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Fresh from a long weekend for most states (and the ASX), many investors would have experienced a rather firm trip back to reality this morning when the Australian share market opened.

The S&P/ASX 200 Index (ASX: XJO) last closed at just a tad over 7,000 points on Friday. But today, the ASX 200 index has plunged a painful 4.7% so far today and is now approaching 6,600 points.

It’s been a brutal day of selling so far. Blue-chip ASX shares are falling, including Commonwealth Bank of Australia (ASX: CBA) down 4.8% and BHP Group Ltd (ASX: BHP) down 6.2% at the time of writing.

Even the ‘safer’ blue chips like Woolworths Group Ltd (ASX: WOW) and Telstra Corporation Ltd (ASX: TLS) have lost more than 2%.

So after such a decisive plunge, many investors might be wondering if we are now in a stock market crash. It’s certainly beginning to feel like one.

Is the ASX 200 in a stock market crash yet?

Let’s see if we can officially apply this dreaded moniker.

A share or stock market crash isn’t just an arbitrary event. It is generally accepted that for a market downturn to be called a stock market crash, it must involve a fall of 20% or more from the most recent market peak. A ‘correction’ is a fall of 10% or more.

So the ASX 200 last peaked at 7,632.8 points back in August 2021. Today, the ASX 200 hit a new 52-week low of 6,566.1 points. That represents a drop of 13.98%. So a painful correction, one could say.

But we aren’t actually in stock market crash territory just yet. To be in a crash, the ASX 200 would have to descend to around 6,106 points. And (thankfully) that is a level we have yet to cross.

The last true stock market crash was the infamous ‘COVID crash’ of 2020. In the space of just a few weeks, this crash saw the ASX 200 lose a gut-wrenching 32% of its value over March and April 2020.

That’s what an extremely rapid and painful stock market crash looks like. The current ‘correction’ we are experiencing could get worse, of course. But as it currently stands, the ASX 200 is still avoiding a full-on crash.

No doubt investors will be hoping that the rest of the trading week gives ASX 200 shares some breathing room. But we shall have to wait and see.

The post Is this a stock market crash for ASX 200 shares? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Block and Zip crash amid market selloff
• ASX 200 slumps 5% following Wall Street sell-off
• 5 things to watch on the ASX 200 on Tuesday
• Waiting to start investing in ASX shares? Today could be a brilliant time to do it
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Sebastian Bowen has positions in Telstra Corporation 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 Telstra Corporation 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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S&P/ASX 200 Index (ASX: XJO) tech shares are taking a beating today.

Not that it’s a great day for any of the sectors.

At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) leading the charge lower, down 6.96%.

And some of the biggest names are taking some of the big falls.

The Xero Limited (ASX: XRO) share price, for example, is down 6.27% while shares in WiseTech Global Ltd (ASX: WTC) are down 8.82%. Meanwhile, ASX 200 tech share giant Block Inc (ASX: SQ2) has crashed 18.40%.

Why are ASX 200 tech shares falling hard today?

The finger of blame is again squarely pointing at hot running inflation and the subsequent interest rate increases investors can expect.

The latest data out of the US showed inflation in May pushed annual CPI figures up to 8.6%. This came after inflation had eased from 8.5% in March to 8.3% in April, stoking hopes that the world’s biggest economy may have hit peak inflation. Current numbers out of the US are the highest in 40 years.

With hopes of peak inflation waning, investors are now bracing for more aggressive interest rate hikes from the US Federal Reserve, and likely other central banks the world over. Higher rates put pressure on growth stocks, like ASX 200 tech shares, often priced with distant future earnings in mind.

The Fed meets this Wednesday (night time in Australia) to determine its next move. Analysts widely expect a 0.50% increase, with a growing number forecasting a 0.75% hike. That would be the biggest increase since 1994.

According to Evercore ISI’s Krishna Guha and Peter Williams (quoted by Bloomberg), “Once the Fed starts moving in 75s it would be hard to stop, and the combination of this and the Fed’s outcome-based approach to inflation feels like it could be a recipe for recession.”

Steven Englander, head of foreign exchange research at Standard Chartered Bank said investors should brace for the potential for even more aggressive tightening from the Fed:

The Fed’s trying to erase any perception that they’re behind the curve. Fifty was the big round number six months ago. Meanwhile, 75 is a very middling type of hike. So, the Fed might say: ‘Look, if we want to show commitment, let’s just do 100.’

How have Xero, Block and WiseTech been performing?

It’s been a difficult year for most ASX 200 tech shares. And Xero, WiseTech and Block are no exception.

As a benchmark, year-to-date the ASX 200 is down 11.25%.

Over that same period, the WiseTech share price has lost 39.31% and the Xero share price is down 45.04%.

Dual listed Block began trading on the ASX on 20 January, following its successful acquisition of Afterpay. Since then shares in the BNPL payment giant are down 49.33%.

The post Why are ASX 200 tech shares getting hit hardest today? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 midday update: Block and Zip crash amid market selloff
• Own Zip shares? CEO warned co-founder 8 months ago, ‘There are some clouds gathering on the horizon’ after Morgan Stanley meeting
• Why is the Block share price crashing 18% on Tuesday?
• Wall Street tumbles into bear market. What does that mean for ASX 200 shares?
• These are the 10 most shorted ASX shares

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc., WiseTech Global, and Xero. 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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The Rio Tinto Limited (ASX: RIO) share price is plunging today amid wider market falls and fears over interest rate hikes in the United States.

At the time of writing, Rio Tinto shares have fallen by 5.72% and are currently trading at $109.28. For perspective, the S&P/ASX 200 Index (ASX: XJO) index is also down by 4.8% today.

So why is the Rio Tinto share price having such a tough day on the market?

What’s happening to the Rio Tinto share price?

Rio Tinto shares are falling, but the mining giant is far from alone. Fortescue Metals Group Limited (ASX: FMG) shares are currently down by almost 9% today, while BHP Group Ltd (ASX: BHP) shares are tumbling just under 6%.

Today’s falls follow similar declines on Wall Street overnight Aussie time, which saw US-listed Rio Tinto (NYSE: RIO) shares descend just over 4%.

The ASX 200 is following Wall Street’s lead after the S&P 500 Index (SP: .INX) fell into a bear market on Monday. The US Fed Reserve is reportedly considering raising rates by as much as 0.75% in an effort to curb rising inflation.

Commenting on the US market falls, City Index senior market analyst Matthew Simpson said:.

This is de-risking at its finest. Investors are rushing for the same small exit in hope of offloading their plummeting assets for cash. 

Tumbling iron ore prices could also be dragging on the Rio Tinto share price today.

According to Trading Economics data, the iron ore price has slipped almost 3% to US$137.50 per tonne. Iron ore prices dropped in global markets on Monday amid fear of further lockdowns in China, mining.com reported. Rio Tinto operates 16 iron ore mines in the Pilbara region of Western Australia.

Share price snapshot

The Rio Tinto share price has descended by around 12% in the past 12 months, but it has lifted almost 10% year to date.

For perspective, the ASX 200 has shed more than 11% so far in 2022.

Rio Tinto has a market capitalisation of around $40.7 billion based on the current share price.

The post Why is the Rio Tinto share price tumbling 6% today? appeared first on The Motley Fool Australia.

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More reading

• 2 ASX dividend shares to buy this month: experts
• 5 things to watch on the ASX 200 on Tuesday
• Rio Tinto share price lifts amid ‘important’ renewable energy step
• 5 things to watch on the ASX 200 on Thursday
• Rio Tinto share price gains lag BHP despite green steel deal

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 last 12 months have been rough on the benchmark All Ordinaries Index (ASX: XAO). Today’s 5% tumble included, the index has slumped 11.15% since this time last year. But not all All Ordinaries shares have suffered in that time.

In fact, some have seen their share prices more than quadruple, gaining over 300% in just 12 months.

Perhaps unsurprisingly, these three outperforming All Ords stocks all focus on the same battery-making material – lithium.

These ASX All Ordinaries shares have quadrupled in a year

Lake Resources N.L. (ASX: LKE)

The past 12 months have been good for All Ordinaries lithium exploration share Lake Resources. The company’s share price has lifted 459.26% since this time last year. It’s currently swapping hands for $1.51.

The lithium explorer works in Argentina’s ‘lithium triangle’, focusing on its flagship Kachi Project as well as three other lithium brine projects.

The most recent news regarding the company dropped earlier this month when it was announced Lake Resources will be added to the S&P/ASX 200 Index (ASX: XJO) shortly.

Core Lithium Ltd (ASX: CXO)

Lake Resources’ fellow ASX All Ordinaries lithium share, Core Lithium, is also set to grace the ASX 200 following the index’s June rebalance.

The Core Lithium share price has gained 369.61% over the last 12 months. It’s trading at $1.198 today.

The company is working to develop the Finniss Project in the Northern Territory. It’s expecting production at the project to begin before the end of this year.

AVZ Minerals Ltd (ASX: AVZ)

The final ASX All Ordinaries lithium share boasting a gain of more than 300% for the last 12 months is AVZ Minerals.

The company’s stock has lifted 387.5% over the last 12 months. However, it’s been frozen at 78 cents since early May.

The stock is in the freezer as the company pushes through an ownership dispute regarding its Manono Project.

If all goes wrong for the company, its holding in the asset could be reduced to 36%. AVZ Minerals is expected to return to trade on 1 July.

The post 3 ASX All Ordinaries shares that have surged 300% in the past year appeared first on The Motley Fool Australia.

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More reading

• Core Lithium share price slides 7% amid market-wide rout
• Which ASX lithium shares are producing and which are not?
• Brokers say lithium price could halve by 2023 but Core Lithium disagrees. Here’s why
• Why is the Lake Resources share price plunging 6%?
• Why Macquarie still sees ‘material upside’ for ASX lithium shares

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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The Fortescue Metals Group Limited (ASX: FMG) share price is currently tumbling a substantial 9.18% as the wider ASX share market experiences a major sell-off.

The S&P/ASX 200 Index (ASX: XJO) is down by 4.7% at the time of writing, so Fortescue shares are far from alone in this painful decline.

Looking at some other big names in the resources sector, these are also seeing some significant drops. The BHP Group Ltd (ASX: BHP) share price is currently sliding 5.9% and Rio Tinto Limited (ASX: RIO) shares are losing 5.6%. So, while all three big Aussie miners are well in the red on Tuesday, Fortescue shares are faring the worst by some margin.

What’s going on?

Volatility has increased across global share markets amid concerns over how far central banks may need to go to bring inflation under control.

In the US, the latest monthly reading for inflation for May showed a year-on-year rise of 8.6%. For the month of May alone, the US inflation figure was 1%.

According to reporting by various media, including Bloomberg, plenty of traders now believe the US Federal Reserve will increase the interest rate by 75 basis points this week. Even if the Fed doesn’t go quite that far, an increase of 50 basis points is now being widely predicted.

On top of that, there are market concerns that the strength of inflation and the likely response by central banks is leading to a higher chance of recession.

All of these factors are wreaking havoc on global markets and, in turn, sending the Fortescue share price plummeting.

Bloomberg reported on comments by Quill Intelligence chief strategist Danielle DiMartino Booth:

The idea that there is some Goldilocks outcome in the cards or soft landing is a mockery.

While tightening into a recession is no easy task, the Federal Reserve must indicate a willingness to raise interest rates by more than a half-percentage point at upcoming meetings if inflation continues to surprise to the upside.

Furthermore, falling iron ore prices amid fears over Chinese lockdowns are likely also dragging on Fortescue’s shares today.

Fortescue share price snapshot

Despite Tuesday’s heavy decline, Fortescue shares have managed to eke out a gain of just over 1% so far in 2022. This compares to a fall of around 11% for the ASX 200.

The post Fortescue share price sinks 9% amid painful market sell-off appeared first on The Motley Fool Australia.

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More reading

• Why Block, Evolution, Fortescue, and Magellan shares are sinking today
• Why are ASX 200 mining shares tumbling on Friday?
• Fortescue share price sinks: Broker warns that it could fall a further 34%
• Here’s why the Fortescue share price is 8% higher so far in June
• Is now the time to load up on Fortescue shares?

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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ASX dividend shares that are expected to pay sizeable dividends could be attractive investment options if they’re good value today.

Who decides if they’re good value? That’s for each ASX investor to work out themselves. Meantime, brokers look at loads of businesses and rate whether they are buys or not.

Share price movements can change the attractiveness of a business in the eyes of experts.

With that in mind, here are two ASX dividend shares that are currently rated buys.

Lynch Group Holdings Ltd (ASX: LGL)

Lynch describes itself as Australia’s leading vertically-integrated wholesaler and grower of flowers and potted plants.

Broker Ord Minnett says it’s a buy with a price target of $3.30. That’s a possible rise of about 50%.

The broker noted a recent update from Lynch, which included commentary regarding elevated costs of energy and logistics.

The company said that in Australia, revenue continues to “trend well” with a growth rate of at least 6% expected in the second half of FY22. It’s actively engaging on pricing and range settings with customers to maximise value and manage the margin.

Costs have increased faster than the business has been able to recover through range and price management, with these adjustments typically lagging costs by between three to six months.

The China business was experiencing “strong” market conditions until the recent COVID-19 lockdowns.

Ord Minnett thinks the Lynch grossed-up dividend yield is going to be 7.9% in FY22 and 10.5% in FY23. The existing dividend policy is to pay out at least 50% of annual underlying net profit after tax (NPAT)

The ASX dividend share is expecting an easing of freight rates to reflect the increased airfreight capacity in the first half of FY23.

Rio Tinto Limited (ASX: RIO)

Rio Tinto is one of the largest mining businesses in the world. Its main earnings generator is iron ore, but there are other commodities that it has exposure to including bauxite, aluminium, copper, lithium, and titanium dioxide slag.

Broker Macquarie rates Rio Tinto shares as a buy with a price target of $135. That’s a possible rise of about 15% for this ASX dividend share.

There are expectations that Rio Tinto will pay a grossed-up dividend yield of 15.8% in FY22 and 10.9% in FY23.

Rio Tinto doesn’t have much control over the prices of the commodities it produces. However, it is in charge of production. In the first quarter of 2022, it saw a 15% quarter-on-quarter reduction in iron ore production. Aluminium and copper production were also down quarter-on-quarter.

Macquarie recognises that the current commodity prices are helping Rio Tinto, while copper could be a good growth avenue for the business with the Oyu Tolgoi project.

The post 2 ASX dividend shares to buy this month: experts appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Tuesday
• Rio Tinto share price lifts amid ‘important’ renewable energy step
• 5 things to watch on the ASX 200 on Thursday
• Rio Tinto share price gains lag BHP despite green steel deal
• Own Rio Tinto shares? Here’s why the miner is being sued by this Russian aluminium producer

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 Macquarie Group 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 Bitcoin (CRYPTO: BTC) price is in freefall, down 16% since this time yesterday.

At the time of writing the world’s top crypto by market cap is trading for US$22,187 (AU$31,737). You need to go back to December 2020 to find the crypto trading any lower.

With the latest falls factored in, the Bitcoin price is now down 53% this year and down 68% from its 10 November all-time highs. That’s seen the total market value of the token slide from more than US$1.3 trillion at the peak to US$426 billion today.

Why is the Bitcoin price tumbling?

The Bitcoin price is coming under pressure on two fronts.

The biggest driver looks to be the higher than expected inflation figures released by the United States on Friday.

The world’s largest economy is seeing inflation climb at the fastest rate in four decades. The May figures came in at 8.6%. That’s up from 8.3% in April, dashing hopes that inflation may have peaked. And stoking fears that the US Federal Reserve will pursue aggressive tightening.

The Fed meets this Wednesday (night time for us), and is widely expected to hike rates by another 0.50%. But after the latest inflation data, more analysts are forecasting an outsized 0.75% rate hike.

That’s seen risk assets, like high growth tech shares, come under a new round of selling pressure. The Nasdaq closed down 4.7% yesterday while the S&P/ASX All Technology Index (ASX: XTX) is down 6.7% in morning trade today. (The ASX was closed yesterday for the Queen’s Birthday holiday.)

Cryptos have been trading in line with risk assets all year and the current selloff is no exception. And it’s not just the Bitcoin price dropping hard. Most all of the top cryptos are well into the red today.

What else is pressuring the crypto markets?

Putting additional pressure on the Bitcoin price was news that global crypto lender Celsius Network paused trading over the weekend.

As Bloomberg reports, speculation has been rife that Celsius might not be able to meet the promises it’s made on high yielding returns for some products, which run up to 17%.

Celsius (CRYPTO: CEL) is currently trading for 27 US cents. That’s down 28% over the past 24 hours and down 60% since Friday.

According to Vijay Ayyar, vice president of corporate development Luno:

The Celsius news added fuel to the fire, adding to the uncertainty in the market. There is a lot of pressure on prices as we go into the week of Fed decision coupled with concerns on the protocols offering high-yield products.

And looking ahead, Steven McClurg, co-founder of Valkyrie Investments cautioned that the Bitcoin price and other cryptos could have further to fall.

“The fundamentals to support stabilisation and recovery just aren’t there. Things can and likely will get worse before they get better,” he said.

The post Why is the Bitcoin price crashing 16% today? appeared first on The Motley Fool Australia.

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More reading

• Could cryptos be facing an upcoming wave of institutional selling?
• What crypto winter? It’s always sunny with Solana
• Is Bitcoin still worth buying to diversify your ASX share portfolio?
• How has the ASX-listed Betashares CRYP ETF been performing?
• ‘Wherever there’s smoke there’s probably crypto,’ warns Dogecoin founder

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. 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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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is on course to record a very disappointing decline. The benchmark index is currently down 4.7% to 6,609.6 points.

Here’s what is happening on the ASX 200 today:

ASX 200 crashes

The ASX 200 index is crashing on Tuesday following a selloff on Wall Street overnight. This has been sparked by fears that rising rates to combat decades-high inflation in the United States could stifle economic growth or even lead to a recession. The selling has been across the board, with not a single sector currently trading higher today.

Tech shares sold off

The tech sector has been a sea of red on Tuesday with the likes of Block Inc (ASX: SQ2) and Zip Co Ltd (ASX: ZIP) among the worst performers in the sector. Both payments companies have seen their shares trade over 19% lower at lunch. This has led to the S&P/ASX All Technology Index sinking over 7% to a new 52-week low today.

Pro Medicus’ contract renewals

The Pro Medicus Limited (ASX: PME) share price is sinking with the market despite the healthcare technology company making a positive announcement. Pro Medicus revealed that its Visage Imaging business has signed two key contract renewals with a combined value of $47 million. Both deals are transaction based with committed minimums and have been negotiated at a higher per transaction cost than their original contracts.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Uniti Group Ltd (ASX: UWL) share price with a 0.5% gain on no news. The worst performer has been the Zip share price with a 20% decline. Loss-making tech shares have been hit particularly hard during today’s selloff.

The post ASX 200 midday update: Block and Zip crash amid market selloff appeared first on The Motley Fool Australia.

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More reading

• Own Zip shares? CEO warned co-founder 8 months ago, ‘There are some clouds gathering on the horizon’ after Morgan Stanley meeting
• The CBA share price is down 5%. Should investors jump on this?
• Zip share price crashes 21% to new multi-year low
• Why is the Block share price crashing 18% on Tuesday?
• ASX 200 slumps 5% following Wall Street sell-off

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 Block, Inc. and Pro Medicus Ltd. The Motley Fool Australia has positions in and has recommended Block, Inc. and Pro Medicus Ltd. 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 Core Lithium Ltd (ASX: CXO) share price has slipped 7% in early trade on Tuesday and now rests at $1.17 apiece.

In broad market moves, the S&P/ASX 300 Metals and Mining Index (ASX: XMM) has slipped 6% into the red towards its lowest level in over a month.

What’s up with the Core Lithium share price?

Investors have sold Core Lithium shares amid a market-wide selloff on Tuesday where the benchmark had slipped 5% at the open.

Before today’s price action the stock had been lumpy after trading in a set of peaks and troughs for the past 3 months.

The upside case was also made by TMF’s Brendon Lau earlier in June as well, citing several drivers in the investment debate.

However, the Core Lithium share price has managed to stay in the green and secure a 99% gain this year to date, outstripping most other ASX shares.

The ASX lithium basket was hit hard in early June following a note from Goldman Sachs outlining its more downbeat view of the sector.

Since the update, it’s been a wobbly ride for the Core Lithium share price, and shares have again trended south as investors sell off ASX shares en masse today.

With numerous shares hitting 52-week lows – in the double digits – the downward pressure is palpable.

Macquarie had given its vote of approval for ASX lithium shares last week, adding its view on concerns plaguing the lithium debate.

It seems the verdict’s out on what’s next in store for the lithium market in the coming years.

Despite the headwinds, Core Lithium remains up more than 360% for the last 12 months.

The post Core Lithium share price slides 7% amid market-wide rout appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow 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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The Zip Co Ltd (ASX: ZIP) share price has tanked to fresh six-year lows today. But some company insiders may not be surprised by its dramatic fall from grace.

Zip’s CEO and co-founder Larry Diamond was warned eight months ago that there was trouble ahead for the buy now, pay later (BNPL) sector, according to reporting in the Australian Financial Review.

The warning was issued during a meeting at Morgan Stanley. The investment bank believed the BNPL sector was about to be hit by rising interest rates and surging inflation.

Zip’s share price fall won’t surprise some

The prediction looks prescient in today’s environment. Zip shares tumbled 21.42% this morning to 49.5 cents. That’s the lowest the share price has been since 2016.

Diamond reportedly called Zip’s other co-founder in Sydney, Peter Gray, and told him the grim news. He said, “there are some clouds gathering on the horizon”. He also said they needed to shift their thinking from global expansion to self-preservation.

BNPL shares facing multiple challenges

Once a darling ASX share, Zip and its peers are now facing multiple challenges. Central banks around the world, including the Reserve Bank of Australia, are rapidly lifting interest rates and tightening liquidity.

This global trend created four big headaches for ASX BNPL shares in one fell swoop. Rising interest rates mean higher costs of funding for all companies. But it hits BNPL players harder due to their need to fund their interest-free payment offering in a business than generates slim margins.

The second issue is bad debt. As rates rise and the economy inevitably slows, more consumers are at risk of defaulting on payments.

Squeezed from all sides

Meanwhile, even BNPL users in a healthier financial position will likely be tempted to cut back on spending. We are already seeing consumer sentiment take a hit from higher rates and cost of living pressures.

Finally, higher rates are bad news for ASX growth shares. They tend to suffer most as the risk-free rate rises. As we have seen, this derating is most pronounced among ASX tech shares and BNPL shares.

Zip shares aren’t the only ones on the nose

It isn’t only the Zip share price that’s crashed. The Block Inc CDI (ASX: SQ2) share price, Splitit Ltd (ASX: SPT) share price, and Openpay Group Ltd (ASX: OPY) share price have also been pummelled.

The bad news doesn’t end at higher interest rates, either. Growing competition from much larger and better-resourced companies is threatening to overtake these industry pioneers.

National Australia Bank Ltd (ASX: NAB) is the latest ASX big four bank to start offering a BNPL service. Then we have tech giants like Apple Inc (NASDAQ: AAPL) joining the fray.

Last man standing?

The BNPL industry is likely to endure more volatility.

When Afterpay was acquired by Block Inc (NYSE: SQ) in January, Zip became the largest BNPL share on the ASX.

At the time, Zip shares were trading above $3. Today, Zip shares are down 88% year to date.

The post Own Zip shares? CEO warned co-founder 8 months ago, ‘There are some clouds gathering on the horizon’ after Morgan Stanley meeting appeared first on The Motley Fool Australia.

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More reading

• Zip share price crashes 21% to new multi-year low
• Why is the Block share price crashing 18% on Tuesday?
• Wall Street tumbles into bear market. What does that mean for ASX 200 shares?
• These are the 10 most shorted ASX shares
• Waiting to start investing in ASX shares? Today could be a brilliant time to do it

Motley Fool contributor Brendon Lau has positions in Block, Inc. and National Australia Bank Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Block, Inc., and ZIPCOLTD FPO. 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 Block, Inc. The Motley Fool Australia has recommended 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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