24 Stocks on the ASX 200 To Watch This Week [23 Aug 2021]

Henry Fung

Henry is a co-founder of MF & Co. Asset Management with over 15 years of experience as a trader, investor and asset manager. Henry runs the Options Income Strategy and has a free 5-day options income strategy course you can take to learn how to use options to generate income.

August 23, 2021

The winning streak the ASX was on since January came to a halt last week.

The sell-off was triggered by a confluence of factors including mixed results, inflation concerns, a sell-off in mining, a worsening of Australia’s COVID scenario, and Fed-related taper jitters.

About A$50+ billion of value was wiped off the ASX over the week. The ASX200, ASX300, and ASX All Ordinaries ended the week down 2.2%, 2.1%, and 2.2%, respectively.

Last Week in ASX Stocks

This week, the biggest sector loser was the mining sector after iron futures slid to a 2021 low of $130/tonne. The major miners all ended the week substantially in the red.

BHP (ASX:BHP), one of the world’s biggest miners and iron ore producers ended the week down nearly 17% despite record earnings of A$23 billion and a dividend of A$2.76 per share.

The company also announced the merger of its oil and gas assets with Woodside Petroleum (ASX:WPL).

BHP’s major competitors Fortescue Metals (ASX:FMG) and Rio Tinto (ASX:RIO) suffered a similar fate closing lower by 8.82% and 10.91% respectively.

Rare earth and exotic metals producers which had been heavily bid up due to investors’ fervour for cleantech also met with selling after the US Fed’s hint on tapering and growth concerns in China.

Lynas Rare Earths (ASX:LYC), Nickel Mines (ASX:NIC), and Pilbara Minerals (ASX:PLS) ended the week lower by 18.43%, 13%, and 12.9%, respectively.

E-commerce stocks had a good week after Sydney announced a lockdown extension and a rise in virus cases, and some players announced better than expected results.

Redbubble (ASX:RBL) closed the week up nearly 32% after reporting 10X growth in EBITDA.

Rivals Kogan (ASX:KGN) and Temple and Webster (ASX:TPW) ended the week 14.31% and 6.81% higher, respectively.

Oil futures closed lower for six days in a row and have hit levels not seen since May, clouding the outlook for energy companies.

Woodside Petroleum (ASX:WPL), Santos (ASX:STO), and Oil Search (ASX:OSH) ended the week lower by 11.06%, 6.91%, and 6.58%, respectively.

This was despite Woodside’s return to profitability and a dividend of A$0.41 per share, up 14%.

Santos swung into the black with an NPAT of US$354 million, a revenue increase of 22%, and an interim dividend of US$0.055 per share (up 162%).

Sydney Airport (ASX:SYD) ended the week down 1.16% after it reported a net loss of A$97.4 million, nearly twice last year’s loss of A$53.4 million, and suspended dividends. The company also announced that it is open to a higher buy-out offer from the Sydney Aviation Alliance.

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Poultry producer Inghams had a stellar week rallying nearly 6% after it announced that its annual profit had doubled to A$83.3 million. The company also proposed a higher dividend of A$0.165 a share.

TPG Telecom (ASX:TPG) ended the week moderately higher by 1.08% after reporting an NPAT of A$76 million, down 7% YoY, and a 71% jump in revenue to A$2.6 billion.

Property developer Stockland Group (ASX:SGP) ended the week flat after reporting an annual profit of A$1.1 billion compared to a loss of A$21 million last year thanks to a booming real estate market and government incentives on construction. The company announced a dividend of A$0.13 per share, up 25.5%.

This Week in Stocks

Annual earnings reports

Water equipment major Reliance Worldwide (ASX:RWC) is due to report FY21 results on Monday. The market is bullish with a consensus of A$326 million EBITDA, up 30% due to strong housing market conditions across the world.

The market expects EBITDA growth of 43%, 36%, and 28% across the US, EMEA, and APAC in local currency terms, respectively.

Woolworth Group (ASX:WOW), Australia’s largest retailer, is scheduled to report on Thursday. The market was expecting lower sales across the ANZ regions this year on a YoY basis due to stockpiling last year, however, lockdown extensions and a worsening COVID scenario could change that over the rest of the year. The consensus is EBITDA of A$202 million, up 417% YoY.

Fintech (ASX:FTC) and BNPL major Zip Co. (ASX:Z1P) is under the spotlight after Square’s mega acquisition of AfterPay. The company is expected to report on Wednesday. The market expects a net loss between A$143 million and A$ A$180 million.

AfterPay (ASX:APT) is also due to report results this Wednesday. While the company reported solid growth at its last trading update with 102% YoY growth in sales, it is still on the cusp of profitability. Consensus Net Loss After Tax (NLAT) is between A$20 million – A$80 million.

Medical pathology and testing company Sonic Healthcare (ASX:SHL) is scheduled to report on Monday for 2H21. The company is expected to report stellar results due to high volumes of COVID testing, which should more than offset lower business from other services.

Plumbing equipment major Reece (ASX:REH) is slated to report FY21 earnings on Tuesday. The market is bullish due to booming real estate markets driving demand for plumbing and related products. Consensus EBITDA is A$700 million (up 8% YoY) based on strong sales growth in ANZ and the US.

Interim Results

Energy is the flavor of the week with three major oil and energy companies reporting interim results this week.

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Cooper Energy (ASX:COE) will report on Monday, and results are expected to be solid thanks to strong production in the first half. However, the recent downturn in oil could rain on the bulls’ parade.

Karoon Energy (ASX:KAR) is also due on Monday. The company reported stellar production in the first half and natural gas use is increasingly being used to replace thermal coal in grid energy. These results will also be the first to take into account a full-production contribution from the company’s Bauna site, reason enough for the market to be bullish.

Oil Search (ASX:OSH) has been in the news of late due to its recently approved merger with Santos. The company was expected to do very well on a PCP basis thanks to an improving global economy. However, this week’s sell-off in oil might dampen sentiment moving forward.

Fuel retailer Ampol Ltd. (ASX:ALD) is due to report FY21 interim results. The company was showing gradual recovery of business in its trading updates, but the recent resurgence of COVID and ensuing lockdowns/curfews have dampened expectations.

Upcoming listings

On August 24, 2021, Culpeo Minerals will list ordinary fully paid shares of A$0.20 each aggregating A$6 million.

The company is a copper exploration and development company whose interests are focused on Chile, the world’s number one copper producer. The company is concentrating on exploring potential high-grade copper systems in the coastal Cordillera region of Chile.

Also on August 24, Kuniko Limited will list ordinary fully paid shares of A$0.20 each aggregating A$7.89 million.

This Norway-located company will mine for cobalt, nickel, and copper, the three fundamental metals for electromobility, using carbon-neutral processes and natural energy.

On August 25, Clarity Pharma will list ordinary fully paid shares of A$1.40 each aggregating A$92 million. It is a clinical-stage radiopharmaceutical company developing next-generation theranostic (therapy and imaging) products, based on its platform SAR Technology.

Economic News and Market Outlook

The market did not receive well the news of Sydney’s lockdown being extended by 1 month and a rise in virus cases in NSW and Queensland. This potentially will hurt Australia’s already lowered growth forecast of 4%.

Australias biggest export, iron ore, is suffering a sell-off after a monster rally since January. Iron ore futures are down more than 40% from their May high of $233/ton.

China, one of its iron-ore’s largest customers, has its own COVID issues and is deliberately lowering steel production, citing climate concerns. China’s steel production in July was down 8.4% YoY.

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The current trade war between the two countries complicates issues further. The Chinese Iron and Steel Association recently asked all producers to curb ore imports to protect domestic miners.

Several Australian companies with supply chains dependent on the Ningbo Port in China will be affected following the port’s recent closure due to COVID. This could further delay sales and derail margins for these companies.

The minutes from the US Fed meeting spooked markets last week and induced a global sell-off after the Fed disclosed intentions of tapering later in the year, implying that it would effectively lower government stimulus to the economy. However, the Fed clarified that tapering does not necessarily mean an increase in interest rates.

The Australian July jobs report was positive with over 2,000 jobs added. The report concluded that the unemployment rate had fallen to 4.6% from 4.9%. Unfortunately, the recent spike in lockdowns and curfews might negate this progress.

In light of the worsening COVID scenario, risks of a delay in tapering by the RBA, and troubles in China, the Australian 10 year Treasury bond spread widened to 16 points, thus showing a negative outlook on the economy.

Investors keenly await the Jackson Hole Economic Symposium which is scheduled for this Thursday in the US. Investors expect the event to shed some more light on the Fed’s tapering plans for later this year.

Australian Retail sales data is due on Wednesday.

This report will be a key indicator for investors regarding the impact of this round of lockdowns/curfews on retail and provide a gauge of consumer sentiment.

Forex Outlook

As mentioned above, the trio of COVID, troubles in China, and forced extended stimulus by the RBA are hurting the Australian Dollar against other currencies. If lockdowns in Australia are extended into the forthcoming quarter, until more people are vaccinated, the country could witness a repeat of last year’s recession.

Meanwhile, Australia’s issues with China, either due to COVID or politics, have pushed the AUD/CNY cross rate to 4.6435, its lowest since February.

To exacerbate the AUD’s woes, the US Fed’s minutes signalled a significantly stronger economy relative to Australia. As a result, the AUD/USD pair is currently at 0.71, its lowest level since November of last year.

Last week, the RBNZ put off plans to hike interest rates after new virus cases emerged. However, the central bank is still likely to raise rates before the end of the year, given the country’s “red-hot” economy and inflation concerns. Unsurprisingly, the AUD/NZD pair closed at 1.0435, its lowest level since August 2020.

Are you still looking for the best stocks to buy in 2021? We’ve put together a free report on 5 stocks that we think are the best buys on the ASX right now. Download it instantly here.

This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.

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