On Thursday the S&P/ASX 200 Index (ASX: XJO) was a sea of red after having its worst day in months. The benchmark index fell 1.9% to 6,649.7 points.

Will the market be able to bounce back from this on Friday? Here are five things to watch:

ASX 200 poised to rebound

The ASX 200 looks set to rebound strongly from Thursday’s selloff. According to the latest SPI futures, the ASX 200 is poised to open the day 95 points or 1.45% higher this morning. In late trade on Wall Street, the Dow Jones is up 1.8%, the S&P 500 is up 1.9%, and the Nasdaq index is 1.5% higher.

ResMed Q2 update

The ResMed Inc (ASX: RMD) share price will be one to watch this morning when it releases its second quarter update. The market is expecting the medical device company to report another year on year jump in ventilator sales because of the pandemic. All eyes will be on how its core sleep treatment business is performing in the current environment.

Oil prices fall

Energy producers such as Oil Search Ltd (ASX: OSH) and Woodside Petroleum Limited (ASX: WPL) could end the week in the red after oil prices softened. According to Bloomberg, the WTI crude oil price is down 0.7% to US$52.49 a barrel and the Brent crude oil price has fallen 0.3% to US$55.65 a barrel. Demand fears and a stronger U.S. dollar weighed on prices.

Gold price softens

Gold miners Evolution Mining Ltd (ASX: EVN) and Northern Star Resources Ltd (ASX: NST) will be on watch after the gold price dropped lower again. According to CNBC, the spot gold price is down 0.25% to US$1,840.70 an ounce. The precious metal came under pressure after safe-haven appeal shifted to the US dollar.

Fortescue given neutral rating

The Fortescue Metals Group Limited (ASX: FMG) share price could be fully valued according to one leading broker. Analysts at Goldman Sachs have responded to its second quarter update by reaffirming their neutral rating and $19.70 price target. The broker is, however, forecasting a very attractive 11% dividend yield for FY 2021.

More reading

• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps
• Why the Fortescue (ASX:FMG) share price sank 4% lower today
• Jailing of NAB exec a scary déjà vu for NAB (ASX:NAB) share price
• Up in smoke! Why ASX cannabis shares are having a bleary day
• Why the Amcor (ASX:AMC) share price is having a rough start to 2021

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. 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 S&P/ASX 200 Index (ASX: XJO) declined by more than 1.9% today, it dropped to 6,650 points.

Here are some of the highlights from the ASX:

IOOF Holdings Limited (ASX: IFL)

The IOOF share price fell by 10.6% today after delivering its quarterly update for the three months to 31 December 2020.

IOOF announced that its funds under management, advice and administration (FUMA) fell by $0.4 billion to $202.4 billion. Management said this reflected an uplift of $12.7 billion due to market movements, largely offset by one-off negative movements of $10 billion including $8.1 billion from the termination of the BT relationship, $1.5 billion from the liquidation of IOOF’s cash management fund and a $0.4 billion one-off transfer from the cash management trust.

The ASX 200 company said that ‘financial advice’ suffered $1.3 billion of net outflows, ‘portfolio and estate administration’ received $40 million of net inflows, ‘pensions and investments’ saw $625 million of net outflows and ‘investment management’ experienced $2.2 billion of net inflows – though that included $1.9 billion of net outflows due to reinvestment simplification into external interest-bearing cash accounts delivering improved client outcomes, but the revenue differential for IOOF was negligible.

Talking about IOOF’s plan with financial advice, IOOF CEO Renato Mota said: “Advice 2.0 has resulted in changes to the way that advisers choose to utilise IOOF’s services. We have seen practices with $363 million in funds under advice choose to become self-licensed and continue to utilise services under the IOOF Group. We have also seen 22 advisers with $869 million in funds under advice transition from IOOF licences due to various reasons including some practices that we don’t view as economically sustainable under our future advice model. The financial impact of the total $1.3 billion advice outflows is not material.”

Evolution Mining Ltd (ASX: EVN)

ASX 200 gold miner Evolution Mining gave its quarterly update to 31 December 2020 today as well.

In terms of cash generation, Evolution Mining said that it made $258.9 million of mine operating cash flow. Net mine cash flow generation was $170.5 million. Group cash flow was $99.3 million.

The cashflow allowed Evolution Mining to reduce its net bank debt by $93.4 million to $86.9 million.

Its gold production increased 6% quarter on quarter to 180,305 ounces, whilst the all-in cost (AIC) declined by 5% to A$1,582 per announce, for an AIC margin of A$834 per ounce.

Bubs Australia Ltd (ASX: BUB)

The Bubs share price went up 23% today after announcing its performance for the three months to 31 December 2020.

Bubs’ group quarterly gross revenue was $12.8 million, an increase of 36% over the first quarter of FY21, though it was down 12% on the prior year.

China cross border e-commerce (CBEC) sales were up 27% quarter on quarter and up 34% compared to the prior corresponding period.

Adult goat dairy gross revenue was up 45% quarter on quarter and up 25% against the prior corresponding period.

The Bubs infant nutrition portfolio, which represented 57% of the second quarter’s revenue, grew 27% compared to the FY21 first quarter.

The company said that Bubs Australia is the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse, with combined retail scan sales at the checkout up 41% quarter on quarter and up 67% compared to the prior corresponding period.

Bubs also said that export sales to markets outside of China continue to strengthen, with sales rising 194% quarter on quarter and up 138% against the prior corresponding period.

Other movements

With the ASX 200 being down by almost 2%, there were some big sell downs.

Some of the WAAAX shares were among the biggest fallers. The Xero Limited (ASX: XRO) share price dropped 6.3%, the Afterpay Ltd (ASX: APT) share price declined 6.2% and the WiseTech Global Ltd (ASX: WTC) share price fell 6.1%.

More reading

• 2 fantastic ASX tech shares to buy in February
• Jailing of NAB exec a scary déjà vu for NAB (ASX:NAB) share price
• Up in smoke! Why ASX cannabis shares are having a bleary day
• Why Bigtincan, Bubs, LiveTiles, & Treasury Wine shares are storming higher
• Why the Amcor (ASX:AMC) share price is having a rough start to 2021

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 Xero. The Motley Fool Australia owns shares of and has recommended BUBS AUST FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO, COLESGROUP DEF SET, and WiseTech Global. 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 Zebit Inc (ASX: ZBT) share price had some ups and downs today after the company announced its quarterly and half year reports. Shares in the e-commerce company went up as high as $1.13 in afternoon trade before retreating to close at $1.10, up 0.45%.

Zebit is a California based e-commerce company that enables customers to pay for products in instalments over six months.

The small cap retailer operates in both retail e-commerce and financial services. Zebit sells products as a merchant and provides the financing for its customers (via a BNPL solution) for those products over time.

What’s driving the Zebit share price?

The Zebit share price was up today on the back of its solid quarterly report ending 31 December which exceeded the prospectus forecast.

In particular, the company increased revenue by 34.2% compared to this period last year. This resulted in quarterly revenue coming in at $44.2 million. Contribution margins also climbed to 15.8%, a significant improvement compared to the 7.3% achieved during December of FY19.

Zebit reduced its bad debts metric to 9.4%. While the level is still high, it’s well below the 19.1% recorded in the prior corresponding period.

Management comments

Zebit president and CEO Marc Schneider welcomed the news, saying:

I am extremely pleased with the company’s performance and continued strong operational execution of Q4 and H2 FY20. We saw positive trends with strong revenue growth and improved credit performance.

Zebit continues to be the one-stop e-commerce solution for millions of US consumers who do not qualify for mainstream credit and need a longer duration to finance sizable purchases.

In over 30 years of operating companies, I have never seen such a strong demand and repeat usage of a product offering. The company continues to be focused on high growth in 2021.

About the Zebit share price

Zebit plans to expand its solid quarterly report by adding new products. The company is piloting an e-commerce solution for prime credit customers. This will allow them to move up the market with a differentiated product.

Listing on the ASX in October last year, the Zebit share price has returned 5.5%. In comparison, the All Ordinaries Index (ASX: XAO) has returned 10.5% over the same period.

More reading

• Why Atomos, BOD Australia, Galaxy, & Zebit shares are racing higher
• Why the Zebit (ASX:ZBT) share price is jumping 12% today

Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Chinese state-owned Shandong Gold’s acquisition of Cardinal Resources Ltd (ASX:CDV) is just about complete.

Shandong is one of the world’s largest gold miners, and the company announced today that it now has a relevant interest in 95.62% of all Cardinal shares. Shandong will acquire all remaining shares by 3 February 2021.

Five business days later, Cardinal’s shares will be suspended and the ASX will remove Cardinal from its official list.

A fight to the finish: China and Russia duke it out over Cardinal

The path to where we are has not been straight forward. Just a few months ago, there was a public bidding war between Shandong and Russian mining giant Nord Gold S.E. over the acquisition of Cardinal Resources.

Back in September, Nord Gold put out a public offer of 90 cents a share to acquire Cardinal Resources. Shandong bid $1 and that’s what set off the war over Cardinal. 

Russia and China continued to haggle for around three months in an effort to outbid the other. Finally, at the end of December, Shandong reigned victorious with the winning offer of $1.07 a share. 

Now here we are, nearly a month later, and the deal is coming to a close.

Why won’t Canada sell to Shandong?

Meanwhile, Shandong has also been making moves to buy another gold mine located in the Canadian Arctic. However, as reported in Wall Street Journal (WSJ), the effort was blocked last month by Canadian Prime Minister Justin Trudeau.

The reason the purchase was blocked is due to growing concern about the rising influence Beijing is having in both Canada and the polar region. According to the WSJ, advice for this action came from former Canadian national security and military officials.

The Australian also mentions Canada’s concerns over national security and notes that if relations between Canada and China remain tense over this issue, it may open new opportunities for Australian coking coal exports in Beijing.

How has this impacted the Cardinal Resources share price?

The Cardinal Resources share price currently sits at $1.06 having gained around 187% over the past 12-month period. Looking at a five-year window, Cardinal Resources shares are up close to 800%.

More reading

• Here are the best All Ordinaries performers of 2020
• Cardinal (ASX:CDV) takeover battle over after winner announced

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 Western Areas Ltd (ASX:WSA) share price closed over 16% lower today at $2.46, making the company one of the biggest losers on the ASX for the day. The S&P/ASX 200 Index (ASX: XJO) finished off 2.7% lower.

Western Areas is one of Australia’s top nickel producers with a current market capitalisation of approximately $811 million. Its shares came under pressure today after the company released its most recent quarterly report. Here’s a closer look at its performance for the quarter ending 31 December 2020.

Mining activity updates

Within Western Areas’ Forrestania operation there are four separate mine sites — Flying Fox, Spotted Quoll, Cosmos and Odysseus. The Flying Fox site is Western Areas first producing underground mine. According to Western Areas, it’s one of the highest grade nickel mines in the world. The mine has been operating since 2006.

At the end of the December 2020 quarter, Western Areas advised that its Flying Fox operation produced 38,255 tonnes of ore at an average grade of 2.5% nickel for 939 nickel tonnes.

The Spotted Quoll mine was discovered by Western Areas in 2007. The company estimates it currently has a mine life exceeding six years, based on reserves. Spotted Quoll produced 86,204 tonnes of ore at an average grade of 3.0% nickel for 2,579 nickel tonnes during the period.

The other two sites, Cosmos and Odysseus, both received capital injections during the period as the company continues to expand and develop its programmes. In total, $35.6 million was invested in the Forrestania operation during the December quarter.

Financial position

Western Areas finished off the December quarter with a cash total plus nickel sales receivables and liquid assets totalling $168.6 million. This is around $12 million less than the preceding quarter.

‘Cash at bank’ was $98 million at the December quarter end. This compares to $120.3 million in the quarter prior.

The company attributed the spending increase to a few different events across the quarter, including the $18 million spend on the Odysseus Mine development and shaft haulage infrastructure construction.

Additionally, the company paid $13.4 million toward mine development and capital expenditure at its Forrestania site. It spent $4.3 million on exploration and feasibility expenditures, and $2.1 million went to FY20 final dividends.

Today’s steep plummet puts the Western Areas share price at $2.46, down more than 7% on this time last year.

More reading

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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 Fortescue Metals Group Limited (ASX: FMG) share price was out of form on Thursday and tumbled lower despite the release of a solid quarterly update.

The iron ore producer’s shares were caught up in the market selloff and dropped 4% to $22.73.

How did Fortescue perform in the second quarter?

For the three months ended 31 December, Fortscue achieved iron ore shipments of 46.4 million tonnes (mt), bringing its half year shipments to a record of 90.7mt.

The former was achieved with C1 costs of US$12.81 per wet metric tonne (wmt), which were largely in line with the previous quarter.

Thanks to the appreciation in the iron ore price during the quarter, Fortescue recorded average revenue of US$122 per dry metric tonne (dmt). This was 91% of the average Platts 62% CFR Index for the quarter.

The strong free cash flow that this generated led to Fortescue finishing the period with net debt of just US$0.1 billion. This includes the payment of the FY 2020 final dividend and the FY 2020 final tax instalment.

Fortescue’s Chief Executive Officer, Elizabeth Gaines, commented: “Record shipments of 90.7mt surpassed any half year since Fortescue’s inception, and we are very well placed to meet the sustained strength in demand from our customers.”

“Fortescue is continuing to deliver strong results for FY21 across all key measures of safety, production and cost; and during the quarter the team achieved a key milestone of first ore at our Eliwana mine,” she added.

Outlook

Fortescue has held firm with its guidance for FY 2021.

It continues to forecast iron ore shipments of 175mt to 180mt with C1 costs of US$13.00 to US$13.50 per wmt.

Capital expenditure is expected in the range of US$3 billion to US$3.4 billion. This is all based on an assumed exchange rate of AUD:USD 0.70.

The company is scheduled to release its half year results on 18 February. Its preliminary net profit after tax for the six months on an unaudited basis is expected in the range of US$4 billion to US$4.1 billion.

More reading

• Why the IGO (ASX:IGO) share price is tanking today
• Why Beach, Fortescue, Iluka, & Temple & Webster shares are dropping lower
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
• ASX property stocks are likely to beat property investments in 2021
• ASX 200 rises 0.4%

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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There are some ASX shares that a number of brokers like and have rated as ‘buys’

It can be quite hard to find good businesses that are trading at a good price. One investor might say that BHP Group Ltd (ASX: BHP) is a good buy, whilst another might say that Woolworths Group Ltd (ASX: WOW) is the share to buy.

Brokers are constantly looking at businesses and share prices, thinking about what would be a good investment. There are various brokers out there like Bell Potter, Macquarie Group Ltd (ASX: MQG) and UBS that provide different recommendations about shares.  

With that in mind, these ASX shares are liked by more than one broker. Of course, this still isn’t a guarantee of success – they could all be herding together.

Baby Bunting Group Ltd (ASX: BBN)

Baby Bunting is the largest baby and toddler product retailer in Australia.

The ASX share is liked by at least three brokers right now.

The company sells things like prams, baby clothes, cots and toys. There was growth in sales during FY20 despite COVID-19 impacts – total sales went up 11.8% to $405.2 million thanks to comparable store sales growth of 4.9% and online sales growth of 39.1%. In that same result, the gross profit margin increased by 120 basis points to 36.2%. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 24.1% to $33.7 million and underlying net profit after tax (NPAT) rose 34.1% to $19.3 million.

At the company’s annual general meeting (AGM), it said in the year to date to 2 October 2020, comparable store sales had grown by 17%. Excluding Melbourne metro stores, comparable store sales had gone up by 28.5%.

In the first quarter of FY21, the ASX share’s online sales (including click and collect) went up 126% – excluding Victoria, online sales went up 92%. Click and collect sales jumped 233%. The gross margin improved by 90 basis points to 37.5%.

The company is anticipating to open between four to six stores in FY21, with three new stores opened in the first half of the year.

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The big four ASX bank is rated as a buy by at least five brokers.

During the 2020 calendar year, the big banks like ANZ significantly increased credit provisions because of the economic impacts of the COVID-19 pandemic.

However, brokers such as Credit Suisse believe that as time goes on, investors will recognise the dividend and earnings recovery. ANZ is Credit Suisse’s favourite big four ASX bank.

The Australian Prudential Regulation Authority (APRA) recently lifted the restrictions regarding how much of a dividend payout ratio that the banks can pay. Under previous guidance, banks were limited to a 50% dividend payout ratio of statutory earnings.

However, APRA does still expect banks to take a prudent approach.

APRA Chair Wayne Byres said: “A decade-long process of increasing capital levels and bolstering resilience in the banking system has put Australian banks in their current position of strength, allowing the sector to support customers and the broader economy at a time of crisis.

Brokers are also positive on big banks like ANZ because of the improving prospects for the housing market as well as reductions in impairment charges for the big four banks.

More reading

• Jailing of NAB exec a scary déjà vu for NAB (ASX:NAB) share price
• ASX 200 down 2.3%: Bank shares tumble, InvoCare jumps, IOOF disappoints
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) fell sharply today, down 2.0% in late afternoon trading.

The ASX and Asian share markets are following the lead of the United States and European markets, where all the major indexes lost ground yesterday (overnight Aussie time).

In the US, the S&P 500 Index (INDEXSP: .INX) fell 2.6%. Technology shares weren’t spared either, with the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) also dropping 2.6%.

In Europe, Germany’s DAX PERFORMANCE-INDEX (DB: DAX) led the charge lower, closing down 1.8%.

Today’s retrace among leading Australian shares puts the ASX 200 back in the red for the calendar year, down 0.8% since the opening bell on 4 January.

With all the talk of frothy markets and bubbles circulating in the financial news, you’d be forgiven for feeling a touch of anxiety.

But according to a wide range of market veterans, the mid-term outlook for share prices remains quite positive.

A tradeable low

Addressing the overnight selloff in equities, Fundstrat Global’s Tom Lee wrote in a note (quoted by the Australian Financial Review [AFR]):

Equities are selling off sharply today and [it] is broad-based… I think there is a good chance today is a tradeable low. Yes. Not the start of a correction, but the resolution of this trading range.

As the AFR reports, David Older, head of equities at Carmignac sounds a more cautious note, though he’s not expecting any kind of major market falls:

Timing the end of this frothiness is hard. It can go on longer than you think. I don’t see a huge move lower… But we have become more cautious.

One of the big changes we saw in 2020 was the rapid rise of retail investors. Many mum and dad investors signed up to new low cost (or even free) online trading platforms during the coronavirus pandemic lockdowns. These so-called Robinhood investors are often quick to chase the latest hot tips. And some analysts believe they could be a destabilising market force.

But Salman Baig, multi-asset investment manager at Unigestion in Geneva, isn’t losing sleep over the increased presence of retail investors. He points to the fact that most previous bubbles, like China’s 2015 market meltdown, saw retail investors heavily dependent on margin finance (aka debt). But today’s environment is different:

It’s important to remember how retail investors are financing these purchases… Now, household savings are high. People have built up cash balances… It does not feel to us like a bubble. Rather, there are some expensive stocks where there could be a meaningful correction.

Andrew Sheets, chief cross-asset strategist at Morgan Stanley, adds, “The fact that people are still nervous enough about future volatility suggests people are not all in.”

Michael Kelly, head of multi-asset investment at PineBridge Investments also isn’t ready to jump on the bubble bandwagon:

I don’t think the bubble bugles are acknowledging why stocks are so expensive. In 2021, markets are going up because earnings are going up and excess liquidity is still surging. We are in a structural growth in capital because of the rising savings rate and, on top of that, quantitative easing. We’ve never ever had that before.

Speaking of ASX earnings…

In case you’re just tuning in from your summer holidays, earnings reporting season kicks off next week. And though few would have expected this at the height of Australia’s pandemic lockdowns last autumn, company earnings are expected to come in quite strong.

As reported by the AFR, Citi forecasts market earnings per share growth of 20% in 2020-21. Citi expects the resources sector to outperform, with earnings growth of 32%. As for dividends, Citi forecasts 22.3% market-wide growth.

According to Citi Australia’s head of research, Craig Woolford:

It’s likely reporting season next month will show many companies have delivered earnings growth over the six months to December, which back in March or April 2020, people would have thought was mad…

The mining companies are benefiting from much higher prices, particularly for iron ore, copper and nickel… We think the strength of the domestic economy will mean there’s less credit risk for the banks and potential for some of the provisions to unwind that they made over 2020.

Quoted in the same article, T. Rowe Price’s head of Australian equities, Randal Jenneke says:

To the extent that we get a higher number, that is going to support markets. We know that we have had an enormous amount of monetary and fiscal support that has really been helping demand for the better part of nine months…

I think that where the market has got this wrong is that this earnings strength is not just going to peter out in the next two to three months. It’s going to be ongoing for most of this year.

The other part of the market that I think is going to do well is the global cyclicals, the miners in particular, as we are going to have a global cyclical recovery… Provided we have a good solid recovery in earnings, it’s not unusual for multiples to be elevated right now given there’s an expectation earnings will improve.

Jenneke indicated 5 ASX 200 shares investors should keep an eye on during the upcoming earnings season.

Domain Holdings Australia Ltd (ASX: DHG), whose share price is up 1.1% in 2021 and up 22.0% since this time last year.

SEEK Limited (ASX: SEK), whose share price is down 4.2% in 2021, but up 17.1% over the past year.

Harvey Norman Holdings Limited (ASX: HVN), whose share price is up 11.2% in 2021 and up 23.9% over the last full year.

James Hardie Industries plc (ASX: JHX), whose share price is down 5.0% in 2021, but up 15.2% since 29 January 2020.

And OZ Minerals Limited (ASX: OZL), whose share price is down 4.4% this calendar year, but shares are up an impressive 83.9% over the last full year.

More reading

• Why the IGO (ASX:IGO) share price is tanking today
• Investment specialist: ASX to buckle in for the commodity bull market of a lifetime
• Top brokers name 3 ASX shares to buy today
• This ASX company will double its earnings this year: fundie
• These ASX shares are targeting enormous growth over the 2020s

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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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One of the most dominant themes running through the ASX last year was Australia’s deteriorating relationship with China. The issues started as a diplomatic spat between the Australian government and the Communist Party of China (CCP) regarding the origins of the coronavirus pandemic.  Tensions have since spilled over into the share market in a dramatic fashion.

Just ask shareholders of Treasury Wine Estates Ltd (ASX: TWE). Treasury shares had one of their worst years ever last year, as the CCP imposed import restrictions on Australian wine entering China. Treasury shares were at $17.70 in January last year. They closed the year at $9.40.

Australia’s “China problem”

Part of the problem is that China views Australia as a lockstep ally of the United States. The United States certainly did not pursue an amicable trade relationship with China under the recently departed Trump Administration. The relationship between these two countries over the past 4 years has been defined by tariffs and trade wars.

The Trump Administration is now history. Many ASX investors might be hoping for a relationship reset between the world’s 2 largest economies. In turn, restoring our own fractured relations. Unfortunately for those investors, this doesn’t look likely.

Biden Administration signals no major change to Sino-US relations

According to reporting in the Australian Financial Review (AFR) today, the Sino-US relationship doesn’t look set for a significant thaw anytime soon.

According to the report, the recently confirmed US Secretary of State, Anthony Blinken told his confirmation hearing that the Trump administration “was right in taking a tougher approach to China”. Blinken is the equivalent to our Foreign Minister. He then “judged” the CCP as “engaging in genocide against Xinjiang’s Uighur population, trampling democracy in Hong Kong, and threatening Taiwan”.

Not exactly the best way to go about a ‘reset’.

Blinken has also apparently described strategic competition with China as “a defining feature of the 21st century”. He reportedly added that “Chinese conduct hurts American workers, blunts the country’s technological edge, and threatens US alliances”.

The report notes that these attitudes break the Biden administration away from the ‘consensus’ that has existed among both previous Republican and Democratic administrations. That consensus basically revolves around the notion that engagement with China will lead a “fostering of domestic liberalisation”.

Secretary Blinken’s remarks, as the report states, seem to mark and end of this consensus in the Democratic Party. Much as the former Trump Administration did for the Republican Party.

It does not look like a favourable resolution for the ASX shares caught in the Sino-Australia crossfire is in sight anytime soon. As a major ally of the United States, it’s unlikely that the Australian government will depart from the ‘new US consensus’ regarding China.

It remains to be seen how Treasury and others will adapt to this new paradigm in international relations between the two countries.

More reading

• Why Bigtincan, Bubs, LiveTiles, & Treasury Wine shares are storming higher
• Will Joe Biden’s election help an Australia-China reset?
• Goldman Sachs sees more pain for the Treasury Wine (ASX:TWE) share price
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The Next Science Ltd (ASX: NXS) share price is racing higher today. This comes after the company announced its fourth-quarter trading update for 2020.

The Next Science share price is rising despite the ASX All Ordinaries Index (ASX: XAO) heavily dropping 2.06% today. At the time of writing, the medical technology company’s shares are up 8% at $1.22.

What’s moving the Next Science share price?

The Next Science share price is on the move after reporting strong growth across its business.

For the period ending 31 December, the company delivered total group revenue of $2.3 million. This represented a 75% increase over the prior corresponding period, and accounts for 66% of FY20’s annual revenue. Next Science attributed the positive result to a recovery on surgery volumes compared to the previous 2 quarters.

In addition, the company highlighted that despite the impacts of COVID-19, it continues to see significant improvement in sales from its largest market, the United States.

Next Science noted that its XPerience no rinse antimicrobial solution has been resubmitted to the United States Food and Drug Administration (FDA) as a 510(k) medical device. This follows the company’s animal studies that was requested by the FDA to further validate the product’s effectiveness. Next Science anticipates that its first commercial sales of XPerience to begin sometime in the first-half of 2021.

The company revealed it had a healthy cash balance of US$15.3 million in the bank, with no debt.

Management commentary

Next Science managing director Judith Mitchell welcomed the results, saying:

We made good progress this quarter in advancing key regulatory approvals, and enhancing our distribution model to drive accelerated sales growth. It is pleasing to see revenue growth returning to a positive trajectory as elective surgery case volumes recover in some regions in the US.

Coupled with the expected launch of XPerience in 1H 2021 and our strengthened balance sheet, we are well placed to deliver a strong performance in 2021.

Outlook

Looking ahead, Next Science believes that its fourth-quarter performance will run through the first-half of 2021. It stated that its sales team will focus on driving market adoption of the SurgX product in the United States. SurgX is a sterile wound gel that reduces surgical site infections.

Furthermore, the company will seek to expand market awareness of its Xbio technology and upcoming XPerience antimicrobial solution.

About the Next Science share price

Over the last 12 months, the Next Science share price has snowballed almost 50% lower reflecting weak investor sentiment.

The company’s shares hit a low of $1.00 in the March coronavirus meltdown last year, and have barely recovered since. Its 52-week high was recorded last February, reaching $2.76 on the ASX boards.

Based on the current share price, Next Science has a market capitalisation of roughly $232 million.

More reading

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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 The Next Science (ASX:NXS) share price is up 8% today. Here’s why appeared first on The Motley Fool Australia.

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