The Recce Pharmaceuticals Ltd (ASX: RCE) share price is pushing higher on Monday morning.

At the time of writing, the synthetic anti-infectives focused biotechnology company’s shares are up 3% to $1.01.

Why is the Recce share price pushing higher?

Investors have been buying Recce shares this morning after it announced the successful dual listing of its shares on the Frankfurt Stock Exchange in Germany. This will see the company’s shares hit the Frankfurt bourse at the opening of trade at 8am central European time today.

According to the release, the dual listing was possible without many of the normal primary listing procedures. This means the company will benefit from a widening of its investor reach with minimal cost.

In addition, there was no associated capital raising for this listing or issuance of new securities. This was due to the company’s strong existing financial position and the fact that it is listed and market-makable via the ASX.

Management commentary

Recce’s Chairman, Dr. John Prendergast, appeared delighted with its dual listing.

He commented: “Dual-listing on the Frankfurt Stock Exchange is a wonderful new chapter in our global strategy. As the third largest stock exchange in the world, it sees the connection of EU biotech and overseas capital with the Company’s New Classes of Synthetic Anti-Infectives development program.”

The company’s investor and corporate relations advisor in Europe, Deutsche Gesellschaft Für Wertpapieranalyse (DGWA), spoke very positively about the listing. It appears to believe Recce will be an attractive investment option for European investors.

DGWA’s CEO, Stefan Müller, said: “DGWA are thrilled to be working with Recce in Europe. Investor interest in quality biotechnology companies is significant and increasing with the global anti-infective market expected to grow at a compound rate of over 30% to 2030 and anticipate this German listing will provide EU investors an opportunity to participate in that growth. We are confident Recce will be warmly welcomed among the European investment community and look forward to supporting their activity in the region over the time ahead.”

More reading

• Why Novonix, Recce, Singular Health, & Starpharma shares are storming higher
• Why the Recce Pharmaceuticals (ASX:RCE) share price is rocketing 10% higher

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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Last week was a rollercoaster ride for ASX 200 shares, with the S&P/ASX 200 Index (ASX: XJO) running as high as 2.70% by Tuesday afternoon before closing the week just 0.30% higher.

This wild performance was driven by weaknesses in sectors including the S&P/ASX Health Care (INDEXASX: XHJ), S&P/ASX Information Technology (INDEXASX: XIJ) and S&P/ASX Materials (INDEXASX: XMJ) which fell a respective 4.46%, 2.30% and 2.76%. Much of the underperformance in the tech and growth sectors was dragged down by increasing concerns for rising bond yields. 

While the ASX 200 is looking to rebound strongly today, here are the worst-performing ASX 200 shares from last week. 

1. IDP Education Ltd (ASX: IEL) 

The IDP share price took a 13.86% nosedive last week, making it the worst-performing ASX 200 share. Despite the significant fall, its shares have only stumbled to a 1-month low and up 14% for the year

There’s a true bull and bear case for the international student and language service provider. A challenging business environment in the face of a global pandemic resulted in a significant decline in the company’s revenues. The 1H FY21 results highlighted a 26% decline in revenue to $269.1 million and 45% decline in net profit after tax to $29.7 million. 

While its financial performance might be weak at face value, Ord Minnett called out IDP’s results on 24 February as an “extremely strong result under the circumstances”.

On the day of its 1H FY21 results, the IDP share price briefly touched a new all-time record high of $29.22. 

On the flip side, there are increasing concerns that the deteriorating relationship with China will curb international student numbers. An article from the Australian Financial Review notes that education agents based in China were given a directive not to send students to Australia.

2. Cimic Group Ltd (ASX: CIM) 

The anticipated and existing policies to boost infrastructure and housing sectors failed to trickle into an improvement in Cimic’s earnings. Cimic Group shares slumped as much as 18.5% on 10 February after the company announced its FY20 results which highlight a 20.3% decline in revenue due to COVID-19.

The Cimic share price has been in a year-on-year decline since 2018. And last week was yet another disappointing 12% decline for the Cimic share price.

3. Fortescue Metals Group Ltd (ASX: FMG) 

Fortescue shares went ex-dividend last Monday, paying an interim dividend of $1.47, or a yield of 6.65% at today’s prices. Given the currently elevated iron ore prices, Fortescue is expected to pay a dividend yield of approximately 11.70% in 2021. 

The Fortescue share price tumbled 8.50% last week, with much of this weakness attributed to going ex-dividend. Similarly, Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP) experienced similar declines along with going ex-dividend as well. 

More reading

• 5 ASX shares to buy in a market crash
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• Morgan Stanley reveals some investment trends to watch in 2021
• How to turn $20,000 into $300,000 in 10 years with ASX shares
• These were the worst performing ASX 200 shares last week

Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Idp Education Pty Ltd. 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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K2fly Ltd (ASX: K2F) shares will be on watch this morning following a contract signing with Coeur Mining Inc. (Coeur).

Established in 1928, Coeur is a precious metals producer that is primarily focused on gold and silver. The company employs over 2,000 people and has wholly-owned projects across the North America region. Coeur is also listed on the New York Stock exchange under the code, NYSE: CDE.

At market close last Friday, the K2fly share price finished the day down 1.4% to 33 cents.

What did K2fly announce?

The K2fly share price could be on the move today as investors digest the company’s latest update.

According to this morning’s release, K2fly advised it has entered into a resource inventory management Software-as-a-Service (SaaS) contract with Coeur.

Under the deal, K2fly will roll-out its RCubed software solution across Coeur’s 5 operating sites.

The annual recurring revenue (ARR) is estimated to be around $115,000 running over a 5-year term. The total contract value (TCV) will be roughly $718,000, depending on exchange rate fluctuations. This brings the company’s SaaS TCV to more than $8.7 million, an increase of 42% quarter-to-date (Q3 FY21).

The latest agreement solidifies the growing demand for K2fly’s software solutions in the mining industry. In late January, international mining giant Alcoa signed a 5-year contract for K2fly’s RCubed resource inventory solution.

Management commentary

K2fly chief commercial officer Nic Pollock welcomed the new deal, saying:

We are delighted to add another US-based, NYSE listed company and yet another gold producer to the growing list of companies using our governance and reporting software.

Additionally, it further validates that K2F’s RCubed software solution is the leading solution in the mining technical assurance space globally for Resource and Reserve Governance and Reporting in all commodities and especially Gold, where we service five of the top ten global gold miners by market capitalisation.

About the K2fly share price

Over the past 12 months, the K2fly share price has accelerated to more than 65%, reflecting positive investor sentiment. The company’s shares hit a 52-week low of 12.5 cents last March, before trekking higher. It’s worth noting that last month its shares reached a multi-year high of 43 cents.

Based on current valuations, K2fly commands a market capitalisation of around $33 million.

More reading

• Here’s why the Recce (ASX:RCE) share price is racing higher today
• The worst performing ASX 200 shares last week
• International Women’s Day: Which ASX companies are fighting gender inequality?
• 2 highly rated ASX dividend shares to buy now
• Here’s why the Nuix (ASX:NXL) share price is storming 5% higher today

Motley Fool contributor Aaron Teboneras 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.

The post Why the K2fly (ASX:K2F) share price will be on watch today appeared first on The Motley Fool Australia.

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This year, the theme of International Women’s Day is #ChooseToChallenge, and in the spirit of challenging gender inequality and bias, we’re taking a deep dive into gender equality within companies listed on the Australian Stock Exchange (ASX).

We will focus on the people making up the boards of S&P/ASX 200 Index (ASX: XJO) listed companies and ask some of the important questions: Where is progress happening? Where does more need to be done? And finally, how are those that have made the ASX 200 contributing to equality?

How gender inequality presents itself in the Australian share market

You may be thinking that gender bias isn’t something we need to be talking about in Australia. That here, sexism died long ago. However, while we have come a long way over years, and we’re getting closer to gender equality, we’re not there yet.

Chief Executive Women (CEW) defines true gender balance on company boards as a 40:40:20 ratio – where at least 40% of a board’s members are female and 40% are male, with 20% leeway.

It’s an ever-changing statistic, but the CEW’s ASX200 Senior Executive Census 2020 reported only 30 companies on the ASX 200 have achieved this balance.

It also found that of 25 chief executive appointments to ASX 200 companies between 2019 and 2020, only one was filled by a woman. In the same time frame, the proportion of female CEOs dropped to just 5%. A number that is more stunning when considered alongside S&P Global research that found the share prices of female-led companies perform, on average, 20% better than male-led companies. 

It’s a bleaker picture still when we consider other Australian indices. According to the Australian Institute of Company Directors (AICD), only 30.2% of ASX 300 Index (ASX: XKO) board members are women, with 14 companies’ boards comprising only men.

Those on the All Ordinaries Index (ASX: XAO) are even worse. Only 26.4% of board members within All Ords-listed companies are women and a total of 80 boards (out of 500) have no women on them.

Is 2021 the year of gender equality on the ASX 200?

2021 is off to a great start for gender equality in companies listed on the ASX 200.

So far, 45.5% of new board appointments in 2021 have been comprised of women. Way up from only 28% in 2011.

In January alone, women came to hold 5 more board seats on ASX 200-listed companies.

Additionally, according to the AICD, the average number of women on ASX 200 boards is 32.6%.

Things certainly have come a long way since the 30% Club launched in Australia in 2015. The club’s primary objective is campaigning for 30% women on ASX 200 boards. Its aims have been well and truly achieved; 110 companies listed on the ASX 200 now have boards that are at least 30% female.

Alas, gender bias and inequality are ongoing battles and we still have a long way to go. But the future is looking bright.

How do ASX 200 companies stack up in the fight against gender inequality?

Currently, Woolworths Group Ltd (ASX: WOW) is leading the fight against gender inequality, with 5 of Woolworths’ 9 board members being women.

A number of companies are keeping up with Woolworths’ example, boasting a 50% female board. These include Elders Ltd (ASX: ELD), A2 Milk Company Ltd (ASX: A2M) and Lynas Rare Earths Ltd (ASX: LYC).

On the flip side, there are only 2 companies in the ASX 200 with no women on their board of directors — Kogan.com Ltd (ASX: KGN) and Silver Lake Resources Limited (ASX: SLR). Each company has 4 board members, and of these, 100% are male. 

More reading

• Leading broker upgrades Woolworths (ASX:WOW) shares to buy rating
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to buy next week
• Morgan Stanley reveals some investment trends to watch in 2021

Brooke Cooper 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 owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool Australia has recommended Elders Limited and Kogan.com 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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Luckily in this low interest rate environment, the Australian share market has plenty of options for investors looking to generate a passive income.

But which ASX dividend shares should you buy today? Here are two that come highly rated:

Integral Diagnostics Ltd (ASX: IDX)

The first ASX dividend share to look at is this medical imaging service provider. At present, Integral Diagnostics operates from a total of 72 radiology clinics, including 26 comprehensive sites. From these sites, the company employs some of the region’s leading radiologists and nuclear medicine specialists.

During the first half of FY 2021, the company reported a 29.5% increase in revenue to $170.7 million and a 61.1% jump in net profit after tax to $23.2 million.

This went down well with analysts at Goldman Sachs. In response to the release, the broker initiated coverage on the company with a buy rating and $5.50 price target.

In addition to this, based on the latest Integral Diagnostics share price, it estimates that its shares offer a fully franked 2.5% dividend yield. While this is not the biggest yield you’ll find, the broker believes it can grow at a solid rate in the coming years.

Goldman notes that Integral Diagnostics is “a well-run business in an attractive industry, with a relatively secure volume profile of mid/high single digit growth, and a clear path for further growth through brownfield and M&A activities.”

Wesfarmers Ltd (ASX: WES)

Another dividend share to consider is Wesfarmers. Like Integral Diagnostics, this conglomerate was on form during the first half of FY 2021.

For the six months ended 31 December, Wesfarmers reported a 16.6% increase in revenue to $17,774 million and a 25.5% increase in net profit after tax to $1,414 million.

While this was driven by solid sales growth across much of the company, its key Bunnings business was clearly the star of the show. The hardware giant recorded a 24.4% increase in revenue to $9,054 million.

Goldman Sachs was pleased with this result as well. In response to it, the broker put a buy rating and $59.70 price target on its shares.

Looking ahead, Goldman is forecasting a fully franked FY 2021 dividend of $1.88 per share. Based on the latest Wesfarmers share price, this equates to an attractive 3.8% yield.

More reading

• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• Brokers name 3 ASX shares to buy right now
• 2 ASX 200 shares to buy for growth
• Exploring the golden window of opportunity for ASX ESG investors
• 2 high quality ASX dividend shares to buy to beat low rates

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Integral Diagnostics 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 Nuix Ltd (ASX: NXL) share price is rebounding after a horror run.

At the time of writing, the investigative analytics and intelligence software provider’s shares are up over 5% to $5.28.

Why is the Nuix share price?

Investors have been buying Nuix shares this morning after it responded to an article in the Australian Financial Review.

Within that article, one analyst likened Nuix’s IPO as putting lipstick on a pig. “There was so much lipstick caked on, no one could recognise it was a pig,” the analyst said.

This comment is in relation to the disappointing half year results release by Nuix in February. Given that Nuix’s shares hit the ASX boards on 4 December, just a matter of a few weeks short of the end of the financial period, investors were very surprised to see it fall short of expectations.

This led to concerns among some shareholders that Nuix “was fattened up for market day.”

This goes some way to explaining why the Nuix share price was down 58% from its high and trading below its IPO price at Friday’s close.

The Nuix response

This morning Nuix released a response to the article. It commented:

“Both 1H FY21 revenue and 1H FY21 Annualised Contract Value (ACV) reported by Nuix on 26 February 2021 were in line with management’s expectations when considering the impact of currency headwinds and the timing of certain deals which subsequently completed in January. As noted in its prospectus, Nuix’s contract completions are typically weighted towards the end of Nuix’s financial half years. In 1H21 for example, more than 30% of that half’s revenue was signed in December 2020.”

Management also notes that the US election had an impact on its first half performance due to delays in contracts being signed. It explained:

“In the case of ACV, this also included a delay in spending with the US government associated with the US election, in particular the unexpected delay in transitioning the Administration which impacted access to government agencies and officials required for signing contracts. Given the strength of Nuix’s government relationships, Nuix is well positioned to capture US government spend as it is released.”

FY 2021 guidance explained

The company also decided to add more colour to its guidance for FY 2021. It said:

“The FY21 revenue forecast, prepared on a consistent basis with applicable accounting standards, is based on estimated renewals, upsell renewals and new business. Renewals and upsell renewals, in the form of additional cores, licences and application add‑ons, are forecast at $164.1 million representing 85% of total revenue. New customer revenue, which has the longest sales cycle and provides opportunity for future renewals and upsell, is forecast at $29.4 million representing 15% of FY21F revenue. In 1H FY21, renewals and upsell of $72.2m was 85% of total revenue and new business at $13.1 million was 15% of total revenue, both in line with the full year forecast mix.”

Nuix’s CEO, Rod Vawdrey, concluded: “Nuix has been a trusted partner for more than fifteen years to leading organisations around the world including governments, law enforcement agencies, regulators and major corporations. As a newly listed company we are committed to building the same long-term trust with the market. The fundamentals of our business remain strong supported by our powerful processing engine and sticky customer base.”

More reading

• Nuix (ASX:NXL) share price hits all-time low: Time to buy?
• The Nuix (ASX:NXL) share price has a lot of ground to make up in FY21
• Here’s why the Nuix (ASX:NXL) share price is tanking 27%
• 2 exciting mid cap ASX shares to buy and hold
• 2 outstanding ASX growth shares to buy

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Nuix Pty 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 Douugh Ltd (ASX: DOU) share price has been a strong performer on Monday morning.

In early trade, the financial wellness app provider’s shares are up 12.5% to 22.5 cents.

Why is the Douugh share price rising today?

The catalyst for the rise in the Douugh share price today has been the release of an announcement.

According to the release, the company has appointed Rakuten Advertising to provide it with affiliate marketing services. Management believes this is a cost-effective and low-risk way to increase mobile app downloads and accelerate customer acquisition.

Douugh’s Founder and CEO, Andy Taylor, commented: “We’ve seen the unparalleled expertise and distinctive marketing solutions that Rakuten offers, and how they will help us to influence and activate audiences across the many paths and platforms of their digital journeys.”

“Rakuten Advertising creates unique opportunities to amplify our digital marketing performance, compared to other affiliate marketing companies because of its unrivalled audience scale, partner diversity, and technology innovation.”

Mr Taylor notes that Rakuten Advertising has a strong history of driving success for finance brands. It has 60 active clients in the vertical. These include five of the top 10 U.S. banks.

It has helped these clients acquire 10 million credit cards, 100,000 personal loans, and 55,000 mortgages. Though, it is worth noting that marketing such products for a well-established bank is far easier than an unknown wellness app with no competitive advantage.

What now?

Douugh hopes that by leveraging affiliate marketing, it will raise brand recognition, expand its customer base, and increase conversions and customer engagement.

The company also revealed that it intends to introduce new services and technologies in the future. This includes cash back rewards across international markets and Australia.

Management believes cash back rewards will be a central strategy for its affiliate program and expects it to accelerate the loyalty lifecycle of Douugh customers.

It also intends to integrate a member-get-member program, with a monetary incentive to Douugh users for inviting friends to sign up to the platform.

However, such programs are not cheap to run and are likely to lead to significant cash burn. So with a cash balance of $16 million at the end of December, another capital raising could be required in the near future.

More reading

• Douugh (ASX:DOU) share price falls as losses grow
• What’s with the Douugh (ASX:DOU) share price today?
• Why Chorus, Douugh, IOUpay, & Reliance shares are tumbling lower
• Douugh (ASX:DOU) share price plummets 9% today despite strong start
• Payright (ASX:PYR) shares get speeding ticket after 32% surge

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 ALS Ltd (ASX: ALQ) share price is charging higher on Monday morning.

At the time of writing, the global testing, inspection, and certification company’s shares are up 6.5% to $10.12.

Why is the ALS share price charging higher?

Investors have been buying ALS shares today following the announcement of an acquisition and the release of a trading update.

According to the release, the company has acquired pharmaceutical testing business Investiga for an undisclosed fee.

Investiga is a pharmaceutical testing business with operations in Brazil and the east coast of the United States. It currently has 360 employees and generated A$20 million of revenue in FY 2020.

The release explains that Investiga specialises in the cosmetic and personal care market, providing services to a portfolio of major global clients. Management intends to integrate the business into the existing ALS Life Sciences network, with a particular focus on growing in the USA. It notes that this represents over a quarter of the global market.

ALS will acquire Investiga at a multiple of 11x adjusted FY 2020 EBITDA, on a deferred basis, paid from existing debt facilities. There is no requirement for shareholder approval.

ALS Managing Director and CEO, Raj Naran, commented “Growing the Life Sciences division is a key part of the ALS strategy and Investiga significantly increases our presence in the Pharmaceutical market. We have a strong track record of integrating acquisitions into our existing Life Sciences network and Investiga provides us with the platform to grow our cosmetic and personal care offering, particularly in the USA.”

Trading update

Also giving the ALS share price a boost this morning has been the release of a positive trading update.

According to the update, ALS continued to trade resiliently in the third quarter and early in the fourth quarter despite the uncertainty created by the COVID-19 pandemic.

Life Sciences volumes have been stable, with laboratories providing their essential services to clients in major markets.

In addition, the Commodities division is starting to benefit from the improving cycle. Geochemistry sample flows increased by 13% in the third quarter, with this momentum continuing in the fourth quarter.

Management notes that major miners, as well as junior and intermediate miners, have contributed to this growth.

Finally, in the Industrial division, Tribology saw some improvement in the third quarter, whilst the trading environment for Asset Care remained challenging.

More reading

• Why brokers rate these 4 ASX shares a buy this month

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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Zip Co Ltd (ASX: Z1P) shares has taken a beating in the past few weeks, along with its peers such as Afterpay Ltd (ASX: APT) and Openpay Group Ltd (ASX: OPY). Investors are most likely querying if the Zip share price has finally bottomed out following the recent market shocks.

It’s worth noting that last month, the company’s shares hit an all-time high of $14.53, before suffering a severe fall. At Friday’s market close, Zip shares ended the day 5.2% down to $9.56 — a 34% decline from its record high.

Below, we take a closer look into what could be affecting the buy-now, pay-later (BNPL) company’s share price.

Why is the Zip share price sinking?

With the company’s latest half-year results wrapped up, there are a few catalysts as to what could be weighing down Zip shares.

Investors have again been spooked by renewed fears about a possible fourth COVID-19 wave in the United States. This comes as Texas and Mississippi opened up their doors to pre-COVID social norms. And to make matters worse, this could lead to the virus mutating into a new highly infectious strain.

So, what does this have to do with Zip?

Well, the company has been making strides to accelerate its growth strategy in the United States. Last August, the BNPL provider purchased QuadPay in a bid to capture the world’s largest retail market. In its H1 FY21 report, Zip revealed that 40% of the total transaction value (TTV) in December came from the United States.

However, with the rise of a potential new COVID-19 variant along with a possible fourth wave, the outlook appears grim. The Zip business could be heavily affected should the economic climate again turn south.

Another factor that may be negatively impacting the Zip share price is two broker notes that were released early this month. Analysts at RBC Capital Markets raised its target price for Zip by 29% to $9.00. However, that’s a current discount of 6% on today’s value.

On the other hand, a note from Macquarie also slightly lifted its estimate, but to a bearish price of $5.70. Again, that is 40% lower than the going rate at the moment.

Foolish takeaway

While the Zip share price may be trading lower than what it was 4 weeks ago, patient investors have done extraordinary well. In comparison to this time last year, the company’s shares are up 332%, and 80% year-to-date.

More reading

• Why interest rates matter for ASX 200 shares
• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 2 fantastic ASX growth shares to buy this week
• 5 things to watch on the ASX 200 on Monday
• Top brokers name 3 ASX shares to sell next week

Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and ZIPCOLTD FPO. 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.

The post The Zip (ASX:Z1P) share price is down 34% in less than a month appeared first on The Motley Fool Australia.

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There’s been increasing talk in recent days about rising bond yields and how that may impact ASX 200 shares. Many investors may be thinking, “what do interest rates have to do with my shares?”

There could be some important relationships and potential implications from the current interest rate spike.

What’s going on with interest rates?

In simple economic terms, central banks like the Reserve Bank of Australia (RBA) lower interest rates to kickstart the economy.

When rates are low, individuals and corporations are more likely to borrow money. That money is then invested back into assets and projects that boost employment and help drive economic growth.

One common misconception is that central banks like the RBA set interest rates. The RBA meets each month to discuss monetary policy and does set a target official cash rate (OCR).

Actual interest rates are set by the market, and while influenced by monetary policy, are subject to market forces.

What’s been happening is interest rates on long-term bonds are starting to spike higher. Bond yields increase when prices decrease, which happens when there is lots of selling. Here is where it starts to matter for investors in ASX 200 shares.

That increase in yields (or increase in selling) could be for a variety of reasons, one of which may be investors expecting higher inflation.

Increased money supply and an early-stage economic recovery could see an increase in inflation, which is bad for long-duration investments like 10-year Treasuries.

Why do interest rates matter for ASX shares?

The vast majority of investors diversify their portfolio across asset classes based on expected risk and return metrics, as well as intra-portfolio correlations.

If bond yields are spiking, buyers of those bonds should receive a higher premium for holding that investment. If that’s due to expected higher inflation, there are a number of ASX 200 shares that could be impacted.

One area that has been hammered recently in global markets is technology. ASX 200 tech shares like Afterpay Ltd (ASX: APT) and Xero Limited (ASX: XRO) boomed in 2020 as investors looked for long-term growth potential amid the uncertainty.

However, the “bird in the hand” adage means that a dollar today should be worth more than a dollar tomorrow. That’s especially the case if there’s high inflation, which would erode the present value of those future earnings.

That could be a key driver in higher share price volatility for ASX 200 shares like Afterpay in recent weeks.

Foolish takeaway

No one really knows why interest rates are spiking around the world but there are some fundamental economic principles that can help to provide context to the recent market movements.

If interest rates are moving up in the expectation of inflation increases, that could have knock-on effects for a number of ASX 200 shares including those in the tech sector.

If it’s due to expected economic growth and subsequent interest rate rises, then it could be a very different story.

More reading

• ASX 200 Weekly Wrap: ASX finishes higher, despite tech selloff
• 5 things to watch on the ASX 200 on Monday
• ASX 200 drops again, Zip sinks, Worley wins
• This was the week that ASX dividend shares proved their worth
• Why is everyone talking about bond yields?

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. 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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