A few ASX shares are growing really rapidly, which may mean that they’re worth looking at.

Businesses that are increasing the revenue and profit at a very fast pace may be able to deliver good shareholders.

Technology businesses in-particular are growing at a very fast rate in reaction to some COVID-19 impacts.

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is one of the ASX shares that have seen the most growth over the last year after the COVID-19 crash.

Over the last year the Temple & Webster share price has risen 342%. The ASX retail share has benefited from the high level of interest from shoppers in digital channels.

In the Temple & Webster half-year report, it revealed that active customers more than doubled to 678,000. Not only that, but revenue per active customer increased by 6% to $401 due to a higher level of repeat buying.

Not only is Temple & Webster increasing its marketing spending as it gets bigger, but its conversion rate is also improving along with a higher customer satisfaction rate. It has done a number of things to make things better for customers including: better range and quality, it doubled capacity in the ‘care team’, added more carriers for bulky delivery, invested in data integration for self-service and AI-assisted help, and it’s working with logistics partners in peak periods.

Temple & Webster generated revenue growth of 118% to $161.6 million and earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 556%.

The company shared some reasons why investors should be interested in the business. The ASX share said it’s the leading pure play online retailer for furniture and homewares in Australia. It has a large addressable market with accelerating online adoption. Finally, Temple & Webster says it’s profitable with strong top-line growth and a debt free balance sheet.  

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX share that has benefited from a rapid shift to digital payments over the last 12 months.

The tech business provides tools and services so that churches can manage their donations and connect with their congregations. One benefit of Pushpay’s offering is that it has a livestreaming function.

Pushpay’s FY21 interim result included a number of strong growth statistics including 203% growth of operating cashflow to US$27 million and earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) growth of 177% to US$26.7 million.

The combined offering of Pushpay and Church Community Builder, called ChurchStaq, is proving to be popular with churches and may help increase the stickiness of those clients as they’re getting all the benefits that Pushpay has to offer.

The ASX share continues to boast of increasing operating leverage and this was shown in January 2021 when it increased its EBITDAF guidance for FY21 once again with the forecast range now US$56 million to US$60 million. Processing volume over the month of December 2020 was slightly higher than the company’s internal forecast.

Will Pushpay’s profit margins keep rising? Pushpay said it expects operating leverage to continue to accrue to the business over the rest of FY21.

The Pushpay share price is valued at 22x FY23’s estimated earnings according to Commsec.

More reading

• 10 of the best ASX shares to buy in March
• 2 fantastic ASX shares with long runways for growth
• Will the ASX share e-commerce boom last?
• Why Afterpay, Nearmap, Temple & Webster, & Z Energy are tumbling lower
• 2 great ASX tech shares to buy today

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Temple & Webster Group Ltd. The Motley Fool Australia has recommended PUSHPAY FPO NZX and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The BARD1 Life Sciences (ASX: BD1) share price is on watch today after positive results from the evaluation of its EXO-NET product in pancreatic cancer. 

Let’s take a closer look at the announcement and what this means for the BARD1 share price. 

What’s driving the BARD1 share price higher? 

BARD1 maintains a cancer diagnostics portfolio. This includes the commercialised hTRET test which is used as a supplement to urine cytology tests. Additionally, the portfolio also includes diagnostics tests in development for ovarian, breast, lung, prostate, and pancreatic cancers. The group is working towards commercialising its proprietary Molecular NET technology. In particular, its lead EXO-NET product designed to capture and purify exosomes in a rapid, scalable and cost-effective manner. 

There are currently multiple EXO-NET evaluations underway. These evaluations are being conducted by various academic and industry partners. Notably, the partners include the University of Sydney, University of Queensland, Minomic International and VivaZome Therapeutics. 

On Tuesday, BARD1 announced positive results from a collaborative research study. The intention of the study was to evaluate its EXO-NET exosome capture technology and Minomic’s anti-GPC-1 antibody. Primarily, this technology is used for the detection of pancreatic cancer. The study found that EXO-NET was highly effective at isolating exosomes from both pancreatic cancer and healthy control samples. While the anti-GPC-1 antibody appeared to bind specific pancreatic cancer exosomes for pancreatic cancer patients. 

BARD1 CEO, Dr Leearne Hinch was pleased with the results and commented on the next steps for EXO-NET: 

This is a very encouraging result that clearly demonstrates the commercial potential of our soon-to-be launched RUO EXO-NET™ product for capturing exosomes and the feasibility of using GPC-1+ exosomes for detection of pancreatic cancer. BARD1 and Minomic are extremely pleased by this outcome and will discuss how to advance the project towards development of an exosome-based GPC-1 test for early detection of pancreatic cancer to improve patient outcomes and survival for this important unmet need.

What’s in store for 2021? 

BARD1 is making significant progress in the development and commercialisation of its diagnostic solutions. In particular, its BARD1, SubB2M, Molecular NETs, and hTRET platforms for healthcare professionals and patients.

BARD1 will continue to test the EXO-NET in collaboration with other academic and industry partners. The company believes the product is on track for commercial launch in 2021.

More recently, an Australian patent was granted for hTERT. The hTERT patent now has granted patents in Australia, China, Europe, Japan and the United States. Additionally, there are currently pending patents in Israel. Moreover, hTERT revenue is in its early days, with the product generating $148,140 for the half-year ended 31 December 2020. 

SubB2M is a unique cancer probe that is currently being used in in-house research programs for the detection and monitoring of prostate and pancreatic cancers and used in collaboration with Griffith University to develop SubB2M-based tests for the detection of ovarian and breast cancers. 

The company currently has a market capitalisation of approximately $230 million with $7.3 million cash at 31 December 2020. 

 

More reading

• Why the BARD1 (ASX:BD1) share price is climbing 6% today
• These small cap ASX shares surged more than 100% in February
• BARD1 (ASX:BD1) share price plummets 15% on legal proceedings

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Syrah Resources Ltd (ASX: SYR) share price is on the move on Tuesday morning.

At the time of writing, the graphite producer’s shares are up over 5% to $1.22.

This latest gain means that the Syrah share price is now up an impressive 24% since the start of the year.

Why is the Syrah share price pushing higher on Tuesday?

Investors have been buying Syrah shares this morning following the release of an update on its Balama operation in Mozambique.

According to the release, the company has achieved consistent production of on-specification natural graphite at Balama during March to date. This positions it ahead of schedule versus the expected lead time of two to three months for its first production.

Given that Syrah announced its plan to restart production at Balama on 22 February, it has taken less than a month to get it to this stage.

What now?

The company advised that it will progressively increase plant utilisation and production volumes as the full contingent of labour at Balama continues to be reinstated.

Syrah’s Managing Director and CEO, Shaun Verner, commented: “During the period of temporary suspension at Balama, we reduced costs whilst also maintaining operating and marketing capability to ensure that we could promptly respond to an improvement in market conditions.”

“Our re-start progress to date is a testament to the ongoing preparedness work by the Balama Operations team during the temporary suspension and positions us well to ramp-up into improving market demand,” he added.

Looking further ahead, the company notes that it continues to progress towards becoming a vertically integrated producer of natural graphite Active Anode Material (AAM) to service ex-Asia markets. It intends to operate Balama in parallel with progressing its natural graphite AAM project at Vidalia, Louisiana, USA.

More reading

• ASX lithium shares to get price shock as commodities supercycle charges up
• Leading brokers name 3 ASX shares to sell today
• Here’s why the Syrah (ASX:SYR) share price is rocketing 15% today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The shares of mining giants BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), and Rio Tinto Limited (ASX: RIO) have come under a spot of pressure recently.

This has been caused by a reasonably sharp pullback in iron ore prices from their recent highs.

Where next for iron ore prices?

The Goldman Sachs commodities team has been looking into iron ore and has made some changes to its forecasts for the steel making ingredient.

Its team is now expecting a recovery in Brazilian exports and a Chinese environmental policy driven slowdown in steel production to narrow the seaborne iron ore deficit in 2021.

Instead of a 27Mt deficit, it is now forecasting a 9Mt deficit for the year. However, due to the strong start that iron ore prices have had in 2021, it has modestly upgraded its 2021 forecast to an average of US$135 per tonne. Goldman was previously forecasting US$120 per tonne.

Looking further ahead, the broker is forecasting a clear surplus in 2022 instead of another deficit. Its analysts have pencilled in a 23Mt surplus next year, compared to an 8Mt deficit previously. Whereas in 2023 Goldman Sachs expects the surplus to increase to 49Mt.

In light of this, its analysts are forecasting an average iron ore price of US$95 per tonne in 2022 and then a long run iron ore price of US$65 per tonne.

Fortunately for Fortescue and other iron ore producers, Goldman believes that in the near term, ongoing strong demand from China (for infrastructure and property) and mill margin strength should limit the sustainability of any iron ore sell-off in the next few months. Furthermore, China’s environmental policies should provide more support for higher grade ore versus lower grade 58% ore.

Should you buy the miners?

Taking all that into account, the broker is still recommending investors buy BHP shares.

It has a buy rating and $53.40 price target on the Big Australian’s shares. This compares to the latest BHP share price of $47.88.

As for the others, Goldman Sachs has a neutral rating and $20.40 price target on Fortescue’s shares and a neutral rating and $118.80 price target on Rio Tinto’s shares.

Goldman commented:

“The higher 2021 Fe forecast (US$135/t) has resulted in upgrades to our EPS estimates, NAVs and 12-m TPs for the 6 iron ore stocks under coverage. Although we are calling for a c. US$50/t or 30% drop in iron ore by year-end, we think the ongoing recovery in global steel demand in 2Q means it is too early to become bearish on the iron ore sector considering the strong FCF/dividend yields in 2021 (average 10%/7%) and 2022 (average 7%/6%), despite the sector trading at 1.15x NAV.”

“BHP and RIO are trading on 5.5-6x, still below the 25-yr historical average of 6.5-7x, with FMG appearing overvalued at 8x compared to its historical average of 5x. Therefore, we see the drop in iron ore price as mostly priced into BHP and RIO already. We maintain our Buy on BHP due to strong FCF, production growth and 30% EBITDA exposure to our bullish view on met coal, copper and oil.”

More reading

• Chinese factory output is up an astonishing 35%
• Struggling to ride the wave of constant investing news?
• Why the Magellan (ASX:MFG) share price leapt 5% today
• Triple whammy hammers the Fortescue (ASX:FMG) share price today
• Why Afterpay, Fortescue, GWA, & Jupiter Mines are dropping today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Portugal has joined a list of at least 16 countries that have suspended use of the AstraZeneca plc (LON: AZN) COVID-19 vaccine over fears it may cause blood clots in some recipients. The manufacturer of the vaccine, which has been approved for use in Australia, insists there is no risk from the product’s use.

Studies conducted during the development of the vaccine, as well as observations during the public rollout, do not indicate any level of heightened threat.

With an effective vaccine distribution contributing to recent market confidence, could fears over the vaccine’s safety impact the ASX?

Australian Government continuing vaccine rollout

Treasurer Josh Frydenberg said Australia will not pause the AstraZeneca vaccine rollout.

“[Australian health experts] have not found any causal link between the vaccine and blood clots,” he told Sky News this morning.

“…the vaccine rollout will continue.”

Similarly, Prime Minister Scott Morrison said the Therapeutics Good Administration (TGA) does not need to reconsider approving the vaccine. The PM has previously cited a thorough examination of the efficacy and safety of the AstraZeneca shot as a reason for Australia’s slower than expected inoculation speed.

While the TGA has approved the imported AstraZeneca vaccine for use in Australia, it is yet to approve the locally manufactured variant. The CSL Limited (ASX: CSL) mass-produced vaccine will provide 50 million doses for Australia and its neighbours.

What a delayed rollout could mean for the ASX

The S&P/ASX 200 Index (ASX: XJO) is up 2,227 points (or 49%) since the coronavirus induced mass sell-off of March last year. Arguably, part of the reason for the strong recovery can be attributed to optimism that vaccines will lead to a quick end to the pandemic.

Again, the Australian government does not intend to pause the AstraZeneca vaccine in Australia and there is no evidence of direct harm caused by it.

However, the share market isn’t always a rational beast. Any fears over a delay to the vaccine’s rollout in Australia could spook some investors.

The economic impacts of COVID-19 and subsequent restrictions devasted some of Australia’s largest companies, particularly those operating in the travel sector or those which are heavily reliant on open borders for their revenue.

It will be interesting to see whether ASX shares such as CSL, Qantas Airways Limited (ASX: QAN), Flight Centre Travel Group Ltd (ASX: FLT), and A2 Milk Company Ltd (ASX: A2M) see any fallout from reports surrounding the AstraZeneca vaccine when today’s session kicks off.

More reading

• Chinese factory output is up an astonishing 35%
• The Flight Centre (ASX:FLT) share price is up 40% in six months: Can it go higher?
• Leading brokers name 3 ASX shares to buy today
• Why brokers think the Qantas (ASX:QAN) share price could fly 17% higher
• These are the 10 most shorted shares on the ASX

Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Metcash Limited (ASX: MTS) share price is on watch today after a trading update from the Aussie conglomerate.

Why is the Metcash share price on watch?

The Metcash share price is worth watching after the group’s investor day saw a trading and dividend policy update.

In its Food segment, Metcash remains “positioned as an alternative” to the majors like Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW). This includes focusing on retailer competitiveness and retaining market share gains.

In Hardware, Metcash said it is a “clear #2 in the market” with a strong trade focus. In Liquor, Metcash also said it remains a clear #2 with its Independent Brands Australia (IBA) network of ~2,700 stores. Strong retail sales growth through the coronavirus pandemic has helped to boost earnings.

Metcash reported a strong balance sheet and underlying cash flows. That has laid a platform to fund growth plans and boost investor returns.

The Metcash share price is one to watch following today’s update. Shares in the Aussie group have delivered strong shareholder returns ahead of the S&P/ASX 200 Index (ASX: XJO) and its peer group on a 5-year basis.

Metcash cited increased “at home” activities like cooking, DIY maintenance and beverage consumption as key growth drivers. An increased preference for shopping locally has also helped to boost Metcash’s sales.

The conglomerate reported strong sales momentum for all business segments so far in the second half of 2021. Supermarket, hardware and liquor sales have all jumped by double digits compared to the prior corresponding period.

This strong momentum has provided the board with more flexibility in its capital management plan.

Metcash also announced an increased target dividend payout ratio. Metcash will increase the ratio from 60% to 70% of underlying net profit after tax, effective FY2021.

Foolish takeaway

The Metcash share price is one to watch today after the company’s latest trading update. It will be interesting to see how the group’s shares perform during early trade following news of the increased dividend payout ratio and strong trading update.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• These are the 10 most shorted shares on the ASX
• Metcash (ASX:MTS) share price hits 52-week high and could go even higher
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Pendal Group (ASX: PDL) share price is on watch this morning after a leadership announcement from the company prior to the market open.

Why is the Pendal share price one to watch?

Pendal is an independent, global investment management group founded in 2007. Formerly known as BT Investment Management, Pendal has ~$100 billion in funds under management (FUM) with a market capitalisation of $2.0 billion.

The Pendal share price is on watch this morning after a Pendal Group CEO Succession announcement. Pendal announced that CEO Emilio Gonzalez will step down after 11 years in the role.

Nicholas Good, CEO of J O Hambro Capital Management (JOHCM) in the United States will be Mr Gonzalez’s successor. JOHCM is a wholly owned subsidiary of Pendal’s and a boutique investment management company with offices around the world.

Pendal chair James Evans said the “robust succession plan” has enabled the key appointment. Mr Gonzalez has a 6-month notice period and will look to enable a “smooth” transition.

Pendal shareholders have seen a 322.9% total return since Mr Gonzalez’s appointment in January 2010. That compares to a 130.1% total shareholder return for the S&P/ASX 200 Index (ASX: XJO) over the same period.

What else is happening for Pendal?

The Pendal share price has fallen 4.9% lower to start the year. That’s despite the investment group reporting a $5 billion increase in FUM in January 2021.

Pendal reported $97.4 billion in FUM at the end of last year despite net outflows of $1.6 billion. Shares in the Aussie investment group are up 40.5% in the last year.

The Pendal share price is trading at a price-to-earnings (P/E) ratio of 16.2 with a 5.9% dividend yield prior to Tuesday’s market open.

Foolish takeaway

The Pendal share price is one to watch in early trade after the company’s latest leadership announcement. Investors have received strong shareholder returns during Mr Gonzalez’s tenure and will be watching the company’s shares closely following today’s update.

More reading

• 3 ASX shares that just stormed to new 52-week highs
• We’ll get 7.8% yield from ASX this year, says investment pro
• Chinese factory output is up an astonishing 35%
• Got money to invest for dividends? Here are 2 ASX shares
• Why all eyes will be on the PointsBet (ASX:PBH) share price today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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With the Australian share market trading close to its highest levels of the year, it will come as no surprise to learn that a number of ASX shares are doing the same.

Three ASX shares which have just hit new highs are listed below. Here’s why investors have been buying their shares:

BlueScope Steel Limited (ASX: BSL)

The BlueScope Steel share price hit a multi-year high of $19.01 on Monday. Investors have been buying the steel producer’s shares after spot prices climbed to very favourable levels. This led to analysts at Ord Minnett recently putting an accumulate and lofty $24.00 price target on the company’s shares. Its analysts believe the company may have to upgrade its earnings guidance in the near future.

Codan Limited (ASX: CDA)

The Codan share price continued its positive run and climbed to a record high of $15.74 yesterday. Investors have been buying the electronic products company’s shares thanks to its strong performance in FY 2020 and FY 2021. This has been underpinned by very strong demand for metal detectors thanks to new product launches and a sky high gold price. Also giving its shares a boost on Monday was news that Codan will be included in the ASX 200 at the next quarterly rebalance.

Silk Laser Australia Ltd (ASX: SLA)

The Silk Laser share price was on form again on Monday and rose to a new record high of $5.20. This latest gain means the laser clinic company’s shares are now up 50% from their December IPO price of $3.45. The catalyst for this was the release of a very strong half year result in February. For the six months ended 31 December, Silk Laser revealed a 62% increase in network sales to $44.9 million and a 305% jump in net profit after tax to $4.7 million. This strong form is expected to continue in the second half, leading to management upgrading its full year guidance.

More reading

• Why the Hub24 (ASX:HUB) share price is firing up 12% today
• Why Codan, Evolution, Opthea, & People Infrastructure shares are charging higher
• ASX quarterly rebalance: HUB24 joins ASX 200, Brainchip into ASX 300
• Why Nuix, Hub24 shares are on watch
• Top fund manager names these 2 ASX shares as buys

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Dividend shares were out of favour last year as the COVID-19 pandemic hit. Businesses roundly cut yields to preserve capital for tough times.

That made life difficult for older investors, who rely on yield for their day-to-day income.

“It’s been near impossible for retirees to generate any sort of meaningful income from cash in the bank or bonds for a number of years now and when dividends were slashed throughout 2020, I think many would have been facing the prospect of drawing down capital to keep the lights on,” said Plato Investment Management managing director Dr Don Hamson.

But as this year began, experts predicted dividend stocks would make a roaring comeback in 2021.

“In 2021, we’re expecting a dividend increase of 30% in Australia in aggregate,” Tribeca Investment Partners portfolio manager Jun Bei Liu said in January.

“In the low bond yield and low interest rate environment, it looks incredibly attractive.”

And one ASX shares fund has now put its money where its mouth is.

Plato Investment Management announced Monday that its Australian Shares Income Fund has set a goal to rake in a whopping 7.8% gross yield this year.

The company forecasts the S&P/ASX 200 Index (ASX: XJO) would produce a 4.8% gross yield in 2021. Plato is betting that its active funds management will add another 3% on top of that.

Hamson attributed his team’s confidence to a bumper mid-year reporting season last month.

“The February reporting season saw a number of companies declaring record dividends and what’s most encouraging is that many of those businesses that have handsomely rewarded investors, look to have strong tailwinds in the foreseeable future,” he said.

“Thankfully, we’ve now seen a very swift recovery in dividends.”

The sectors to supersize ASX dividends in 2021

He picked out the banks as major contributors to income investing this year. Commonwealth Bank of Australia (ASX: CBA) was Hamson’s pick out of the big four institutions.

“Its $1.50 dividend equates to only 67% of earnings and the bank has said its pay-out ratio is likely to be 70 to 80% this year, so a stronger second-half dividend is expected,” he said.

“There’s also the possibility management will use excess franking credits to undertake an off-market buyback in the coming year, which will be a lucrative opportunity for retirees in particular.”

Hamson also named miners, and especially iron ore extractors, as a boon to income investors in 2021.

“We think this is a space income investors can’t afford to ignore right now. Of the top 6 dividend payers in Australia, 3 are now mining stocks,” he said.

“Are the payouts sustainable? Well, we think the supply and demand fundamentals for iron ore prices remain solid and if prices come off $100 per tonne from the highs, these companies still have good profit margins. Management at the big miners also seem to be learning from mistakes about over-investing in new mines which have impacted dividends in the past.”

Outside of those industries, the consumer discretionary sector would also chip in with some dividend gems, according to Hamson.

“The likes of JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL) have delivered in spades for investors — and strong sales momentum in the first quarter of this year indicates the retail boom we saw stemming from the pandemic still has some way to go.”

Hamson warned investors to avoid dividend traps with careful selection of quality companies.

“We believe diversity, active stock picking which focuses on avoiding dividend traps and tax effective portfolio management will be the keys to getting even more from dividends in the coming 12 months.”

Plato’s Australian Shares Income Fund is only for wholesale investors. But the company has a sister product, Plato Income Maximiser Ltd (ASX: PL8), which simulates the experience for retail shareholders.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• ASX 200 recovers, Evolution Mining acquisition, Afterpay sinks
• 2 ASX 200 shares to buy for income
• Why the Hub24 (ASX:HUB) share price is firing up 12% today
• Triple whammy hammers the Fortescue (ASX:FMG) share price today

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Super Retail Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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During an eventful day with many ups and downs, the S&P/ASX 200 Index (ASX: XJO) closed yesterday’s session 0.10% higher. While there are many reasons the index may have inched higher, one reason could be recent economic news coming out of China.

Reuters reported yesterday that industrial output in the People’s Republic was up an enormous 35.1% in the January/February period compared to one year earlier. China aggregates its January/February data to accommodate for Lunar New Year celebrations.

The results beat the median 30% growth figure extracted from a Reuters poll of analysts. In December, output was up 7.3% on the prior year.

It’s not unreasonable to expect the performance of the Chinese economy to have some impact on the ASX. In 2019, 40% of all Australian exports (US$ 103 billion) went to the largest Asian nation.

Signs of recovery in the data

COVID-19’s effects on the Chinese economy were an omen for global capital. The virus, originating in the city of Wuhan in Hubei Province, led to a 6.8% contraction in China’s GDP during Q3 of FY20. The disease spread throughout the world soon after.

Given that, it’s not surprising factory output is now growing at such a tremendous rate. Yet even still, there are signs China’s economy is growing beyond its pre-pandemic levels. Many are attributing this to China’s ability to quickly contain the virus within its borders. Additionally, according to Reuters, the recovery was aided by “robust trade, pent-up demand and government stimulus.”

Compared to January/February 2019, China’s industrial output is still up 16.9%. Reuters is attributing the impressive growth rate to a surge in foreign demand. Within China too, confidence and demand are heading in the right direction.

Retail sales in China were up 33.8% – greater than the 32% figure predicted by analysts. In December, retail sales were up only 4.6% and, in the first two months of 2020, they contracted by 20.5%. Even compared to the beginning of 2019, retail sales were up 6.4%.

Likewise, fixed asset investments are seeing a similar bump. They increased by 35% on 2020. This, however, was below analyst predictions of a 40% jump. Compared to the beginning of 2019, fixed asset investments still grew by 3.5%.

To get even more granular, private-sector fixed asset investments were up 36.4%. Private-sector investment makes up 60% of all investment in the single-party state.

China’s economy was the only major one to record an expansion during 2020. It grew by 2.3%.

How the news might affect ASX-listed companies

Many Australian companies are becoming increasingly reliant on Chinese demand for revenue growth. However, despite the positive news, there are still reasons to temper expectations for Australian shares.

For one, the Chinese government is still placing hefty, retaliatory tariffs on many Australian goods, including wine, beef, and even lobsters. As well, the Australian Government’s imposed international border lockdown is materially affecting companies like A2 Milk Company Ltd (ASX: A2M) and its supplier, Synlait Milk Ltd (ASX: SM1). The dairy producer heavily relies on the daigou market to sell its baby formula.

Despite all the bluster, the Central Committee is yet to place tariffs on the biggest Australian export to its nation – iron ore. Chinese industry is reliant on Australia’s steady supply of quality ore to keep it moving. Massive growth in output and no tariffs may bode well for iron ore exporters like BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), among others.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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