Well, it’s official. The Reserve Bank of Australia (RBA) has just done what it’s threatened to for months and cut the official cash rate to yet another record low. Interest rates were already at unprecedented, record lows at the old rate of 0.25%, where they have been sitting since March. Today’s moves put a new meaning to the phrase ‘record low’.

So much is being made of this move, but what does it really mean for savers, investors and ASX shares?

Consequences of ‘record low’ interest rates

Let’s be frank, a cash rate of 0.1% is essentially zero. It means that the cost of borrowing money has never been cheaper, at least in modern history. Those looking to borrow money, or buy a home (or who have already done so) should be especially thankful. And this is true in real terms as well, not just nominally. Inflation is also at record lows. The RBA also told us today that it foresees inflation staying at around 1% per annum in 2021, only rising to 1.5% in 2022. That means a mortgage with an interest rate of 2% in 2021 will really be a loan with a 1% interest rate in real terms. That’s cheap money.

So this move today is great news for borrowers. But what does this mean for savers? Well, it’s very dire. Bank accounts are already offering next-to-nothing in terms of interest rates. And this move is likely to further put pressure on margins. I wouldn’t be surprised if you can’t find a savings account or term deposit with an interest rate above 1% by the end of the year.

If we consider this paradigm in conjunction with what we just discussed about inflation, it is even direr. If inflation is 1% in 2021, and a bank account pays you 1% in interest, your money is effectively going nowhere. In fact, it will be going backwards in real terms when you pay your required tax on the interest earned.

TINA TINA Bobina

Enter TINA – the acronym that has come to define investing in the age of the coronavirus. TINA stands for ‘There Is No Alternative’, and perfectly sums up why this move is good for the S&P/ASX 200 Index (ASX: XJO) and the shares within it.

No one wants to have their cash sitting ‘safe’ in the bank, but losing real purchasing power every year. As such, all but the most risk-averse investors are likely going to be using either the share market or the property market to try and boost their portfolio’s returns. There is simply no other option, seeing as cash and government bonds are rendered almost worthless by interest rates being at near-zero.

That should provide a tailwind for the entire share market, which will last until rates begin rising again. And, if we take what the RBA has said today, that’s not coming anytime soon.

More reading

• ASX 200 has explosive start to trading ahead of RBA decision
• Macquarie’s latest ASX “buy” idea has a 10% yield
• How to prepare your portfolio for economic recovery
• 5 things to watch on the ASX 200 on Tuesday
• What is the best US election outcome for ASX shares?

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Vection Technologies Ltd (ASX: VR1) has caught the attention of investors recently, surging up by about 86% over the past 7 weeks. Today alone, the Vection share price jumped up 9.52% to 12 cents at the time of writing.

The company builds technology that enables people to interact with designs in virtual reality. For example, the company’s product, FrameS, is used by luxury car makers to provide virtual showrooms for customers. This includes brands such as Lamborghini, Maserati, Volvo and Philip Morris.

What’s moving the Vection share price?

Vection has seen improved performance in its share price since announcing a partnership with Nuovamacut Automazione Spa from Italy. Nuovamacut distributes Solidworks software, a product compatible with Vection technology, to 8,600 company clients and 26,000 users. This makes it the biggest designer community in the Italian territory. Its diverse client portfolio includes sectors ranging from industrial machinery, engineering and construction to aerospace and education.

In addition,Vection announced a partnership with Luiss Business School yesterday. This company has accreditations that will allow Vection to accelerate the promotion of its AR suite of healthcare solutions across the public and private healthcare sectors. The school is the creator of the Italian model for risk management in healthcare.

Vection anticipates strong revenue growth in the second half of FY21 and has an increasing focus on recurring revenue generation. With a goal of achieving annual recurring revenues of 50% by June, 2022.  Moreover, it has a strong cash balance of ~$8 million.

What’s the addressable market?

Vection says engineers, designers and builders are increasingly looking for solutions that can quickly turn their computer aided design (CAD) data into real-time experiences. This helps to reduce costs, and creates unique experiences. In addition, the convergence of augmented reality (AR), virtual reality (VR), and mixed reality (MR) with CAD software is revolutionising design and creation workflows.

However, the company believes opportunities exist in many fields. For example, medical, engineering, real estate, military, and education. In manufacturing specifically, the company says there is a US $18 billion total addressable market in design by 2023. With an additional $13 billion in construction of manufactured items.

What’s more, with major Italian entities as investors, the Vection share price has institutional backing. Specifically, the Italian Government, HTC Vive X, Primoglio SGR and A11 Venture. 

More reading

• Why the Vection (ASX:VR1) share price charged up 11% today
• Vection (ASX:VR1) share price lifts on partnership deal
• 3 ASX shares I think could be the next Afterpay (ASX:APT)
• Top ASX tech shares to buy in October 2020

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

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Unprecedented times call for unprecedented measures.

Today, the Reserve Bank of Australia (RBA) found itself in unchartered territory after it cut the Australian official cash rate by 15 basis points to 0.1%, making it the lowest official cash rate in Australian history.

In addition, the RBA announced a quantitative easing (QE) program, in which it would purchase $100 billion worth of 5 to 10-year government bonds over the next six months.

The move is being made in a bid to stimulate the Australian economy, which only last week was declared by the RBA itself to be “technically out of recession”. Despite this assertion, the economy is still showing symptoms of a recession with the RBA announcing that the unemployment rate is set to peak at 8%. By the end of 2022, the bank expects the unemployment rate to be around 6%.

Here are some major highlights from the RBA meeting today:

• Official cash rate cut from 0.25% to 0.1%.
• QE program worth $100 billion.
• Yield target on the Australian 3-year bond cut to 0.1%.
• The bank expects GDP growth to be around 6% in the year to June 2021 and 4% in 2022.
• The unemployment rate is expected to peak at 8%, below the 10% the RBA had been previously expecting. By the end of 2022, the unemployment rate is expected to be around 6%.
• The bank is forecasting underlying inflation to be at 1% in 2021 and 1.5% in 2022, well below its target of between 2% and 3%.

How the market reacted after the announcement

The Australian dollar immediately fell to US70.38 cents from US70.60 cents after the announcement. The Australian government bond yields also fell across the curve with the 3-year, 5-year, and 10-year yields all falling slightly.

Why was the rate cut necessary?

Former RBA governor, Ian Macfarlane, suggested that Australia’s hand was forced by central banks in the United States and Europe when they cut their own rates to unprecedented lows, even to negative territory.

Mr. McFarlane says that record low rates have not done “any good” but “when the majority do it, you really have no choice.”

The RBA believes if it does not join the US Federal Reserve and European Central Bank in slashing rates, money will flood into Australia as overseas investors look for higher yields.

This will, in turn, push the Australian dollar higher – a scenario which is not in Australia’s best interest as it attempts to fight its way out of a recession.

What impact will the rate cut have on ordinary people?

Manager at website Finder, Graham Cooke, believes further cuts will not make dramatic changes to the finances of ordinary Australians.

“The cash rate has already dropped 125 basis points in the last two years, so a further 15-point cut is unlikely to have much of an impact on the economy,” Mr. Cooke said.

Australia and New Zealand Banking Group Ltd (ASX: ANZ) Chief Executive, Shayne Elliot, said that “lowering interest rates to record new lows is unlikely to encourage extra borrowing, but lower loan repayments will leave a bit more money in people’s pockets to spend, hire, and invest.”

What other developments are ahead?

The RBA will release its quarterly statement on monetary policy on Friday 6 November, which will contain its latest economic forecasts.

More reading

• Laybuy (ASX:LBY) launches tap to pay digital card
• Why the ResMed (ASX:RMD) share price smashed the market in October
• ASX stock of the day: Skyfii (ASX:SKF) shares shoot the moon
• Why IDP Education, Sandfire, Telix, & Treasury Wine shares are dropping lower
• Why brokers are optimistic about the Western Areas (ASX:WSA) share price after it dropped 17%

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

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The Laybuy Holdings Ltd (ASX: LBY) share price is up slightly today following the announcement of its tap to pay product. 

Another buy now, pay later share?

Yes, Laybuy is the newest buy now, pay later (BNPL) to hit the ASX. The company had an initial public offering (IPO) offer price of $1.41 per share and an indicative market capitalisation of $246 million at the offer price. It floated on 7 September and opened around the $2.00 mark. However, the market may not be convinced of its growth potential and the Laybuy share price has since been sold down to around the offer price. 

Laybuy provides a payment platform that enables customers to split the payment of purchases, both online and instore, across 6 weekly interest-free instalments. The company considers itself a dominant BNPL provider in the New Zealand market, and views its key competitors in that market as Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P). It also operates in the highly competitive Australian market and relatively young UK market. 

Positive quarterly update 

The company provided a positive update for the second quarter FY21 that highlighted the business’ continued momentum. Its gross merchandise value (GMV) was up 162% on the prior corresponding period to NZ$127.1 million. Active merchants increased 48% to 6,323 and active customers increased 16.7% quarter on quarter to 568,000. From a profitability perspective, its net transaction margin continues to improve, increasing 432% to 2.3% of GMV for 2Q from 0.5% in 1Q21.

Launch of tap to pay digital BNPL card in Australia 

Today, Laybuy launched its globally unique and innovative digital BNPL Mastercard Inc (NYSE:MA) in Australia. The product allows customers to purchase goods and services in-store using Laybuy with a simple tap of their smartphone. The Laybuy share price is trading at $1.47, up 2.8%, at the time of writing. 

Laybuy managing director Gary Rohloff said the digital card enabled consumers to enjoy the benefits of Laybuy, while making use of Mastercard’s simple and secure contactless payment technology. He described the card as a win-win for both shoppers and retailers as it allowed both parties to skip a number of steps usually required when making purchases with BNPL. 

Unfortunately for Laybuy, these products have already been released to the market by its competitors, Afterpay and Zip. 

More reading

• Why Laybuy, Oil Search, PointsBet, & Webjet shares are racing higher
• Why these 5 fintech ASX shares are surging
• These were the best performing ASX tech shares in October 
• Why Zip Co Ltd (ASX:Z1P) share price is down 15% in one week
• Where to invest $1,000 into ASX shares this week

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

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The ResMed Inc. (ASX: RMD) share price was a very positive performer in October.

During the month the medical device company’s shares recorded an impressive 16.1% gain. This compares to a 1.9% gain by the ASX 200.

Why did ResMed shares smash the market in October?

Investors were buying ResMed’s shares last month after the release of its first quarter update in the final week of the month.

Expectations were already high for the company, but it well and truly smashed them out of the park.

During the first quarter, ResMed reported a 10% increase in revenue to US$751.9 million. This was well ahead of the market consensus estimate of US$709.47 million.

But things were even better on the bottom line thanks to favourable product mix changes and foreign exchange rates.

ResMed’s net income increase by 48% compared to the prior corresponding period to US$178.4 million.

And while this was boosted by the impact of legal settlement expenses in the prior year, its non-GAAP net income grew almost as strongly. Non-GAAP net income grew by 37% to US$185.4 million and earnings per share also grew 37% to US$1.27.

ResMed’s earnings per share were also notably ahead of the market consensus, which stood at US$1.03 per share.

What were the drivers of its strong result?

ResMed’s strong growth in the first quarter was driven by robust demand for its core sleep treatment products and increased demand for ventilators due to the COVID-19 pandemic.

ResMed’s CEO, Mick Farrell, commented: “Our first quarter results reflect solid performance and positive trends across our business. During the quarter, we continued to support the global COVID-19 pandemic response, providing ventilators, masks, and circuits to countries in need around the world.”

“In our core markets of sleep apnea, COPD and asthma, we are encouraged by the sequential improvement in new patient volume, as well as the ongoing strong adoption of our mask and accessories resupply programs,” he added.

How did brokers react?

The result went down well with brokers and saw both UBS and Credit Suisse upgrade its shares to buy ratings. The latter has a $31.00 price target on ResMed’s shares, which implies potential upside of almost 11% even after October’s strong gains.

More reading

• Big brokers upgrade Resmed (ASX:RMD) share price target
• Top brokers just upgraded the ResMed (ASX:RMD) share price and this other ASX stock
• These were the 5 best performing ASX shares last week
• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• These were the best performing shares on the ASX 200 last week

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

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The Skyfii Ltd (ASX: SKF) share price is on fire today, climbing 24.32% at the time of writing to 23 cents a share. The shares were priced at 18 cents at market close yesterday, and opened at 19 cents this morning before climbing to their current level. At this share price, Skyfii has a market capitalisation of $79.66 million.

However, even after today’s impressive gains, it’s worth noting that Skyfii is one volatile stock. Last Wednesday, Skyfii was as high as 26 cents a share, meaning this company was down 30% before today’s moves. Skyfii actually started 2020 off at 18 cents a share, which means today’s moves mirror the year-to-date gain for the company. However, if you picked up Skyfii for 7 cents back in March, you would be looking at a gain of more than 200% on today’s prices.

So who is this futuristic-sounding company? And why are Skyfii shares on fire today?

Who is Skyfii?

Skyfii describes itself as a global software and data services company that “transforms the way organisations collect, analyse and extract value from data.” The company calls itself the “world’s first omni-data intelligence company”.

According to the company:

We process billions of data points monthly, captured in the physical & digital world to help businesses better understand and improve the experiences of millions of customers every day

Skyfii has offices in 7 countries around the world, including in the United Kingdom, United States, South America and South Africa. The company has a range of products all designed to bring data together from multiple sources to improve “venue operations” and “visitor experiences”.

One of its flagship offerings is the OccupancyNow software. This software helps venues manage occupancy, social distancing, automatic staff alerts, COVID-19 regulation compliance and contract tracing.

It also has some other product offerings. Skyfii’s recently-acquired Blix program helps venues and stores measure customer traffic (including whether guests are wearing masks), while its ‘Guest Wifi’ program helps venues set up in-house Wifi services. Skyfii also offers services like camera installation and customer traffic sensors. These can do things like tell a venue whether it is at ‘COVID capacity’ at any in point, and provide live updates to customers whether they can enter particular rooms or areas based on these criteria. 

The company’s IO platform offers a subscription model for keeping all of this data in a useable and easily accessible format.

Some of Skyfii’s clients reportedly include Toyota, Porsche, Volkswagen, Country Road Group, Chanel and Swarovsky.

Why are Skyfii shares on fire today?

The catalyst for today’s share price jump appears to be the release of an update for the quarter ending 30 September 2020.

In this update, Skyfii told investors that revenue for the quarter came in at $3.4 million, which was up 21% on the previous quarter (ending 30 June 2020). This included recurring revenue of $2.2 million, up 7% from the previous quarter.

The company also reported that its ‘cash at bank’ now stands at $2.7 million, up 27% from the previous quarter. It has $1.9 million of a $2 million debt facility still undrawn.

Skyfii also announced a ‘strategic partnership’ with the US-listed Boingo Wireless Inc (NASDAQ: WIFI). According to Skyfii, the partnership will “equip Boingo to resell the fell suit of Skyfii’s IO products and services”. It also “anticipates further contract wins to be announced soon”.

These positive updates are what seem to be behind the surging Skyfii share price today.

More reading

• Why the ResMed (ASX:RMD) share price smashed the market in October
• Why IDP Education, Sandfire, Telix, & Treasury Wine shares are dropping lower
• Why brokers are optimistic about the Western Areas (ASX:WSA) share price after it dropped 17%
• Why Laybuy, Oil Search, PointsBet, & Webjet shares are racing higher
• Rising jobs and house loans place these ASX shares in focus

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. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In afternoon trade the S&P/ASX 200 Index (ASX: XJO) is on course to record a very strong gain. At the time of writing, the benchmark index is up a sizeable 2.3% to 6,088.4 points.

Four shares that have failed to follow the market higher today are listed below. Here’s why they are dropping lower:

IDP Education Ltd (ASX: IEL)

The IDP Education share price is down 2% to $19.30. This is despite there being no news out of the student placement and language testing company. However, with COVID-19 cases surging globally, investors may be concerned that its recovery from the crisis could take longer than first expected.

Sandfire Resources Ltd (ASX: SFR)

The Sandfire share price has dropped 5.5% to $4.20. This morning the copper producer revealed that it has settled its dispute with Adriatic Metals. Sandfire has agreed to pay Adriatic $8.7 million. This dispute relates to proceeding CIV 1820 of 2020 brought by Sandfire against Adriatic in the Supreme Court of Western Australia.

Telix Pharmaceuticals Ltd (ASX: TLX)

The Telix share price is down over 2% to $2.11.  This appears to be a case of profit taking after a massive gain on Monday. Investors were buying the pharmaceuticals company’s shares after it announced a strategic commercial partnership with China Grand Pharmaceutical and Healthcare Holdings. That agreement is for its portfolio of Molecularly-Targeted Radiation products and includes US$25 million up-front non-refundable prepayment to Telix. It also comes with up to US$225 million in regulatory and commercial milestone payments.

Treasury Wine Estates Ltd (ASX: TWE)

The Treasury Wine Estates share price has dropped 2% to $9.05. This morning analysts at Ord Minnett retained their hold rating and $10.00 price target on the wine company’s shares. It appears to believe that the Treasury Wine share price could struggle until China’s investigation into wine dumping is complete.

More reading

• Best and worst performing ASX shares in the staples sector
• Sandfire Resources (ASX:SFR) share price lower amid China copper ban rumours
• Why Abacus, Amaysim, CSR, & Telix shares stormed higher today
• Telix (ASX:TLX) share price jumps 30% to an all-time high. Here’s why.
• 3 ASX stocks are outperforming today after brokers upgraded them to “buy”

Motley Fool contributor James Mickleboro owns shares of TELIXPHARM DEF SET. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Western Areas Ltd (ASX: WSA) share price took an almost 20% nose dive last Friday, following its review of its Flying Fox mine. 

What happened to the Western Areas share price?

Western Areas downgraded its FY21 guidance on all fronts. Its nickel production was lowered to 17,000–19,000 tonnes from the original 19,000–21,000 tonnes forecast. Its unit cash cost of production also increased to be around $3.50 to $4.00 per pound of nickel, up from the previous $3.25 to $3.75 per pound guidance. The negative surprise resulted in significant trading volumes for Western Areas and a 17.74% slump on the day of the announcement. 

Big broker updates 

This week, a series of big broker updates have emerged after the news was digested over the weekend. Despite most brokers downgrading the Western Areas share price target, the commentary was surprisingly positive. 

Citi upgraded the Western Areas share price target from neutral to buy. It did however, lower its price target from $2.65 to $2.35. It notes that the company’s quarterly production report missed expectations and saw a lowering in guidance for FY21, but the share price slump has improved the value proposition of the company. 

Credit Suisse lowered its Western Areas share price target from $2.50 to $2.35 and retains an outperform rating. It highlights the weak September quarter update on lower production and lower grades. It also fears that the “downturn may not be temporary and risks remain operationally”. However, much like Citi, it believes the company’s valuation has become more attractive due to the share price decline. 

Macquarie downgraded the company from outperform to neutral and lowered its price target from $2.80 to $2.00. The only differentiating commentary from Macquarie was its concern that the company could face funding issues. 

Likewise, Morgan Stanley lowered its price target from $2.75 to $2.55 and retains an overweight rating due to the disappointing quarterly production report. However, the broker takes an optimistic view that the issues are temporary. 

Foolish takeaway

Overall, big brokers have largely lowered their share price targets for Western Areas but also maintain a positive view that the share price discount has made the company more attractive. The key risk raised by the brokers is whether or not these production challenges are temporary or possess longer term implications moving forward. Fortunately, the nickel spot price has been strong in recent months and recently hit a 1-year high. 

More reading

• ASX 200 Weekly Wrap: ASX 200 has another shocker as US election approaches
• These were the worst performing shares on the ASX 200 last week
• ASX 200 ends down 0.6%, AMP (ASX:AMP) share price jumps 20%
• Why Western Areas (ASX:WSA) share price is falling off a cliff today
• ASX 200 flat: ResMed smashes expectations, AMP surges on takeover talks

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

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

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

Laybuy Holdings Ltd (ASX: LBY)

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

Oil Search Limited (ASX: OSH)

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

Pointsbet Holdings Ltd (ASX: PBH)

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

Webjet Limited (ASX: WEB)

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

More reading

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

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

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

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

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

Positive momentum in jobs

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

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

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

Housing price improvement

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

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

BIS Oxford Economics economist, Maree Kilroy, said.

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

ASX shares with residential exposure

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

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

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

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

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