long story short, it wasn’t a pretty sight. Net profits were down 66%, and earnings per share (EPS) were down 63% to 72.5 cents.

But it was interesting to see what Westpac would pull out of its hat in terms of dividends. This ASX bank declined to even pay an interim dividend this year in light of the coronavirus pandemic, in addition to a record $1.3 billion fine. It was the first time Westpac hasn’t paid a biannual dividend since 1986.

Westpac finally coughs up a dividend

That, no doubt, would have been disappointing for shareholders, who had to watch Westpac’s banking stable mates Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) all pay interim dividends earlier in the year. In fact, Commonwealth Bank shareholders have ‘only’ seen their dividends fall from $4.31 per share in 2019 to $2.98 a share in 2020.

But the drought for Westpac has finally broken. Westpac revealed that it will be paying a final dividend of 31 cents per share on 18 December, fully franked at 30%. That will come as some relief for shareholders, but pales in comparison to what they are used to. Last year, Westpac paid out $1.74 per share in dividends, and in 2018, $1.88.

On the current Westpac share price, this new dividend of 31 cents a share (assuming 62 cents a year) would give shareholders an annualised dividend yield of 3.48%, or 4.97% grossed-up with full franking. While Westpac might get back to its former glory days of $1.88 in annual dividend payments eventually, the banking sector is facing strong headwinds right now, including near-zero interest rates and a sluggish Australian economy. It might not be the 6–8% dividend yield that Westpac shareholders have been used to, but this is the new reality for the ASX banking sector.

More reading

• Glory days of ASX bank shares are gone: fundie
• What to expect from the NAB (ASX:NAB) FY 2020 result
• 5 things to watch on the ASX 200 on Tuesday
• Westpac (ASX:WBC) reports FY20 result, ASX 200 up 0.4% today
• 3 ASX 200 shares that received broker upgrades last week

Motley Fool contributor Sebastian Bowen owns shares of National Australia Bank Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Auswide Bank Ltd (ASX: ABA) share price is up 6.22% today after a business update for the first quarter of FY21.

The regional bank reported strong growth metrics for the quarter. These include:

• Net profit after tax of $5.566 million, up 36.22% vs previous corresponding period
• Net interest margin of 1.99%, up from 1.89% in first quarter of FY20
• Loan book volume is up by 7.24% to $3.381 billion vs previous corresponding period

Auswide Bank managing director Martin Barrett welcomed the result, saying:

We have made an excellent start to FY21 with a first quarter that has delivered a pleasing performance across our key financial targets. We continue to make strong progress delivering on our strategic plan and improving the capability of the bank.

Auswide also reported it has provided COVID-19 related assistance to impacted customers during the first quarter. At 30 September, this loan assistance has fallen to 3.3% of Auswide’s loan book compared to almost 9% at the end of FY20.

Briefly about Auswide Bank

Auswide is a fully-licensed regional bank with a strong focus on residential mortgages in Queensland.

According to its FY20 full year report, the bank’s loan book carries credit quality with 72% of the loans having a loan-to-valuations (LVR) ratio of 80% or less. Its loan payment in arrears stood at 0.39%, a historic low.

In April, credit rating agency Fitch downgraded Auswide’s long-term issuer default rating of BBB+ from stable to negative, citing uncertainties in outlook due to the coronavirus pandemic.

At the same time, the agency praised Auswide for having a solid loan book and strong risk management controls.

And the Auswide Bank share price…

The Auswide Bank share price is down around 12% for the year. This compares with the 19% decline in the financial sector index measured by ASX 200 Financial ex- A-REIT Sector Index (ASX: XXJ).

The share price is trading at $5.29 at the time of writing, up 6.22% amid a broader rise in the market. At the current price, Auswide’s market cap stands at $212 million.

More reading

• Summer is coming, and none too soon for ASX retail landlords
• Melbourne Cup tips inside (yes, really!)
• ASX 200 has explosive start to trading ahead of RBA decision
• Sandfire Resources (ASX:SFR) share price lower amid China copper ban rumours
• Macquarie’s latest ASX “buy” idea has a 10% yield

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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If you’ve read the Game of Thrones books – there are 5 so far – or watched the HBO series – 8 seasons – you’ll be familiar with the phrase, “Winter is coming.”

It’s the catchphrase for House Stark, the guardians of north Westeros. And it means you best get prepared for a lengthy rough patch ahead.

I read all the books long before HBO got wind of them. But I stopped watching the show around mid-season 6, when the storyline got ahead of the books. I’m still waiting for author George R R Martin to finish penning the last few instalments.

He’s a notoriously slow writer. And his books are massive. But I think it’s worth waiting to get the plot and dialogue straight from the man himself. Then I’ll tune back in for the rest of the Hollywood version.

Anyhow, winter in Westeros is no fun at all. And while we’ve been spared zombie attacks, I think most Aussies can commiserate with what a rough winter we’re emerging from. Atop the tragic loss of lives and severe illnesses, we’ve endured lockdowns, an economic recession, lost jobs, and wild share price moves on the ASX.

But the worst may well be behind us.

Summer is coming

Noting the relative strength of the Aussie housing market and fairly upbeat consumers, HSBC chief ANZ economist Paul Bloxham put a spin on the Stark’s catchphrase in this morning’s Australian Financial Review (AFR), saying:

Summer is coming. We’ve got very low levels of COVID-19 and a reopening economy is a clear sign things are picking up. There’s rising consumer sentiment and a pick-up in timely indicators for the housing market.

The housing market and consumer sentiment – both critical drivers of Australia’s economy – should receive another boost later today when the Reserve Bank of Australia (RBA) announces its decision on an interest rate cut and new quantitative easing (QE) measures.

Former Future Fund chief executive Mark Burgess is not putting much stock in the power of the rate cut. After all we’re likely talking about a 0.15% reduction here, taking the official cash rate from the current record low 0.25% down to a new uber-low 0.10%. That’s unlikely to make or break many investment or hiring decisions.

But Burgess has very different view on the RBA’s QE decisions (quoted by the AFR):

If they do QE, that would say to the government we’ve got your back on debt. If they don’t participate in QE, then that may lead to a tightening in fiscal settings. In Australia we still have a surplus mindset. The debt-is-bad philosophy could change. Doing QE says we don’t have to respond to that debt too soon.

We’ll know soon what the RBA decides. But regardless of the central bank’s move this month, Australia is in an enviable global position to begin opening back up domestically, and just in time for Christmas.

Unfortunately, the picture is far more dire in the northern hemisphere.

A tale of 2 sectors

In a tale of 2 sectors, manufacturing activity in major northern economies like China, the European Union and the US is up, while brick-and-mortar retailers continue to struggle.

However, the rapidly spreading pandemic could see manufacturing falter as northern winter progresses.

According to the AFR, TD Securities said in a note:

The recovery in the [US] manufacturing sector continues to impress. Indeed, the sector is well entrenched in expansion territory, registering its sixth consecutive month above the 50 mark. Despite October’s solid outturn, the US manufacturing sector’s outlook is not without a few hurdles. The rapid resurgence in new COVID-19 cases in the US and across the Atlantic constitutes a downside risk to the broader economic recovery.

As for brick-and-mortar retailers, Bloomberg reports:

America’s ailing malls suffered a pair of body blows over the weekend as two major landlords followed their ever-growing list of bankrupt tenants into Chapter 11 protection.

Pennsylvania Real Estate Investment Trust and CBL & Associates Properties Inc. sought protection from creditors Sunday, citing pandemic-induced pressures on their tenants and, in turn, themselves. Together the two REITs account for some 87 million square feet of real estate across the U.S., according to court papers.

ASX retail landlords

Australia’s near victory over the coronavirus is something to be celebrated. But it certainly hasn’t come without costs.

The S&P/ASX 200 Index (ASX: XJO), up 2.03% this morning, is still down 9% in 2020.

But the pain hasn’t been universal.

Many ASX online retailers’ share prices have soared during the lockdowns and social distancing. Like the Kogan.com Ltd (ASX: KGN) share price, up 180% year-to-date.

But most brick-and-mortar retailers saw a big drop in business during the southern winter as lockdowns bit hard. Many have sought to delay or renegotiate their rental terms, which in turn has put pressure on their landlords.

Take Scentre Group (ASX: SCG), for example. The company owns and runs Westfield retail assets across Australia and New Zealand, which in ordinary times see hundreds of millions of shoppers pass through the doors each year.

With its tenants struggling, Scentre’s share price is down 43% for the year.

But as ANZ’s Paul Bloxham said, “Summer is coming.”

And with the economy reopening, those 3 words could be music to the ears of Australia’s beaten down brick-and-mortar retailers and their struggling landlords.

More reading

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• Why REITs led the pack on the ASX today
• ASX property shares buoyed by latest market data
• Is the Adore Beauty (ASX:ABY) share price in the buy zone?
• The Mosaic (ASX:MOZ) share price comes alive, up 5%

Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd. The Motley Fool Australia has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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