The Genex Power Ltd (ASX: GNX) share price is up over 5.5% today and currently trading at 28 cents.

Genex Power is focused on developing a portfolio of renewable energy generation and storage projects across Australia.

The company’s flagship Kidston Clean Energy Hub, located in north Queensland, will integrate large-scale solar generation with pumped storage hydro.

Genex share price pumps after company locks in funding

The Genex share price bumped up after the company confirmed that the Queensland Government is going to provide a $147 million funding package. 

The funding will go toward the construction of a new 275kV single circuit, 185.9km transmission line from Kidston to Mt Fox, and a new substation at Mt Fox.

The new infrastructure will facilitate the connection of the company’s Kidston Pumped Storage Hydro Project to the national electricity market.

Powerlink Queensland will build, own, and operate the project, which is expected to support over 400 new jobs during construction. The funding package will be advanced directly to Powerlink.

Positioning for future growth

Genex believes that the new transmission infrastructure will underpin fresh potential for future sustainable energy projects. 

The company stated that the transmission line will facilitate the creation of a new renewable energy zone in north Queensland, which is a location that’s abundant with strong wind and solar resources.

Genex CEO James Harding commented:

The Transmission Line will support not only our flagship Kidston Pumped Storage Hydro Project, but the broader Kidston Clean Energy Hub including the Kidston Stage 3 Wind Project and the Kidston Stage 2 Solar Project, with the creation of a new North Queensland Renewable Energy Zone.

The funding package announced today is $15 million more than the original $132 million package offered by the Queensland Government in September 2020.

Over the past 12 months, the Genex share price has climbed more than 28%.

More reading

• Here’s why the Icetana (ASX:ICE) share price is up 19% today
• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• Why the Dicker Data (ASX:DDR) share price almost hit a record high today
• American Pacific Borates (ASX:ABR) share price pops following latest presentation
• Afterpay (ASX:APT) share price higher following PayPal’s BNPL update

Motley Fool contributor Gretchen Kennedy 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 Icetana Ltd (ASX: ICE) share price has soared 19.23% today and is trading at 16 cents at the time of writing.

Icetana is a global software company providing video analytics solutions designed to automatically identify inconsistent actions in real-time for large scale surveillance networks.

The software integrates with customers’ existing video management systems and IP cameras.

Icetana share price soars after announcing new contract

Prior to the Icetana share price soaring, the company announced it secured a three-year contract with a Singapore resort. The contract is worth $536,000 and will be operated through security services vendor Prosegur Singapore Pte Ltd.

This is the first time that Icetana has worked with an integrated resort customer outside of Australia. The company believes there will be more international opportunities.

The contract has been priced on a software-as-a-service (SaaS) basis and will contribute to Icetana’s annual recurring revenue.

In November, Icetana reported that the company entered a contract with a Canadian power utility. The five-year contract is valued at CAD$90,000.

In its December 2020 quarter-end report, Icetana reported $231,000 in receipts from customers for the quarter. As at 31 December 2020, there was approximately $134,000 in receivables due.

Comments from the Icetana CEO

Sharing his insight about the Singapore deal, Icetana CEO Matt Macfarlane said:

This order represents the culmination of an extended process undertaken by the icetana and Prosegur teams. This was one of the COVID-19 affected projects that we are very pleased to see progress to an implementation stage. Particularly encouraging is the clear choice of the icetana motion intelligence platform over direct competitors. This represents icetana’s largest SaaS based recurring revenue contract to date. The opportunity to expand the number of cameras at this Singapore site and in other locations controlled by this end-user is potentially very significant to icetana.

Icetana share price snapshot

The Icetana share price has fallen more than 43% over the past 12 months. Year-to-date, it’s dropped nearly 13%.

At current prices, Icetana has a market capitalisation of $13.9 million.

More reading

• Why the Wesfarmers (ASX:WES) share price has soared 24% in a year
• Why the Dicker Data (ASX:DDR) share price almost hit a record high today
• American Pacific Borates (ASX:ABR) share price pops following latest presentation
• Afterpay (ASX:APT) share price higher following PayPal’s BNPL update
• CBA (ASX:CBA) share price rises as bank cuts savings rate

Motley Fool contributor Gretchen Kennedy 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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Wesfarmers Ltd (ASX: WES) shares have proven to be among the ASX’s most dependable achievers over the past year, rising by more than 24%. Since its lows of 23 March last year, the Wesfarmers share price is up a staggering 87.5%.

This year alone, the industrial conglomerate has added more than 8% to its market capitalisation and has been clocking new all-time highs like The Flash over the past two months. As a point of comparison, the S&P/ASX 200 Index (ASX: XJO) is still down around 2.4% compared to where it was 12 months ago. So what is it about this ASX blue-chip share that has investors so eager to buy in?

What is Wesfarmers?

Wesfarmers is one of the most diversified large-cap businesses on the ASX. It owns many of Australia’s most well-known and profitable retail brands, such as Bunnings, Kmart, Target, and Officeworks. But that retail cornerstone is only one part of this company’s earnings base. It also owns a suite of other businesses.

These range from coal mines and lithium processors to a clothing line. There’s Kleenheat Gas, CSPB Fertilisers and Australian Vinyls. There are also the recently-developed ‘new world’ businesses like Decipher (offering cloud-based data services), Catch.com.au (an online retailer), and Geeks 2U (offering computer and tech repairs). Wesfarmers also retains a stake in the loyalty program Flybuys, as well as a ~5% stake in Coles Group Ltd (ASX: COL).

Coles sale works wonders

Let’s talk about Coles for a moment. It might seem like ancient history now, but for more than a decade, it was a fully-owned subsidiary of Wesfarmers. Wesfarmers spun-off the grocery giant in late 2018, resulting in Coles’ own ASX listing, with investors receiving one Coles share for every Wesfarmers share owned. At the time, Wesfarmers retained a 15% stake in Coles, but it has progressively sold down this stake to the 5% it still owns.

Even so, Wesfarmers (and its shareholders) have done very well out of this deal. Coles was spun-off at a price of roughly $12.80. Today, Coles shares are trading at $18.36 (at the time of writing), and have developed an impressive dividend track record.

Speaking of dividends, let’s turn to Wesfarmers. Today, at the time of writing, the Wesfarmers share price is sitting at $55.73. That represents a market cap of around $62 billion, a price-to-earnings (P/E) ratio of 38.46 and a trailing dividend yield of 2.76% (which comes fully franked).

A P/E ratio of 38.46 objectively looks very high for a company of this size and scale. For comparison, Coles shares currently have a P/E ratio of 24.81. The ASX 200 itself currently has an average P/E of 23.18. So why are investors still so keen to buy in?

Why is the Wesfarmers share price outperforming?

Well, the first thing to note is that Wesfarmers has been sitting happily in a number of tailwinds over the past year. The trading update it delivered in November 2020 informed investors that  Bunnings sales were up 25.2% over the previous corresponding period.

Kmart and Officeworks also had strong results, with sales up 3.7% and 23.4% respectively. Likewise, Catch.com.au recorded a 114% rise in transaction volume. It seems that Bunnings and Officeworks were beneficiaries of the coronavirus-induced lockdowns, with customers turning to home renovations, building home offices and other improvements to fill in their time.

Additionally, Wesfarmers’ acquisition of the lithium company Kidman Resources in 2019 appears to have been well-timed. Fellow lithium producers like Pilbara Minerals Ltd (ASX: PLS) and Galaxy Resources Limited (ASX: GXY) have boomed over the past year as lithium prices rose on the back of electric vehicle and battery demand. Pilbara shares alone are up more than 200% over the past 12 months. Investor enthusiasm surrounding lithium has arguably also flowed into the Wesfarmers share price as a result of its Kidman ownership.

Finally, investors may be just assuming that the Wesfarmers share price represents a solid, long-term investment. Afterall, the company boasts a diversified earnings base, long history of shareholder returns, and the fact it is leveraged to the growth of the Australian economy, to entice investors. 

More reading

• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?
• Westpac (ASX:WBC) share price to close gap with CBA (ASX:CBA) says Morgans
• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• ASX shares to rocket 6% this year
• Here’s how ASX equal-weight ETFs stack up to index funds

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Wesfarmers 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 Dicker Data Ltd (ASX: DDR) share price has been a positive performer on Friday.

In afternoon trade the technology hardware, software, and cloud distributor’s shares are up 1.5% to $11.76.

This leaves the Dicker Data share price trading just a stone’s throw away from its record high of $11.96.

Why is the Dicker Data share price on the rise today?

Investors have been buying Dicker Data’s shares on Friday following the release of an announcement after lunch.

According to the release, the company has been appointed as the newest Australian distributor for industry-leading cloud, networking, digital workspace, and security vendor, VMware.

The release explains that this appointment was made following a mammoth 16-month global tender process.

“A significant source of growth.”

Dicker Data’s Chairman and Chief Executive Officer, David Dicker, believes the deal with VMware could be a key driver of growth for the company.

He commented: “This partnership will be a significant source of growth for our company in FY21 and unlocks not only the direct VMware business, but an entire ecosystem of solutions through the large number of VMware’s strategic and technology alliance vendors we already work with.”

“It’s exceptionally gratifying to see all the hard work our people put into this project rewarded with us beating out all our competitors to what is a pivotal vendor alliance. I look forward to reporting the positive impacts of our new partnership with VMware throughout FY21,” Mr Dicker added.

And while the company is unable to quantify the revenue impact the new distribution partnership will have at this stage, management appears to believe it could be material in the future.

Executive Director and Chief Operating Officer, Vlad Mitnovetski, explained: “The opportunity ahead of us with VMware cannot be understated. We believe VMware will rise to be one of our top vendors within a few short years of joining our business.”

“Access to the VMware portfolio cements Dicker Data’s position as the leading corporate and commercial distributor in the APAC region. The partnership will enable Dicker Data to offer a range of market leading technology products and solutions and builds confidence in our business amongst the wider market as we now represent all major tier-one technology brands and hold strong majority market share across our portfolio,” he concluded.

More reading

• American Pacific Borates (ASX:ABR) share price pops following latest presentation
• Afterpay (ASX:APT) share price higher following PayPal’s BNPL update
• CBA (ASX:CBA) share price rises as bank cuts savings rate
• Why the Orthocell (ASX:OCC) share price is on the rise
• GameStop, AMC trades temporarily blocked on Square’s Cash App

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. 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 Dicker Data (ASX:DDR) share price almost hit a record high today appeared first on The Motley Fool Australia.

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The American Pacific Borates Ltd (ASX: ABR) share price is up 3.53% to $1.76 at the time of writing, following the release of the company’s investor presentation. 

American Pacific Borates is a global speciality fertiliser producer. The company’s Fort Cady Borate Mine in California is a resource where boric acid, gypsum and potassium sulfate (SOP) will be produced for the North American specialty fertiliser market as well as new high-end technologies like electric vehicles and space shuttles.

American Pacific is also developing the Salt Wells Borate and Lithium Projects in Churchill County, Nevada, USA.

What are borates and why are they important?

According to American Pacific, boron is classed as a strategic commodity in many countries including the US.

Borates are the naturally occurring minerals which contain boron. American Pacific points out that plants need boron to grow and humans consume borates through food. 

Most globally produced borates come from mining colemanite, borax or kernite ore. The company’s Fort Cady pursuit mines colemanite.

Boron is used for modern car mechanisms like ceramic brake pads and touch screens. It also plays a role in fibreglass insulation and nuclear reactors.

American Pacific states that renewable energy technologies such as wind turbines and solar PV modules cannot be built without boron.

Investor presentation highlights

In its presentation, American Pacific detailed that it is expecting to sell five key products. Boric acid for industrial use, boric acid for agricultural use, SOP, “boron-enriched” SOP and gypsum.

SOP is a potassium sulfate speciality fertiliser that combines potash and sulfur.  The company states that there is a demand for SOP in the US because of how it benefits crops. For example, crop trials using boron-enriched SOP delivered a doubled yield in broccoli. Gypsum is another sulfate mineral that is also used in fertiliser. 

American Pacific splits the revenue streams of the business as a value driver. The current split is estimated to be 52.6% boric acid, 44.7% SOP and 2.7% gypsum.

Current post-tax, unlevered net present value (NPV) was reported as US$2.02 billion.

The company posted an earnings before interest, tax, depreciation and amortisation (EBITDA) of US$453 million and has set its EBITDA target for Phase 3 of its Ford Cady project to A$6.64 billion. 

American Pacific’s cash at bank balance as of 31 January 2021 was $64.3 million.

American Pacific share price snapshot

On current prices, American Pacific has a market capitalisation of $637.7 million. The company’s shares are up 17% in 2021 so far, and over the previous 12-month period, the American Pacific share price has climbed over 277%.

More reading

• Afterpay (ASX:APT) share price higher following PayPal’s BNPL update
• CBA (ASX:CBA) share price rises as bank cuts savings rate
• Why the Orthocell (ASX:OCC) share price is on the rise
• GameStop, AMC trades temporarily blocked on Square’s Cash App
• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?

Motley Fool contributor Gretchen Kennedy 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 Afterpay Ltd (ASX: APT) share price is pushing higher on Friday following an update from one of its newest and arguably biggest competitors.

In afternoon trade, the payments company’s shares are up 2% to $149.41.

This leaves the Afterpay share price trading just a touch short of its record high.

What was the update?

Overnight, payments giant PayPal released its fourth quarter results and provided the market with an update on how its buy now pay later (BNPL) offering was performing. This follows the launch of the service during the quarter.

For the three months ended 31 December, PayPal delivered total BNPL payment volume of US$750 million. It also finished the period with over 10,000 merchants and nearly 3 million active customers. The company also reported that it experienced a 40% repeat customer rate.

Management commented that the growth in its BNPL service was the biggest positive surprise during the quarter.

What does this mean for Afterpay?

Goldman Sachs has been looking through the result and has made a few observations.

One is that PayPal has facilitated as much gross merchant volume in its first quarter as Afterpay did after five. It was also the same with its customer numbers, which matched what Afterpay achieved after five quarters of operation in the United States.

Though, it is worth noting that PayPal already has a significant customer base to convert into BNPL customers. So, this isn’t a true apples to apples comparison.

The US BNPL market is strong

Another takeaway from this update that Goldman notes is that “the strong launch of PYPL’s service is another data point which suggests BNPL demand in the US is very strong.”

The broker estimates that there are now at least 37 million BNPL accounts that have been registered in the US market. Though, it notes that the number of users is likely to be materially below this figure. This is because there will be consumers using more than one service provider or have registered an account but not used the service.

From these, Goldman Sachs estimates that Afterpay accounts for 8.5 million customers.

It commented: “The latest Sensor Tower data would suggest that APT had reached just over 8mn customers at the end of 31 Dec 2020 (vs. GSe of 7.8mn) and may be over 8.5mn by the end of January. This could suggest some upside risk to our 30 June 2021 target of 10.3mn.”

Is the Afterpay share price in the buy zone?

At this point, Goldman Sachs doesn’t see value in the Afterpay share price and has retained its neutral rating and $99.90 price target on its shares.

More reading

• 2 ASX growth shares to buy right now
• Leading broker tips 3 ASX shares to positively surprise during earnings season
• ASX 200 up 0.9%, Afterpay drops, CBA rises
• 2 ASX shares that humbled successful fundies
• Why the Afterpay (ASX:APT) share price is pushing higher again

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 and recommends PayPal Holdings. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia has recommended PayPal Holdings. 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 Commonwealth Bank of Australia (ASX: CBA) share price is up after some of the big four banks cut their savings rates.

According to reporting by News Corp (ASX: NWS), both CBA and Australia and New Zealand Banking Group Ltd (ASX: ANZ) have decided to reduce the interest rates for bank account savers.

ANZ has decided to cuts its savings rate by 0.10% and CBA decided to reduce the interest rate by 0.05%.

News.com.au quoted Canstar executive Steven Mickenbecker, he said: “The low interest rate environment has dealt a major blow to savers, with the average annual interest earnings on bonus savings accounts now $400 less annually than what it was 10 years ago. For some people this could be the cost of their car insurance renewal each year. As savings rates creep ever closer to zero, more savers must surely be changing their savings habits, whether it be by chasing the higher rates that are available or by building a mix of other investments into their portfolio or both.”

At the time of writing, National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) haven’t yet announced any interest rate cuts.

This move may slightly increase the banks’ net interest margin (NIM), which is the profit measure of the margin of when banks are lending out money.

What have recent results looked like for the big four banks?

CBA

The FY20 result reflected the impact of COVID-19 on customers and the economy, however the bank said its performance remained strong due to disciplined execution of the strategy and it continued to improve its balance sheet.

The FY20 statutory net profit after tax (NPAT) dropped 12.4% to $9.63 billion and cash NPAT declined 11.3% to $7.3 billion. The loan impairment expense increased by $1.3 billion to $2.5 billion as the loan loss rate increased to 33 basis points. The net interest margin (NIM) declined by another 2 basis points to 2.07% because of the impact of lower interest rates.

The common equity tier 1 (CET1) capital ratio was 11.6%, which was above APRA’s unquestionably strong benchmark of 10.5%.

The latest released financial result was the FY21 first quarter trading update which showed that CBA generated $1.9 billion of statutory NPAT and $1.8 billion of cash profit, down 16% on the prior corresponding period. CBA said that income was stable, but expenses (excluding customer remediation) were up 2%.

In that quarter to 30 September 2020, the CET1 ratio continued to strengthen as it grew 20 basis points to 11.8%.

The CBA share price has gone up 1.4% today.

ANZ

It wasn’t too long ago that ANZ reported its FY20 result.

Its profit had a difficult year with (continuing operations) cash profit falling by 42% to $3.76 billion. Statutory net profit after tax fell by 40% to $3.58 billion.

When ANZ excluded certain items, the profit decline wasn’t as heavy. Profit before the credit impairments and tax fell by 16% to $8.37 billion. Profit before credit impairments, tax and large notable items only fell by 1% to $10.1 billion.

The total provision charge in the second half was $1.06 billion and followed the $1.67 billion charge taken at the first half. The collective provision balance increased to $5 billion at 30 September 2020. Its gross loans and advances increased by 1% to $622 billion whilst customer deposits grew by 8% to $552.4 million.

ANZ’s common equity tier 1 (CET1) ratio declined by 2 basis points to 11.3%.

More reading

• Westpac (ASX:WBC) share price to close gap with CBA (ASX:CBA) says Morgans
• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• What to expect from the Commonwealth Bank (ASX:CBA) half year result
• This chart shows why the ASX bull market can keep running
• 4 most trusted ASX companies (and the 4 least trusted)

Motley Fool contributor Tristan Harrison 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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Orthocell Ltd (ASX: OCC) shares are edging higher in mid-afternoon trade after the company announced it has been recommended for inclusion on the Australian Prosthesis List. At the time of writing, the Orthocell share price has risen 3.85% to 54 cents.

What’s driving the Orthocell share price?

Investors appear to be pleased with the latest news from the company, pushing the Orthocell share price higher on Friday.

According to its release, Orthocell advised it has received word from the Australian Government Department of Health, that its CelGro Dental product has been recommended for inclusion on the Australian Prosthesis List.

Once on the list, this allows the company to be reimbursed for its products by private health insurance agencies when patients have hospital cover. In a way, it acts as an incentive program that can further promote the take up on CelGro Dental.

Originally, Orthocell expected to be included on the Prosthesis List sometime between the middle and the end of FY21. However, with the date significantly brought forward, the company could achieve its inclusion within the first quarter of the 2021 calendar year.

Orthocell stated that the latest update further advances its position in securing a global distribution partner.

Quick take on CelGro

Orthocell’s lead product, CelGro, facilitates tissue repair and healing in a variety of orthopaedic, reconstructive and surgical applications. This includes treating defects in areas of the body such as tendons, bones, nerves, and cartilage.

Most notably, the collage medical device can be used in dental bone and tissue regeneration procedures. These include dental bone repairs, growth around dental implants in extraction sockets, and tissue regeneration in intrabony defects.

Words from the managing director

Orthocell managing director Paul Anderson hailed the importance of today’s update. He said:

Inclusion on the prothesis list is an important step in gaining reimbursement from private insurers for Striate + (previously named CelGro Dental). This is a significant milestone for our Company that is made possible by our recent Australian TGA approval and clinical data enabling progression towards reimbursement.

How has the Orthocell share price performed lately?

The Orthocell share price has been tracking higher since the start of November, up around 65% over the last three months.

Orthocell shares reached a 52-week high mid-last month on the back of receiving regulatory approval for entry to the United States market.

Based on the current Orthocell share price, the company commands a market capitalisation of roughly $101 million.

More reading

• Why the Orthocell (ASX:OCC) share price is rocketing 23% higher

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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Traders were once again blocked from buying shares of GameStop Corp (NYSE: GME) and AMC Entertainment Holdings Inc (NYSE: AMC), but this time, instead of Robinhood interfering with the ability to trade, it was Square Inc (NYSE: SQ)‘s Cash App.

Square had been one of the big beneficiaries of the hubbub that was raised last week after Robinhood prohibited its app users from buying shares of AMC, GameStop, and dozens of other stocks as their prices surged during a massive ‘gamma squeeze’ that cost short-sellers billions of dollars. 

The mobile trading platform’s users erupted in anger at only being allowed to sell shares, and Robinhood’s CEO Vlad Tenev has been called to appear before Congress to explain what happened. 

Many Robinhood traders abandoned the app and fled to other online brokerages, with most choosing the Cash App.

But now that Square also blocked buying certain stocks, will it receive the same blowback Robinhood did? Probably not.

Square told investors that it wasn’t involved in the decision; rather, its trade clearinghouse (DTC) Axos caused it, having “significantly increased the capital requirements” to trade four stocks. Cash App said that it disagreed with the decision.

While that was the same explanation as Robinhood gave last week, it took the app almost a day to say it. Initially, Robinhood said the reason was that it always monitors the markets, and because of the volatility, it was making changes to which stocks its users could buy and sell. It was only later that Tenev said it was because its DTC had asked for $3 billion to allow the trades to go through.

Because Square was more forthcoming at the outset, investors aren’t likely to be as upset and penalize Cash App. Buying the restricted stocks was allowed to resume later in the day.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in?
• Did Robinhood lose its investor base forever?
• GameStop has 1 undeniable advantage
• GameStop effect: 3 more shorted ASX shares that could skyrocket
• These central bankers aren’t worried about share market bubbles. Should you be?

Rich Duprey 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 Square. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The S&P/ASX 200 Index (ASX: XJO) has been on fire this week. Since Monday, the ASX 200 has risen from 6,607 points to today’s 6,819 points (at the time of writing). That’s a hefty rise of more than 3.3%.

Since the index has lost 2.3% over the past year, this week’s rise is a significant one. If we have a couple more weeks like this week, we’ll be back at all-time highs in no time.

So why such a comprehensive jump?

Well, we can probably put it down to the actions of the Reserve Bank of Australia (RBA) this week. On Tuesday, the RBA surprised investors with a startlingly dovish update. The RBA told the markets that it would be doubling down on its quantitative easing (QE) programs, as well as all but promising interest rates will stay at 0.1% until 2024.

As RBA governor Dr Philip Lowe told us, the RBA is waiting for inflation to reach around 3% before he sees any changes to monetary policy. A 3% inflation rate would likely only come with a booming economy with full employment. Until then, we’re still stuck with ‘lower for longer’.

This announcement sent ASX shares into a frenzy. This is because low rates give ‘risk-on’ assets like ASX shares a massive boost, seeing as there are no real alternatives for generating yield in a zero-rate, QE-fuelled environment.

Raging bull… market

According to reporting in the Australian Financial Review (AFR) today, fund managers and economists are in agreement on this, with many commentators predicting “a raging bull market” in 2021 as a result.

The report quotes MST Marquee’s Hasan Tevfik as saying:

RBA stimulus increases the possibility of a raging bull market in equities. The extreme financial repression, which the RBA is trying to orchestrate, should be explosive for debt-financed M&A [mergers and acquisitions].

But the commentary isn’t all ultra-bullish. Some commentators are expecting that the RBA’s actions will fuel what they see as already-existing ‘bubbles’ in financial markets.

Here’s Mr Tevfik again:

We have all the ingredients for an asset bubble to form in housing… Cheap money, rebounding economy, strong consumer sentiment and job vacancies strongly rebounding. There is no bubble today, and the RBA is focused on investor credit growth in the housing market which is under control right now. In six months it could be a very different story…. We are also seeing all the signs of the beginning of an equity market bubble.

Hugh Dive of Atlas Funds Management agrees. He told the AFR that while there was no ASX-wide bubble, “there are pockets of what looks like a dangerous bubble, namely tech and buy now, pay later”.

So should ASX investors go all in?

Well, these commentators are suggesting that conditions remain very fertile for ASX shares in the short term, but they are also warning investors not to get too carried away. We are seeing some interesting signs of late of frenzied speculative behaviour, such as the GameStop Corp (NYSE: GME) saga last month.

It’s normally speculative behaviour that signals the ‘top is nigh’ for a bull market. But with the RBA still steering the ASX ship into uncharted monetary policy waters, who knows where we’ll end up on this one. Perhaps keeping a foot in both camps, with a solid ASX share portfolio as well as a strong cash buffer, is the best path to tread.

More reading

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• Westpac (ASX:WBC) share price to close gap with CBA (ASX:CBA) says Morgans
• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• Did Robinhood lose its investor base forever?
• GameStop has 1 undeniable advantage

Motley Fool contributor Sebastian Bowen 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 RBA stimulus to fuel ‘raging bull market’ in ASX shares. Should you go all in? appeared first on The Motley Fool Australia.

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