In morning trade the Splitit Ltd (ASX: SPT) share price has surged higher after the release of its second quarter update.

At the time of writing the buy now pay later provider’s shares are up 24% to $1.70.

How did Splitit perform in the second quarter?

Just as we have seen with Afterpay Ltd (ASX: APT) and Sezzle Inc (ASX: SZL) this week, demand for Splitit’s platform was exceptionally strong during the June quarter.

This led to the company reporting Merchant Sales Volume (MSV) of US$65.4 million for the second quarter. Which was a record 260% increase on the prior corresponding period and a 176% lift on its first quarter MSV.

This ultimately led to Splitit reporting gross revenue of US$2.4 million for the quarter, representing a whopping 460% increase on the prior corresponding period and 246% on the first quarter.

What were the drivers of its growth?

Strong growth was achieved in both North America and Europe, with MSV rising 261% and 240%, respectively, in these markets.

At the end of the period there were 1,000 merchants on its platform, which is more than double the number it had this time last year.

It was a similar story for its customer numbers, with total unique shoppers growing 85% over the 12 months to 309,000.

Another positive is that these customers are spending more. Splitit reported an average order value of US$893, up 44% on the prior corresponding period. However, it is worth noting that its repeat shopper metric is heading the wrong way. It has fallen to 10.2% from 13.6% in the first quarter.

Brad Paterson, CEO of Splitit commented: “June saw a continuation of the strong business momentum we experienced in April and May. Consumers are making better use of their existing credit to preserve cash, while demand from higher value merchants is ramping up, supported by the accelerated shift towards eCommerce as a result of COVID-19.”

“While we continue to tightly manage our expenses in light of global economic uncertainty, our business model supports more efficient consumer budgeting during these uncertain times, and continues to deliver enormous benefit to merchants by significantly improving consumer conversion on their sites,” he added.

Today’s gain means the Splitit share price is now up a staggering 750% from its March low of 20 cents.

More reading

• Does Afterpay have a competitive advantage?
• Afterpay expects sales to double to $11bn and launches $800m cap raise
• Afterpay share price hits $67! Are BNPL shares in a bubble?
• Can ASX fintech shares withstand a falling market?
• 3 ASX payments shares that could double your money

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle 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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ASX mining stocks are likely to outperform this morning but it’s the IGO Limited (ASX: IGO) share price that will be under the spotlight.

ASX miners will be supported after commodity prices firmed overnight even as futures pricing is tipping a weak start for the S&P/ASX 200 Index (Index:^AXJO).

IGO could get a bigger boost though. The nickel and gold miner’s flagship Nova project beat management’s full year production guidance.

Production going nova

Management reported that it produced 7,181 tonnes of nickel in the June quarter to take its full year output to 30,436 tonnes. This is slightly ahead of its guidance of 27,000 to 30,000 tonnes.

It was by-products copper and cobalt that was the bigger standout though. The miner produced 3,210 tonnes of copper in the quarter with full year production hitting 13,772 tonnes. This compares to management’s forecast of up to 12,500 tonnes.

Meanwhile, cobalt production for the latest quarter came in at 277 tonnes to take the full year number to 1,142 tonnes. Management initially thought FY20 production would top out at 950 tonnes.

“At Nova, production of all metals exceeded guidance, with nickel production slightly higher than the top end of guidance, while copper and cobalt production were ~10% and ~20% higher, respectively,” said IGO’s chief executive Peter Bradford.

Going for gold

What this means is that operating costs at Nova may be lower than what analysts were expecting given that the miner would sell by-products to cover the cost of producing its key commodity, nickel.

IGO also produces gold at its Tropicana joint-venture project. The mine produced just over 102,000 ounces of the precious metal in the quarter to take its full year number to 463,118 ounces.

IGO’s share of the gold sold in FY20 was 141,169 ounces and the figures are within management’s production forecast of 450,000 to 500,000 ounces and gold sold estimate of 135,000 to 150,000 ounces for the year.

Convoluted outlook for base metals

The nearer-term outlook for base metals like copper and nickel are dividing analysts. These commodities are closely linked to global production, which have been hit hard by the COVID-19 pandemic.

Coronavirus cases in many key economies continue to escalate at unprecedented rates and large parts of Victoria are going into a second lockdown.

This means base metal producers like the OZ Minerals Limited (ASX: OZL) share price, South32 Ltd (ASX: S32) share price and Sandfire Resources Ltd (ASX: SFR) share price may be in for a bumpy ride.

Foolish takeaway

However, IGO has a slight advantage over many of its peers thanks to its gold exposure through Tropicana.

This could help the miner weather the upcoming storm a little better given that the price of gold will benefit from the growing uncertainty.

IGO didn’t provide any other details like costs or average prices it sold its commodities at. That will come on July 29.  

More reading

• Afterpay and 1 other ASX share to buy and hold beyond 2025
• Is there value in the Scentre share price?
• Why I see good value in the BHP share price today
• Why the CBA share price is worth watching this quarter
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Brendon Lau owns shares of OZ Minerals Limited and South32 Ltd. 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 Althea Group Holdings Ltd (ASX: AGH) share price is on watch this morning after the company announced it has launched online sales of medicinal cannabis. Patients can now order products online via the ‘Althea Concierge’ platform and have them delivered directly to their doors. This eliminates the need to visit a doctor or pharmacy in order to obtain the treatment on an ongoing basis.

What does Althea do? 

Althea was founded in 2017 in Melbourne and holds licenses to import, cultivate, produce and supply medical cannabis.  The company has seen strong growth in customer numbers since launching. By the end of March this year, Althea had supplied medical cannabis to over 5,000 Australian patients. The company also has a manufacturing facility in Canada, Peak Processing Solutions. This facility produces ‘Legalisation 2.0’ products such as edibles, beverages, and cosmetic applications. 

How do online cannabis sales work?

The Althea Concierge platform, which is a TGA registered medical device, has been comprehensively updated to facilitate online sales and interactive, customisable treatment plans. Used in conjunction with telemedicine, the platform allows doctors to prescribe Althea medical cannabis products. Patients pay for their prescriptions online and medication is then delivered directly to their doors. This then eliminates the ongoing need for multiple visits to doctors and pharmacies . 

The new interactive treatment plan feature allows doctors to issue personalised treatment plans directly to patients’ phones. This provides patients with customised dosage reminders and allows them to record their usage and provide ongoing feedback to their doctors. Anonymous patient symptom data will contribute to a body of evidence in support of Althea medications. 

Althea CEO, Josh Fegan said, “We are very excited about this latest update to the Althea Concierge platform. The ability for contactless sales is probably the biggest development yet for medicinal cannabis in Australia”. Althea plans to roll out the updated version of its Concierge platform in the United Kingdom, where the company launched in June 2019, in the coming months. 

What is the outlook for the Althea share price?

Althea has been expanding rapidly since its inception. It has gained significant numbers of Australian patients and prescribers as well as launched in the UK. The company has also commenced manufacture in Canada and begun supplying products to Germany. It certainly appears as if Althea is set to make its mark on the medicinal cannabis industry. In the first half of FY20, the company reported a 963.8% increase in revenues. Investors are eagerly awaiting full year results to see if Althea can continue its trajectory.  

More reading

• Althea share price lifts as cannabis market growth predicted
• ASX cannabis shares see mixed recovery

Motley Fool contributor Kate O’Brien 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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Here, we look at 2 ASX shares that I think would make strong additions to your ASX share portfolio: Afterpay Ltd (ASX: APT) and Carsales.Com Ltd (ASX: CAR).

Both have proven business models in their respective market niches. Both also continue to grow strongly internationally, and I believe are well placed for above average earnings growth over the next 5–10 years.

Afterpay

The Afterpay share price has witnessed an amazing recent run on the ASX. It has risen from $8.90 in late March in the early phase of the coronavirus pandemic, to now be trading at $68.00. That’s a gain of over 600%!

This buy now, pay later (BNPL) provider has continued to perform well financially, despite challenging market conditions. This was confirmed by a strong market update in late May. In particular, its US operations have been growing strongly. Nearly 9 million US consumers now use the Afterpay platform.

Tencent Holdings, which owns messaging app WeChat, recently became a major shareholder in Afterpay. This also has definitely pleased the market. The WeChat app is hugely popular in the Asian market and Afterpay could potentially leverage WeChat as a means to gain inroads further down the track.

Also, a recent partnership with Apple will enable the Afterpay platform to be integrated with Apple Pay. This is slated to make the Afterpay platform even easier to use, and could assist in driving further uptake, especially in the massive US market.

Despite the strong rise in the Afterpay share price, Afterpay is still in my buy zone. It is still very early days for Afterpay in the US market, and Europe and Asia are further expansion points in the future.

Carsales

The Carsales share price was hit hard during the early stage of the coronavirus pandemic, however rallied strongly since late March. The online automotive classifieds provider has now regained nearly all of its share price losses since its 12-month high in mid-February. This ASX share has continued to perform solidly in recent months, despite difficult trading conditions.

In a recent trading update, Carsales revealed that total revenue is predicted to be flat for FY 2020. Earnings before interest, taxes, depreciation, and amortisation, however, is expected to rise slightly. I think that this is a commendable result, particularly when you consider the devastating impact that the pandemic had on the automotive sector in its early phase.

I believe that Carsales continues to be well placed to outperform the S&P/ASX 200 Index (ASX: XJO) over the longer term. It has a strong entrenched position in the Australian market, with a growing local population, and has strong potential to grow its overseas operations.

More reading

• Is there value in the Scentre share price?
• Why I see good value in the BHP share price today
• Why the CBA share price is worth watching this quarter
• Why Etherstack and these shares were the most traded on the ASX last week
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Phil Harpur owns shares of AFTERPAY T FPO and carsales.com Limited. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended carsales.com 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 Scentre Group (ASX: SCG) share price has been an interesting one to watch in 2020.

The S&P/ASX 200 Index (ASX: XJO) has bounced back strongly since the March bear market. Although the Scentre share price has partially recovered from its March lows, this has been to much lesser degree than the ASX 200.

I thought I’d take the chance to dive into what exactly Scentre does and how the Scentre share price is performing in 2020.

What does Scentre Group do?

Put simply, Scentre is the owner and operator of Westfield shopping centres across Australia and New Zealand. It is also an Australian real estate investment trust or ‘REIT’.

This means that, under normal circumstances, Scentre is a strong ASX dividend share. REITs are required to payout at least 90% of yearly profits to shareholders under the trust structure.

Scentre is heavily concentrated in the retail sector given its $56 billion in retail real estate assets under management.

How has the Scentre share price performed this year?

Unfortunately for investors, Aussie shopping centres have not been a great investment this year. The Scentre share price has fallen nearly 44% this year to just $2.15 per share. 

While retailers like JB Hi-Fi Limited (ASX: JBH) have soared in value, this has been predominantly due to significant online sales.

Without heavy foot traffic, it stands to reason that Aussie shopping centres will see a fall in income. That’s because fewer shoppers means tenants (i.e. retailers) may be unable or unwilling to pay their usual rent throughout the coronavirus pandemic. This translates into less rental income for Scentre and lower free cash flow available for dividend payments.

Currently, no one knows what will happen in the next 3 months, let alone the next 3 years. So how can we say whether the Scentre share price is good value right now?

Are there better-priced REITs on the ASX?

These are very unusual times, particularly given the restrictions that still exist on the use of many public spaces. If an ASX share has fallen 40% lower, I tend to think there are smart investors who possibly know something I don’t.

The best option in my books is to look at relative value. The COVID-19 restrictions should (in theory) affect all retail REITs. Therefore, comparing the Scentre share price against its peers can help tell us if its good value.

I think Vicinity Centres (ASX: VCX) and SCA Property Group (ASX: SCP) can be regarded as fairly comparable retail REITs to Scentre Group.

The Scentre share price trades at a price-to-earnings (P/E) multiple of 9.67 with an 8.93% dividend yield. It also boasts a market capitalisation of $11.16 billion which is larger than both Vicinity ($6.5 billion) and SCA ($2.4 billion).

SCA Property shares trade at a relatively more expensive P/E ratio of 12.98 while Vicinity trades at a lowly 4.37.

I don’t think dividend yields are really worth comparing given the uncertainty around FY20 distributions at the moment.

Foolish takeaway

From a quick analysis, I don’t think the Scentre share price is a great value buy right now. Retail real estate is one of the sectors that could continue to be challenged by COVID-19 restrictions for quite some time.

It appears that the Vicinity Centres share price is relatively cheaper than Scentre. Combined with the relative uncertainty over dividends this year, I don’t think I’ll be buying Scentre shares at $2.15 per share.

More reading

• Afterpay and 1 other ASX share to buy and hold beyond 2025
• Why I see good value in the BHP share price today
• Why the CBA share price is worth watching this quarter
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops on return of lockdown in Melbourne

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property Group. The Motley Fool Australia has recommended Scentre Group. 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 Australian Finance Group Ltd (ASX: AFG) share price has remained relatively flat despite the mortgage aggregator releasing its latest quarterly update yesterday. 

The update showed AFG recorded its largest quarterly lodgement result of almost $17 billion in the quarter ended June 2020, which is a 30% increase on the same time last year. Total lodgements were $5.2 billion in April, $6.1 billion in May, and $5.5 billion in June.

The group reports that banks closing branches and redirecting resources to deal with hardship cases has meant increased demand for brokers from customers looking to make changes to their financial arrangements.

Refinancing activity was strong early in the June quarter and there has been a flurry of activity from first home buyers aided by government incentives. Refinance applications accounted for 28% and 36% of lodgements in April and May, before falling to 23% in June. First home buyers accounted for 12% and 14% of lodgements in April and May, increasing to 21% in June.

Major banks winning business

AFG has witnessed a significant shift in business towards the major lenders over the past few months. After peaking at around 70% in the quarter, the highest level since 2017, flows of business to major lenders settled back down to 60% in the month of June.

Australia and New Zealand Banking GrpLtd (ASX: ANZ) was the big winner among the majors, with 9.92% market share last quarter. ANZ’s market share rose as high as 36.87% in May thanks to cash back offers and low fixed rate products. Commonwealth Bank of Australia (ASX: CBA) benefitted from consistency of service and back office efficiency which saw its market share rise to 23.66% at the end of June, up from 14.7% last quarter.

Westpac Banking Corp (ASX: WBC) saw market share drop to 12.38% at the end of June from 20.14% at the close of the third quarter due to a blow-out in turnaround times. Processing bottlenecks began to impact turnaround times for the major by the close of the quarter leading the non-majors to take back some ground.

About the AFG share price

AFG is gaining market share with lodgement volumes increasing as Australians increasingly turn to mortgage brokers to help manage their financial needs.

AFG’s proposed merger with Connective looks set to proceed following merger clearance from the ACCC. The merger will result in the largest mortgage aggregator in Australia, accounting for almost 40% of mortgage brokers operating in the country.

The AFG share price plummeted from a high of $2.96 in February to a low of 92 cents in March, but has since gained 80% to trade at $1.66.

More reading

• Why the CBA share price is worth watching this quarter
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Here’s what ASX investors need to know about the RBA’s rate decision today
• Leading brokers name 3 ASX 200 shares to sell today
• Why the CBA share price and other ASX banks could outperform in FY21

Motley Fool contributor Kate O’Brien 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 Northern Star Resources Ltd (ASX: NST) share price will be one to watch on Wednesday following the release of its fourth quarter update.

How did Northern Star perform in the fourth quarter?

During the quarter ending 30 June 2020, Northern Star generated underlying free cashflow of $217.9 million from the sale of 262,717 ounces of gold.

This took Northern Star’s total sales for FY 2020 to 900,388 ounces from gold production of 905,177 ounces. This was ~1.6% below the lower end of its FY 2020 guidance, which was withdrawn in March due to uncertainties stemming from the pandemic.

Something else that was withdrawn in March was the payment of its fully franked 7.5 cents per share interim dividend. This payment has now been reinstated and will be made to eligible shareholders on 16 July. After which, the company expects to resume dividend payments in the ordinary course of business.

The company certainly has sufficient liquidity to pay its dividends. At the end of the period its cash, bullion, and investments had risen by 40% over the three months to $769.5 million.

Though, it is worth noting that since the end of the financial year, Northern Star has elected to pay down its corporate bank debt by $200 million. This leaves it with a debt of $500 million.

Costs rise.

The company didn’t provide any details on its all-in sustaining costs for the quarter, but hinted that costs rose because of the pandemic,

Northern Star Executive Chair, Bill Beament, commented: “The health and safety of our people and the communities in which we operate is always our first objective and the measures we adopted in response to COVID-19 reflected that.”

“As we foreshadowed at the time, these measures incurred additional costs, reduced productivities and restricted production,” he added.

Nevertheless, Mr Beament was very pleased with the company’s performance during the quarter.

He said: “To generate quarterly free cashflow of A$217.9 million in these circumstances is an outstanding result which reflects the performance of our staff and business partners, our success in being able to operate continuously throughout the pandemic and the underlying strength of our assets.”

No guidance for FY 2021 was provided with today’s update.

Also on watch today will be the Saracen Mineral Holdings Limited (ASX: SAR) share price after the release of its quarterly update. It delivered record FY 2020 production of 520,414 ounces, ahead of its guidance of 500,000+ ounces.

More reading

• 5 things to watch on the ASX 200 on Tuesday
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 on Friday
• Should you buy ASX gold shares like Saracen Minerals in July?
• 5 things to watch on the ASX 200 on Thursday

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. 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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It’s not often you look at an ASX blue-chip and think it’s undervalued, but that’s what I think about the BHP Group Ltd (ASX: BHP) share price right now.

How has the BHP share price performed this year

Shares in the Aussie iron ore miner jumped 1.3% higher to $36.10 per share in yesterday’s trade.

That means the BHP share price is now down 7.3% from where it started the year. For reference, the S&P/ASX 200 Index (ASX: XJO) is down 10.1% in 2020.

That means BHP is already outperforming many of its ASX 200 peers. So, where could the boost to intrinsic value come from in 2020?

Macroeconomic tailwinds could be the key

I think a surging iron ore price is a big factor here. Resources shares like BHP are largely beholden to whatever the commodity price is at the moment.

According to Market Index data, iron ore prices are currently at US$101.54 per tonne. That means the key commodity price is now up 36.9% since 23 March when we saw the bottom of the bear market.

That’s good news for the BHP share price and its FY20 earnings in August. Higher iron ore prices should translate to higher revenues and more cash flow available for dividends and reinvestment.

I see a potential infrastructure boom as a key tailwind for the BHP share price. The coronavirus pandemic proved to be the trigger for Australia’s first recession since 1991/92.

It’s purely speculative at this point, but it’s not hard to see the federal and state governments turning to infrastructure to kickstart the economy. Infrastructure projects can employ huge numbers of people and require significant resources.

That includes significant amounts of steel for major projects, which could boost demand for iron ore.

Why I see good value in the iron ore miner today

If it’s all good news, why is the BHP share price still down 7.3% in 2020?

For one, the Aussie dollar could make or break Aussie exports in 2020. A low dollar is good for exports as it makes Aussie products relatively cheaper for other countries. However, the AUD–USD exchange rate has rocketed higher since March and the Aussie dollar is now buying 69 US cents.

Many miners are facing increased scrutiny over their operations at the moment after some high-profile controversies in recent months. On top of mounting pressure, there’s also the question of whether the BHP share price is a strong relative buy versus its peers.

Shares in the company are trading at a price-to-earnings (P/E) ratio of 13.5 as at yesterday’s close. That’s nearly double that of Fortescue Metals Group Limited (ASX: FMG) and near-identical to Rio Tinto Limited (ASX: RIO).

That says to me that investors don’t see enough upside in the BHP share price right now. While investors aren’t piling in just yet, I think BHP is worth keeping an eye on this year at the very least.

If we do see an infrastructure boom, I think that could be the key to boosting the BHP share price back into the positive in 2020.

More reading

• Why the CBA share price is worth watching this quarter
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops on return of lockdown in Melbourne
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Why brokers have just downgraded BHP and these ASX stocks today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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 100 index is home to some of Australia’s biggest and brightest companies.

Whilst I wouldn’t be in a rush to invest in all of the shares on the index, there are a number which I believe are great buy and hold investment options right now.

Here are three ASX 100 shares I like:

CSL Limited (ASX: CSL)

The first ASX 100 share that I would buy is this biotherapeutics giant. I’ve been very impressed with the way CSL has consistently delivered strong profit growth over the last decade. The good news is that there’s no sign of this trend ending anytime soon after its positive form continued in FY 2020. And with demand for immunoglobulins products remaining strong and the company possessing a potentially lucrative pipeline of new products, I believe this trend will continue for a long time to come and drive the CSL share price notably higher over the 2020s.

NEXTDC Ltd (ASX: NXT)

The newest member of the ASX 100 is NEXTDC. It was deservedly added to the index at the latest rebalance. NEXTDC is a technology company providing innovative data centre outsourcing solutions, connectivity services, and infrastructure management software. Its partner ecosystem hosts Australia’s largest independent network of carriers, cloud, and IT service providers. This allows NEXTDC’s customers to source and connect with cloud platforms, service providers, and vendors to build integrated hybrid cloud deployments and scale their IT infrastructure and services. I feel the quality of its centres and the cloud computing boom have put NEXTDC in a position to grow its earnings at a strong rate over the next decade. I expect this to lead to the NEXTDC share price outperforming the ASX 100 over the period.

ResMed Inc (ASX: RMD)

A final ASX 100 share to consider buying is this medical device company. It has a portfolio of cloud-connected devices treating people with sleep apnoea, chronic obstructive pulmonary disease, and other chronic diseases. Demand for its industry-leading devices has been very strong in recent years, underpinning stellar earnings growth. The good news is that the sleep treatment market is tipped to grow rapidly over the next decade, which I believe puts ResMed in a position to continue growing its earnings at an above-average rate for some time to come.

More reading

• How to beat the market with 2 kids and no time
• Where to invest $1,000 in ASX tech shares today
• Why CSL and these ASX 200 shares could be fantastic buy and hold options
• Why NEXTDC and these high flying ASX shares just hit record highs
• 2 ASX shares I would buy for growth and income

James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. 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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I find the Commonwealth Bank of Australia (ASX: CBA) share price a fascinating one to watch.

With a market capitalisation of $126.1 billion, this banking behemoth is one of the largest listed companies in Australia. That means when the CBA share price moves, often the S&P/ASX 200 Index (ASX: XJO) does too.

On top of that, CommBank is Australia’s largest bank. It’s no secret that a huge proportion of the Aussie economy can be attributed to the Financials and Resources sectors. And I do tend to think that CommBank’s share price movements can act as a barometer of sorts for the wider ASX.

So, for all of its intriguing attributes, why am I specifically watching this ASX bank share in July?

Why I’m watching the CBA share price right now

I’m not really one for technical analysis, but watching CommBank’s trading patterns makes for interesting viewing. Having hit a new 52-week low of $53.44 in the March bear market, the CBA share price has hovered around the $68-$72 per share mark for the last month. I think that’s pretty indicative of where the market is at right now. In fact, I wouldn’t be surprised to see the S&P/ASX 200 Index move largely sideways until the August earnings season.

There are plenty of headwinds facing the economy and many were there even before the coronavirus pandemic smashed global economic growth. However, despite all the economic gloom, markets have rebounded strongly. This has largely been due to record-low interest rates, strong government stimulus and expansionary monetary policy.

On the surface, all of these measures should be good for the CBA share price. However, this economic quarter (i.e. July to September) could be one that makes or breaks the ASX bank share.

For one, the heavy government stimulus is likely to be rolled back in September or October. Once these safety nets are removed, we should get a real idea of where the economy is headed for the remainder of 2020 and beyond. Having already hit a recession in the June quarter, I’m bracing for more bad economic news. That could be in the form of even higher unemployment, rising corporate insolvencies and/or higher default rates.

We should also see CommBank release its quarterly Basel III Pillar 3 disclosure report at the end of September. That document should give an indication of the bank’s key regulatory metrics such as Common Equity Tier 1 (CET1) ratio and other capital adequacy measures.

Foolish takeaway

If it was all doom and gloom right now, investors wouldn’t still be buying in at the current CBA share price. It’s easy to be negative but there is still some pretty strong fundamental support for ASX shares.

One big factor is the implicit government support that underpins the Aussie banking system. It’s unlikely that we’d see a major credit crisis from the big four given they are ‘too big to fail’ and the government would invariably step in to help if necessary. There are also the extensive efforts of central banks around the world to prop up the economy. Significant quantitative easing has boosted liquidity in capital markets to keep key lending mechanisms in play right now.

If we see a gradual re-opening of state economies in Australia, this could also boost corporate earnings in 2020. Higher earnings means better debt serviceability which is good news for Aussie bank earnings (and balance sheets).

All in all, I think the CBA share price is interestingly poised right now. For me, the September quarter looms large in determining whether or not to buy into the Aussie bank in 2020.

More reading

• Why I see good value in the BHP share price today
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 drops on return of lockdown in Melbourne
• These ASX shares are swept up by the new Victorian COVID-19 lockdown
• Why brokers have just downgraded BHP and these ASX stocks today

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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