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One investment professional has named Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) as preferred picks among the big ASX banks.

The ‘big four’ S&P/ASX 200 Index (ASX: XJO) banks are NAB, Westpac, Australia and New Zealand Banking Group Ltd (ASX: ANZ) and Commonwealth Bank of Australia (ASX: CBA).

It has been a pretty rough time for banks lately as investors come to grips with the impacts of inflation and rising interest rates.

At the time of writing, the CBA share price has fallen 13% over the past month, while shares in NAB and ANZ are both down around 12%.

Westpac shares have plunged more than 18% in the same period.

While there are a lot of similarities between the banks, there are also some key differences. Valuations, dividend yields, management teams, the percentage of its loan book exposed to residential mortgages and so on.

David Clark, of wealth management company Cameron Harrison, has picked out two of the big four ASX banks as preferred opportunities, as reported in the Australian Financial Review.

Preferred big four ASX banks

Clark advises investors not to allocate too much of their portfolio to ASX 200 banks because the “returns are unlikely to reach the heady levels of the past decade”.

More than 28% of the ASX 200 is made up of financial businesses. That’s too high, according to the investment consultancy.

Out of the big four ASX banks, Cameron Harrison preferred NAB and Westpac, amid challenges facing the others.

With the world becoming increasingly digital, a good digital offering is likely to improve efficiencies, customer service and costs. However, Clark said that ANZ was “struggling” with its digital transformation.

ANZ recently built a banking platform called ANZ Plus, its new digital banking service.

ANZ’s Australia Retail group executive Maile Carnegie wrote in a recent blog post that the rebuild of the underlying technology was now complete. He said the bank was starting to see the rebuild of the customer applications that sat on top, starting with ANZ Plus savings and transaction accounts.

The big four bank plans to have beta testing for loans in late 2022, so the solution for ANZ’s tech troubles could still be some months away.

Why not CBA?

CBA is the biggest bank in market capitalisation terms. However, Clark thinks that it’s trading at “too high a premium” compared to the others.

Let’s have a look at the valuation in relation to price/earnings (p/e) ratios for FY22 using data on CMC.

The CBA share price is valued at 16x FY23’s estimated earnings.

Shares in Westpac are valued at 10x FY23’s estimated earnings, while ANZ shares come in just under 10x FY23’s estimated earnings. The NAB share price is valued at 12x FY23’s estimated earnings.

Time will tell if CBA shares fall, the other three rise or the valuations stay this separate.

The post Why this fundie favours NAB and Westpac shares out of the big four appeared first on The Motley Fool Australia.

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More reading

• Westpac tips another big RBA rate hike next week
• ANZ rewards shareholders with its latest dividend. Here are the details
• 2 excellent ASX dividend shares that analysts rate as buys in July
• Why the CBA share price is slipping lower today
• Can investors bank on the NAB share price in July?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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As most ASX investors would be aware, the month just gone was not an especially pleasing one for ASX investors or the S&P/ASX 200 Index (ASX: XJO). June saw the ASX 200 lose almost 9% of its value. But what of the Xero Limited (ASX: XRO) share price?

Xero is one of the most popular ASX growth shares on the market. The online accounting software company has delighted investors in the past with impressive share price rises. Over 2020, Xero shares appreciated by a pleasing 80% or so.

But the company has been struggling since 2020. Over this year so far, Xero has lost close to half of its value. So with this in mind, how did Xero go over June?

From hero to Xero for share price

Well, as one might guess, it wasn’t a particularly uplifting month for the Xero share price. The company began June at a price of $89.29 but closed at just $76.96 on Thursday. That means Xero recorded a loss of 13.8% over the month, a marked underperformance of the broader ASX 200.

This was despite the absence of any news or announcements out of Xero over June. So it’s likely the nasty falls Xero shares experienced were purely driven by the investor apathy towards tech shares that we saw during the month.

Many other ASX tech shares experienced similar falls over the period. For example, WiseTech Global Ltd (ASX: WTC) lost more than 10%, while Block Inc (ASX: SQ2) sunk by more than 28%. Zip Co Ltd (ASX: ZIP) had a shocker, falling by more than 52%.

But it might not be all bad news for Xero investors. As my Fool colleague James covered last week, ASX broker Morgans has just come out with an “add” rating on the Xero share price.

Morgans sees Xero as “a high-quality company, with strong growth potential in an industry with high barriers to entry”. It has given the company a 12-month share price target of $90.25, which implies a potential upside of more than 16% from recent pricing.

So perhaps the Xero share price has far more exciting things in front of it than it left behind in June. But we shall have to wait and see.

The post The Xero share price lost 14% last month. Here’s the tea appeared first on The Motley Fool Australia.

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More reading

• What on earth happened to ASX 200 tech shares in June?
• Here are the top 10 ASX shares today
• Here are the 3 most heavily traded ASX 200 shares on Friday
• Brokers name 3 ASX shares to buy today
• Embattled ASX 200 retail shares primed for a comeback: experts

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc., WiseTech Global, Xero, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc., WiseTech Global, and Xero. 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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If you’re interested in investing in the tech sector, then you may want to consider the three ASX tech shares listed below.

These three shares have been named as Bell Potter’s top picks in the sector for FY 2023. Here’s what the broker is saying:

Life360 Inc (ASX: 360)

The first ASX tech share that Bell Potter rates highly is location technology company Life360. While the broker acknowledges that the company isn’t profitable yet, it feels investors should look beyond this due to its explosive growth, strong balance sheet, and expectation to be cash flow positive next year.

It commented:

Life360 develops and delivers a mobile app for families – called Life360 – that provides communications, driving safety and location sharing. The company adopts a freemium model to attract customers but has been successfully converting a portion of these customers to paying subscribers over the last several years by providing valuable features. The company has also recently made two acquisitions – Jiobit and Tile – so that now it not only connects and protects people but also pets and things. Yes Life360 is currently not profitable but is expected to be operating cash flow positive from 4Q2023 and has more than sufficient cash to fund its operations till then.

Bell Potter has a buy rating and $7.50 price target on Life360’s shares.

Nitro Software Ltd (ASX: NTO)

Another ASX tech share that Bell Potter rates as a buy for the new financial year is document productivity company Nitro Software. Like Life360, the broker expects Nitro to be cash flow breakeven next year and has ample cash to support it through to then.

Nitro is a global document productivity software company that enables digital transformation in organisations around the world through a suite of products built to enable digital workflows. The company has been successfully switching its revenue model from perpetual to subscription and the latter – which is recurring – now represents around two-thirds of total revenue. The company also recently made the acquisition of a leading eSign company called Connective which now positions Nitro as the third global player in the enterprise eSign market. Yes Nitro is also currently not profitable but is expected to be cash flow breakeven in 2H2023 and has more than sufficient cash to fund its operations till then.

The broker has a buy rating and $2.50 price target on Nitro’s shares.

TechnologyOne Ltd (ASX: TNE)

A final tech share to buy according to Bell Potter is TechnologyOne. Unlike the others, it is a highly profitable enterprise software company. And thanks to its ongoing shift to a software-as-a-focus business model, it is expected to become even more profitable in the future.

Bell Potter said:

Technology One is a provider of ERP (enterprise resource planning) software to large corporates and government agencies in Australia, New Zealand, Asia Pacific and the UK. The key competitive advantage of the company is it has developed a fully integrated SaaS solution of its software and is now switching customers to this solution. The migration is now around three quarters complete and Technology One is starting to reap the benefits of greater recurring revenue and a higher margin. This combination will in our view drive double digit earnings growth for years to come and, as the migration of customers approaches 100%, we expect the multiple to rerate to that of a pure SaaS company.

Bell Potter has a buy rating and $12.50 price target on TechnologyOne’s shares.

The post Broker names 3 of the best ASX tech share to buy in FY23 appeared first on The Motley Fool Australia.

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More reading

• Top broker names 3 of the best ASX 200 shares to buy in FY23
• Experts say these ASX 200 growth shares are buys with 20%+ upside
• Why are ASX tech shares struggling today?
• Why is the Life360 share price sinking 9% today?
• ASX 200 midday update: Tech shares tumble, Collins Foods jumps

Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc. The Motley Fool Australia has recommended Nitro Software Limited and TechnologyOne Limited. 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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Exchange traded funds (ETFs) continue to grow in popularity. And it isn’t hard to see why.

By investing in an ETF you can gain access to a large and diverse number of different shares that you wouldn’t ordinarily have access to. This can be a great way to invest diversely on a limited budget or bolster an already sizeable portfolio.

With that in mind, listed below are two ETFs that could be worth looking at next week:

iShares Global Consumer Staples ETF (ASX: IXI)

The first ETF for investors to look at next week is the iShares Global Consumer Staples ETF.

This ETF has been designed to give investors exposure to companies that produce essential products, including food, tobacco, and household items. As demand for these types of products is generally consistent whatever is happening in the economy, this ETF could prove a top option in the current uncertain environment.

Among its 100+ holdings are the likes of Coca-Cola, Costco, Diageo, Nestle, Philip Morris, Unilever, Walmart, and Australia’s own, Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

Vanguard MSCI Index International Shares ETF (ASX: VGS)

Another ETF for investors to look at when the market reopens next week is the highly popular Vanguard MSCI Index International Shares ETF.

If diversification is your aim, then it is hard to look beyond the Vanguard MSCI Index International Shares ETF. That’s because this ETF provides investors with access to a massive 1,500+ high quality companies from around the globe.

The companies you’ll be owning a slice of with this ETF include the likes of Apple, Exxon Mobil, Johnson & Johnson, Mastercard, Meta Platforms, Nvidia, Pfizer, and Walt Disney.

The post Here are 2 top ETFs for ASX investors next week appeared first on The Motley Fool Australia.

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• What dividend yield is the Vanguard MSCI Index ETF offering to ASX investors?
• 3 quality ETFs for ASX investors to buy next week
• What do you get when you invest in the VGS ETF?
• 3 popular ETFs for ASX investors to buy now
• 3 ASX ETFs for investors to buy next week

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Vanguard MSCI Index International Shares ETF. The Motley Fool Australia has positions in and has recommended COLESGROUP DEF SET and iShares Global Consumer Staples ETF. The Motley Fool Australia has recommended Vanguard MSCI Index International Shares ETF. 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 Fortescue Metals Group Limited (ASX: FMG) share price dropped by double-digits in June. Including the fall on Friday, the past month shows a drop of 17%.

As an iron ore miner, Fortescue is exposed to movements in the iron price as well as sentiment about commodities and miners.

Resource businesses are price-takers. That means miners have to take the price that buyers are buying at. The iron ore price has seen a lot of volatility over the last year or so.

There have been times of strong demand from China. There was also a period last year when Chinese steel demand production fell (perhaps to reduce emissions before the Winter Olympics).

Looking at where Fortescue shares were a year ago, the Fortescue share price has fallen close to 30%.

After a difficult time in recent history, could the ASX mining share mount a turnaround starting in July?

Broker thoughts on the Fortescue share price

Brokers don’t have a working crystal ball, but they like to estimate price targets – that’s where they think the Fortescue share price will be in 12 months from the date of the price target opinion.

Different brokers have various optimistic or pessimistic thoughts on which direction Fortescue is headed over the next year.

The broker Macquarie currently has a neutral rating on the big iron ore miner. Its price target is $18. After the recent fall of the ASX mining share, that implies a possible rise of around 5%. Iron ore prices are remaining stronger for longer, while there’s also currently a reduced discount for Fortescue’s iron ore, which is lower quality than the iron from some of its main competitors.

The broker Morgan Stanley currently has an underweight rating on the miner. Its price target is $14.20, which implies a possible fall of approximately 17%. Chinese lockdowns led to the broker reducing its expectations for commodity prices. The amount of money that Fortescue is spending on its green initiatives through Fortescue Future Industries (FFI) is also a concern for the broker.

The broker Ord Minnett has a hold rating on the business. The Fortescue share price target here is $19, which implies a rise of around 11%. Ord Minnett thinks Fortescue is the best iron ore producer.

Dividend expectations

Of the three brokers I’ve mentioned, I’ll outline two of the projections for the Fortescue grossed-up dividend yield in FY23.

Ord Minnett has estimated that Fortescue could pay a grossed-up dividend yield of 15%. Macquarie has pencilled in a grossed-up dividend yield of 17.9%.

Next steps for Fortescue

Fortescue is scheduled to release its quarterly production report for the three months to June 2022.

Then comes reporting season for the year to 30 June 2022, where we’ll learn of Fortescue’s net profit after tax (NPAT) for FY22, the final dividend and comments for the upcoming year (and beyond).

The post Should investors dig the Fortescue share price in July? appeared first on The Motley Fool Australia.

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More reading

• How did the Fortescue share price perform in June?
• These ASX 200 mining shares are digging a deeper hole on Friday
• What’s dragging on the Fortescue share price today?
• How have ASX 200 mining shares fared over June?
• Which ASX 200 mining share offers the best dividend yield for FY22?

Motley Fool contributor Tristan Harrison has positions in Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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The Transurban Group (ASX: TCL) share price rose on Friday by 0.83% to finish the session at $14.50.

Transurban has rallied on the ASX this year with its share price rising 4% over the first half of 2022.

But investors endured a tumultuous month in June.

Transurban shares dropped from a closing price of $14.70 on 3 June to a trough of $13.63 on 16 June. Then they rose again to finish the month flat — up 0.07%.

What do the experts think of the Transurban share price?

As my fellow Fool James reported today, Morgans has an add rating on Transurban. The broker’s 12-month share price target is $14.42.

A number of other brokers have weighed in on Transurban’s short-term future. Some are positive, some are negative.

The asset management company Cameron Harrison sits on the positive side. Transurban is currently the top holding in the company’s portfolio.

Why Transurban is our No. 1 stock pick

Partner David Clark is responsible for investment management at Cameron Harrison.

In an interview with the Australian Financial Review (AFR), Clark says Transurban is benefitting from rising inflation.

Clark said:

The toll road operator is a short-term beneficiary of the current inflation cycles and economic reopening.

Transurban’s toll road concessions have very strong inbuilt inflation protection, with two-thirds of revenue linked to the inflation rate and a further quarter fixed at 4.25 per cent (until 2029).

The concession tenures have an average life of 30 years and toll rates cannot be reduced in the event of deflation.

This means the current spike in inflation (and subsequent fall to reasonable levels) will lead to structurally higher revenues throughout the term of the concession.

Transurban has pricing power

Clark says Transurban’s pricing power is an advantage in today’s economy.

He explained:

When we assess the current inflationary environment, we are looking for companies that can exert pricing power in their markets, which can be used to mitigate rising input costs.

Pricing power presents itself in a variety of ways.

For instance, companies with a dominant market position can leverage that into market pricing power (Bunnings/Wesfarmers Ltd (ASX:WES)), revenues that are predominately associated with essential spending (healthcare or staples/supermarkets), cash flows with inbuilt inflation escalation (toll road operators, such as Transurban) and/or are at the beginning of the supply chain (industrial commodities producers OZ Minerals Limited (ASX: OZL) and BHP Group Ltd (ASX: BHP)).

The post Here’s why Transurban shares are this fund manager’s top holding appeared first on The Motley Fool Australia.

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More reading

• 2 excellent ASX dividend shares that analysts rate as buys in July
• 2 ASX 200 shares with enough pricing power to battle inflation: Expert
• Why is the Transurban share price languishing today?
• Hoping to bag the next Transurban dividend? Read this
• Brokers name 2 ASX dividend shares to buy next week

Motley Fool contributor Bronwyn Allen has positions in BHP Billiton Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. 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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June was an especially tough month for ASX shares and the S&P/ASX 200 Index (ASX: XJO). But what about the BetaShares Nasdaq 100 ETF (ASX: NDQ)? This exchange-traded fund (ETF) doesn’t even hold any ASX shares within it. So how did it go last month?

So the NDQ ETF is the only ASX exchange-traded fund that solely covers the NASDAQ-100 (INDEXNASDAQ: NDX) Index. The Nasdaq is one of the two major US stock exchanges. It tends to house the US’s tech companies, which gives it a noticeable weighting bias towards this sector. Indeed, more than half of NDQ’s weighting is towards tech shares.

So how did the NDQ ETF perform over June?

Well, it wasn’t a fantastic month for investors. NDQ units started the month off at a price of $28.23. But this ETF finished up on Thursday at $26.71. That’s a loss of 5.38% for June. Interestingly, the index that the NDQ ETF tracks – the Nasdaq 100 – fell by far more, around 9%. So this difference can probably be explained by currency fluctuations between the Aussie and US dollars.

Now, that 5.38% loss might not be what NDQ investors wanted out of June. But it’s arguably not a terrible result, considering the ASX 200 index fell by a far greater 8.9%.

But still, rec is red. And it wasn’t a good month for Nasdaq investors by any means.

The NDQ ETF is dominated by the largest US tech shares. Indeed, its largest five holdings are none other than Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), Tesla Inc (NASDAQ: TSLA) and Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). All familiar names, I’m sure. Together, this ‘famous five’ make up more than 40% of NDQ’s entire portfolio weighting.

None of these five companies recorded gains over June. The losses range from Alphabet’s 4.33% loss (for the GOOGL Class A shares) to Amazon’s loss of 11.65%.

So with so much red ink within NDQ’s underlying portfolio, it’s perhaps no wonder that this ASX ETF recorded a loss last month. Like with ASX tech shares over June, it’s likely that Nasdaq tech shares came under pressure from concerns over inflation and higher interest rates. Tech shares often get hit harder than most in this kind of investing environment.

So after June’s disappointing returns for the NDQ ETF, no doubt investors will be hoping for a better July.

The post Here’s how June treated the NDQ ETF appeared first on The Motley Fool Australia.

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More reading

• Why I think these 2 ASX shares are ideal for growth investors
• Is NDQ expensive or cheap compared to other ASX ETFs?
• Is it time to go bargain hunting for ASX shares?
• 3 high quality ETFs for ASX investors to buy now
• Here’s why the NDQ ETF is down almost 30% in 2022

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet (A shares), Amazon, Apple, Microsoft, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, BETANASDAQ ETF UNITS, Microsoft, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has positions in and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. 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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Last month was a rough one for the Santos Ltd (ASX: STO) share price despite no news having been directly released by the company.

Though, the S&P/ASX 200 Index (ASX: XJO) energy giant was likely weighed down by falling energy commodity prices.

As of the final close of June, the Santos share price was $7.42 cents. That’s 9.51% lower than it was at the end of May.

For context, the ASX 200 slipped nearly 9% last month.

So, what’s been going wrong for the ASX 200 energy share recently? Let’s take a look.

What happened to the Santos share price in June?

The Santos share price suffered a notable tumble last month despite no news direct from the company.

However, Santos was the talk of the town as an energy crisis unfolded in June. Speaking on the crisis, the company’s CEO Kevin Gallagher was quoted by media as saying:

The scarcity of new developments today is frightening with forecasts of tight supply over coming years … Customers are crying out for this gas with more demand than we can meet when it comes to market around 2026. And I am trying to bring Narrabri to market earlier if that is possible.

Of course, such demand may have helped energy commodity prices spike earlier in the month.

The Australian Energy Market Operator (AEMO) capped gas prices in parts of Australia in mid-June after they reached cumulative high price thresholds. It later implemented and lifted a suspension on the National Energy Market (NEM) wholesale market.

Around that same time, the Santos share price reached a new 52-week high of $8.86.

Additionally, US natural gas futures hit its highest point since 2008 in early June. But that’s behind us now. Gas prices have since retreated to a three-month low, according to Trading Economics.

Meanwhile, oil prices recorded their first monthly decline of 2022 in June. The Brent crude oil price slipped 1.2% to reach US$114.81 a barrel on Thursday while the West Texas Intermediate oil price plunged 3.7% to US$105.76 a barrel.

All this may have weighed on the Santos share price over the last few weeks. Though, the poor month’s performance wasn’t enough to push the ASX 200 energy giant into the longer-term red.

The Santos share price is currently 9% higher than it was at the start of 2022. It has also gained 1.5% since this time last year.

The post Why did the Santos share price plunge 10% in June? appeared first on The Motley Fool Australia.

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More reading

• Why are ASX 200 energy shares dragging on the market today?
• Santos shares go cold despite energy regulator outlining ‘crucial’ role gas will play for decades
• How did ASX energy shares perform in June?
• 5 things to watch on the ASX 200 on Thursday
• Why are ASX 200 energy shares surging today?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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It wasn’t a great month for ASX 200 shares or the S&P/ASX 200 Index (ASX: XJO) last month. June saw the ASX 200 lose a painful 8.9% of its value. But it was a lot bleaker for ASX 200 tech shares.

As is often the case, June saw ASX tech shares pull back by far more than the broader market. Although the ASX 200 lost 8.9% over June, the S&P/ASX All Technology Index (ASX: XTX) went backwards by 10.3%.

But many ASX tech shares had an even worse time of it than the All Tech index. Take Xero Limited (ASX: XRO). Shares of this online accounting software provider fell by 13.8% over the month just gone. Or Block Inc (ASX: SQ2). Block shares shed a nasty 28.17% over June alone. Zip Co Ltd (ASX: ZIP) takes the cake with its disastrous loss of 52.17% over the month.

Other prominent ASX tech shares include WiseTech Global Ltd (ASX: WTC), losing 10.1%, Seek Limited (ASX: SEK) down 13.4%, and Appen Ltd (ASX: APX) with its 13% loss.

But it wasn’t a total wash for ASX tech shares. Some recorded gains for June. These included Pro Medicus Limited (ASX: PME), which rose 0.28%.

But overall, it was a pretty nasty month for ASX tech shares.

What happened to ASX 200 tech shares last month?

But why? Well, there wasn’t a lot of news out of the sector itself over June. But we did see similar moves over on the US markets. June also saw many US tech shares record similar losses. Take Tesla Inc (NASDAQ: TSLA). It lost more than 11% last month.

So we can probably blame ASX tech shares’ poor June on the concerns over inflation and rising interest rates that have dominated investors’ fears for months now. Last month saw both the US Federal Reserve and our own Reserve Bank of Australia (RBA) decisively hike interest rates. Most commentators expect many more rate hikes over the rest of the year, and into 2023.

Tech shares, with their (in many cases) future-derived valuations and lack of present profitability, are often perceived to be riskier assets in this kind of environment. Thus, it’s perhaps no surprise that these kinds of companies have copped the worse of the market’s falls over June. No doubt investors will be hoping for a brighter July. But we’ll have to wait and see what this month brings for the ASX 200 tech shares sector.

The post What on earth happened to ASX 200 tech shares in June? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Appen Ltd, Block, Inc., Pro Medicus Ltd., Tesla, WiseTech Global, Xero, and ZIPCOLTD FPO. The Motley Fool Australia has positions in and has recommended Block, Inc., Pro Medicus Ltd., WiseTech Global, and Xero. 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 Scott Phillips.

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The Reserve Bank of Australia (RBA) will be holding its latest cash rate meeting next week and the economics team at Westpac Banking Corp (ASX: WBC) are expecting more pain for borrowers.

What is Westpac forecasting?

Last month the RBA elected to raise rates by 0.5%, taking the benchmark cash rate to 0.85%.

According to the latest Westpac Weekly economic report, Australia’s oldest bank expects the RBA to follow up June’s hike with another 0.5% increase next week. This will take the cash rate to 1.35%.

Westpac’s chief economist, Bill Evans, believes the central bank should go hard early. Particularly when rates are still relatively low. Whereas he feels smaller increases will be appropriate in an “uncertain environment.”

He commented:

We advocated pushing hard on rates at the beginning of the cycle when the risk of overtightening was low.

My interpretation of the “uncertain environment” is that in due course, when rates are higher, that consideration will be relevant. Once policy is near the top of the “neutral zone” [1.5–2.0%] the impact of policy on the economy does become more uncertain and caution is warranted.

It is for this reason that Evans believes a 50 basis points increase next week is almost inevitable.

So, now that the Board has clarified its position on the best approach to policy it would seem quite clear that with the cash rate at only 0.85% a second decisive move of 50 basis points is the appropriate policy.

What about future meetings?

Westpac’s chief economist suspects that a third consecutive 50 basis points hike will be coming at the August meeting if inflation remains high.

Though, Evans isn’t advocating a fourth consecutive hike in September. He would prefer the RBA to sit tight and see what impact other rate increases have before acting again.

Our view is that a better policy would be to raise the cash rate by 50 basis points in August and then pause in September so that the unprecedented cumulation of four consecutive meetings totalling 175 basis points can be assessed. There will be no indication of that strategy in July. We will have to await the August Statement to see whether the pause is favoured by the Board.

All eyes will be on the ASX 200 on Tuesday to see how it deals with the news. Here’s hoping it is better than last time!

The post Westpac tips another big RBA rate hike next week appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro owns Westpac Banking Corporation. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. 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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