The Australian share market was on form again on Wednesday and raced notably higher.

Some shares climbed more than most, with a few managing to even hit 52-week highs or better.

Three that have achieved this feat are listed below. Here’s why they are scaling new heights:

ASX Ltd (ASX: ASX)

The ASX Ltd share price continued its positive run and hit a record high of $89.71 on Wednesday. Investors have been buying the stock exchange operator’s shares this year due to its defensive qualities and strong share market activity. This morning the company reported a 49% increase in capital raised on the ASX during the month of May compared to the prior corresponding period. It also revealed that the total number of trades on the ASX is up 29% year to date to 423.3 million.

Integrated Research Limited (ASX: IRI)

The Integrated Research share price climbed to a two-year high of $3.66 yesterday. Investors appear confident that demand for the services of this global provider of performance management software for critical IT infrastructure, payments, and unified communications will remain strong during the pandemic. The market has not heard from the company since its half year results in February. This could be a case of no news is good news.

Zip Co Ltd (ASX: Z1P)

The Zip Co share price continued its remarkable run and hit a record high of $6.79 on Wednesday. Investors have been fighting to get hold of the payments company’s shares since it announced an agreement to acquire New York-based buy now pay later provider QuadPay. This deal will see the company go head to head with Afterpay Ltd (ASX: APT) in the United States market. QuadPay is a leading, high growth, instalment provider with 1.5 million customers and 3,500 merchants on its platform. From these it is currently generating annualised total transaction value of over $900 million and annualised revenue of $70 million. This is just the smallest fraction of a U.S. retail market estimated to be worth a staggering $5 trillion.

More reading

• ASX 200 jumps 1.8%, Australian headed for recession
• Sezzle Inc shares and 2 other small cap ASX techs surge higher today
• Why Afterpay, Infigen, Qantas, & Zip Co shares are charging higher
• The Zip Co share price just zoomed to a record high: Is it too late to invest?
• ASX 200 rises 0.3%, Zip rockets higher

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 Integrated Research Limited and 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 Westpac Banking Corp (ASX: WBC) share price will be on watch on Thursday after announcing the results of its investigation into the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance issues. 

This follows the launching of civil proceedings against Westpac by AUSTRAC on 20 November 2019.

Westpac Chairman John McFarlane explained: “In line with the Board’s commitment at the 2019 AGM, we are now making public the results of reviews into the Bank’s AML/CTF compliance failings.”

“It’s been my experience since joining the Bank that Westpac deeply regrets this matter. Indeed, recognising the seriousness of the issues raised by AUSTRAC, the former CEO stepped down and the former Chairman brought forward his retirement. We are all committed to fixing these issues so they don’t happen again.”

What did Westpac announce?

Westpac has blamed its International Funds Transfer Instructions (IFTIs) non-reporting failures on a mix of technology and human error dating back to 2009.

Whereas the failure to properly adhere to AUSTRAC guidance for child exploitation risk occurred due to deficient financial crime processes. This was then compounded by poor individual judgements.

All in all, three primary causes of the AML/CTF compliance failures have been identified by Westpac. They are as follows:

• Some areas of AML/CTF risk were not sufficiently understood within Westpac.
• There were unclear end-to-end accountabilities for managing AML/CTF compliance.
• There was a lack of sufficient AML/CTF expertise and resourcing.

Board governance.

Westpac also released the Advisory Panel Report into Board governance of AML/CTF obligations and the promontory assurance letter on management’s accountability review.

The bank advised that the Advisory Panel has formed a range of views on financial crime related governance.

The report notes that the way the Westpac Board organised its general governance responsibilities was mainstream and fit for purpose.

However, with the benefit of hindsight, it feels that directors could have recognised earlier the systemic nature of some of the financial crime issues Westpac was facing. The Panel also noted that the reporting of financial crime matters to the Board was at times unintentionally incomplete and inaccurate.

Westpac’s new CEO, Peter King, advised that the bank has looked back over ten years and where fault was identified, appropriate action has been taken.

He said: “Consequences that have been applied to individuals include significant remuneration impacts and disciplinary actions. A number of relevant staff had already left the company.”

“A range of remuneration consequences were applied to 38 individuals. Consequences applied to prior year awards, including withheld FY19 short term variable reward, totalled approximately $13.2 million. In addition, cancelled FY20 short term variable reward, including for the CEO and Group Executives, is valued at approximately $6.9 million assuming an outcome of 50% of target opportunity,” he added.

What now?

Mr King has acknowledged the need for cultural change within Westpac.

He commented: “We recognise we need to change. We completely accept that some important aspects of Westpac’s financial crime risk culture were immature and reactive, and we failed to build sufficient capacity and experience in some important areas.”

“We have learned from this and are absolutely committed to making amends for this event,” the CEO concluded.

This brings to an end Westpac’s investigations. It will continue to work with AUSTRAC on the legal process, following the submission of its defence and admissions on 15 May 2020.

More reading

• ASX 200 jumps 1.8%, Australian headed for recession
• ASX 200 up 1%: Big four banks jump, Afterpay hits record high
• Is the Westpac share price a buy?
• 5 things to watch on the ASX 200 on Wednesday
• ASX 200 down 0.1%: Big four banks drag ASX lower ahead of RBA meeting

Motley Fool contributor James Mickleboro owns shares of Westpac Banking. 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 Xero Limited (ASX: XRO) share price has been a top ASX tech performer for quite some time. Shares in the Aussie software provider are up 11.66% this year while the S&P/ASX 200 Index (ASX: XJO) has slumped 11.11% lower.

But there’s one that thing that really stands out about Xero right now. The Aussie tech group’s shares trade at a price to earnings (P/E) ratio of 4,122.29. That’s a pretty astonishing number, but does it mean Xero is overvalued today?

Is the Xero share price overvalued?

Xero is currently trading at $89.33 per share. A P/E ratio of 4,122 means that for every $4,122 you pay for the share, you can expect the company to generate $1 worth of earnings.

That’s an incredibly high number. Let’s compare that figure that to a strong dividend share like Fortescue Metals Group Limited (ASX: FMG). Fortescue shares are currently valued at $14.66 with a P/E ratio of 6.04.

Of course, we have to compare apples with apples. This means it might be more appropriate to evaluate the Xero share price against that of its WAAAX peers. The Altium Limited (ASX: ALU) share price, for example, currently trades at a P/E ratio of 62.16. Therefore, on the surface it might appear that Xero shares are grossly overvalued.

However, I don’t think it’s that simple. The Xero share price has consistently climbed over the years and investors continue to buy into the company. The group continues to sign big clients and I think small and medium business clients will rely on Xero software throughout the COVID-19 crisis. 

Furthermore, many ASX tech shares don’t actually post positive earnings or ‘profit’. That means the earnings component of the P/E ratio is useless and won’t provide any decisive value. However, if a company posts a 1 cent per share profit, all of a sudden their P/E ratio will be enormous.

Foolish takeaway

I don’t think it’s wise to just use P/E ratios to value the Xero share price, particularly in the current climate. If Xero retains key customers and manages to reduce churn, the ASX tech share could still be a good buy in 2020 and beyond.

More reading

• 5 things to watch on the ASX 200 on Thursday
• 3 high quality ASX shares to buy and hold for decades
• These ASX 200 shares could be perfect for a retirement portfolio
• The latest ASX 200 stocks to be upgraded to “buy” amid the recession
• Why I’m not afraid to invest in shares during this recession

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium and Xero. 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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Is Australia in a recession? According to Federal Treasurer Josh Frydenberg, we are.

Strictly speaking, a recession is defined as two consecutive quarters of gross domestic product (GDP) contraction. This is something Australia has miraculously avoided for 29 years.

But with the Australian Bureau of Statistics reporting a 0.3% contraction in first quarter GDP on Wednesday morning, Mr Frydenberg recognises that a recession is now inevitable.

When quizzed at a press conference about whether the country was now in a recession, Mr Frydenberg said: “Yes, that is on the basis of the advice I have from the Treasury Department about where the June quarter is expected to be.”

Why is GDP certain to contract in the second quarter?

Although there is almost a month before the end of the second quarter, the pandemic-related shutdowns that occurred in March and April are understood to have materially impacted GDP during the quarter.

While the reopening of Australia sooner than many expected will be a boost, it certainly won’t be enough to offset the economy grinding to a halt at the height of the pandemic.

One positive is that Sarah Hunter from BIS Oxford Economics believes the country will escape a Great Depression-like scenario.

In a note, courtesy of the ABC, she said: “With the health outcomes tracking better than expected [which has allowed an earlier-than-anticipated end to lockdown conditions] and the government packages providing a significant support to household income, the decline in GDP in the first half of 2020 will be relatively small when compared to other economies.”

But how small is “small”? Hunter and her team are expecting “the peak-to-trough fall in GDP to be significantly less than 10 per cent.”

When will Australia’s recession end?

The economics team at National Australia Bank Ltd. (ASX: NAB) believe that Australian second quarter GDP will be down 8%. After which, it is expecting a recovery to start from the third quarter, ultimately leading to a 4.3% decline in GDP for the year.

A return to growth is then forecast for 2021, with a full recovery achieved by 2022.

The bank explained: “Looking forward, we expect a much larger fall of around 8% in Q2 where strict containment measures were in place in the first half of the quarter. Beyond that we expect a small rise in GDP in Q3 before a more substantial pickup in growth in Q4. That sees a year average fall in GDP of 4.3% this year, followed by growth of around 4.0% in 2021.”

“Despite the rebound in growth, we do not see the level of GDP fully recovering to its pre-virus levels until mid-2022. Therefore, while we see unemployment improving over 2021 from its peak in coming months, it should remain elevated for some time,” it added.

More reading

• ASX 200 jumps 1.8%, Australian headed for recession
• Is the NAB share price cheap today?
• How to value the big four ASX banks
• How bankable are the big four ASX bank shares in 2020?
• ASX 200 up 0.6%: NAB charges higher, ACCC investigates Qantas acquisition

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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Should half of your share portfolio actually be cash right now? That’s what listed investment company (LIC) MFF Capital Investments Ltd (ASX: MFF) has done.

I really respect fund manager Chris Mackay, I think he’s one of the best investors in Australia. He has guided MFF Capital to be one of the best LICs over the past decade with great picks like Visa and Mastercard.

MFF Capital timed the payment of a special dividend well, coming just before the coronavirus market crash.

I think it was very interesting to see that in MFF Capital’s May 2020 update it said that net cash as a percentage of assets was now 46.4%, now almost half of the whole portfolio.

Mr Mackay is keeping in mind how factors like heavily populated cities, globalisation and widespread global travel are crucial for ongoing economic growth and the economic sufficiency of billions of people. But these factors are also partially how the coronavirus spread so easily.

Other geopolitical issues are also concerning to Mr Mackay with problems in Hong Kong and the riots in the US.

Should you sell half your portfolio?

I don’t think you need to be that drastic with your portfolio. I’m certainly not going to sell half my portfolio. But I am bit concerned for the US over the next six months. The riots, ongoing pandemic and upcoming US election could be a challenging time with the US president’s unique style.  

The share market recovery is somewhat justified with how much central bank support there is. And the fact that the pandemic isn’t as bad as it could have gotten despite there being more than 100,000 deaths in the US alone.

Not every share has a great future from the changes that the coronavirus will cause to the economy. But there are still opportunities out there that look good, particularly with how low interest rates are.

Having said that, I’d like to buy more MFF Capital shares. Mr Mackay is a great operator and now it’s well funded for downside protection and can buy plenty of shares if the share market is sold off again.

More reading

• Why I’m not afraid to invest in shares during this recession
• 10 top ASX growth shares to buy in June for strong returns
• How to make $1,000 a month in dividends
• Where I would put $10,000 into ASX 200 shares today
• Save your future self from financial misery

Motley Fool contributor Tristan Harrison owns shares of Magellan Flagship Fund 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 S&P/ASX 200 Index (ASX: XJO) was on form again on Wednesday and stormed notably higher. The benchmark index ended the day up a sizeable 1.8% to 5,941.6 points.

Will the market be able to build on this on Thursday? Here are five things to watch:

ASX 200 expected to race higher.

The ASX 200 looks set to race higher again on Thursday. According to the latest SPI futures, the benchmark index is poised to jump 72 points or 1.2% at the open. This follows a very positive night of trade on Wall Street, which saw the Dow Jones jump 2.05%, the S&P 500 rise 1.35%, and the Nasdaq index climb 0.8%.

6,000 points in sight.

With ASX 200 futures pointing to a strong rise at the open, the index looks set to smash through the symbolic 6,000 points market today. It has been almost three months since the benchmark index traded at this level. Investors will be hoping it is onwards and upwards from here.

Oil prices soften.

Energy shares including Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) will be on watch today after oil prices softened. According to Bloomberg, the WTI crude oil price is down 0.35% to US$36.68 a barrel and the Brent crude oil price has fallen 0.55% to US$39.34 a barrel. Traders appear nervous ahead of an announcement by OPEC.

Gold price sinks lower.

Improving risk sentiment has hit safe haven assets like gold overnight, which could mean miners such as Evolution Mining Ltd (ASX: EVN) and Newcrest Mining Limited (ASX: NCM) come under pressure today. According to CNBC, the spot gold price is down 1.9% to US$1,700.90 an ounce.

Magellan rated neutral.

The Magellan Financial Group Ltd (ASX: MFG) share price may be fully valued according to analysts at Goldman Sachs. The broker has reiterated its neutral rating and lifted its price target on the fund manager’s shares to $51.69. Goldman believe Magellan is on track to deliver strong performance fees in the second half. However, it feels this is already priced into its shares.

More reading

• ASX 200 jumps 1.8%, Australian headed for recession
• These ASX 200 shares could be perfect for a retirement portfolio
• The latest ASX 200 stocks to be upgraded to “buy” amid the recession
• Why I’m not afraid to invest in shares during this recession
• Top brokers name 3 ASX 200 shares to buy right now

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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