Market falls 3.9% for the week as China lockdowns return

China's stock market crashes return in September 2022

A rather dismal week in the Australian stock market came to a bearish close on Friday, shedding 0.3% or 16.9 points to close the ASX 200 at 6828.7 points.

That meant the index had lost a hefty 3.9% for the week and had deliberately ignored a slightly positive lead from Wall Street, with the S&P 500 and Dow closing higher.

It wasn’t too hard to look around and see what was dragging our market down with commodity prices falling sharply after the Chinese government decided to force 20 million people living in Chengdu into lockdown for four days under its COVID-zero approach.

Iron ore stocks weaken

Unsurprisingly, that was harsh medicine for the heavily China-dependent mining sector, which fell 2% with shares in BHP (ASX:BHP) shedding the most points from the index as they fell 77c or 2.1% to $36.74.

The same situation applied to the other major iron ore players as they reacted to an 8% drop in iron ore prices with Rio Tinto (ASX: RIO) and Fortescue Metals (ASX: FMG) both falling. 2.5% with the ex-dividend status. of BHP helping to lead to a weekly mining index drop of 10.3%.

The technology looked good but then fell

The technology sector kicked off Friday as a potential counterpoint, starting the day strong, but after Nasdaq futures began turning south, stock price gains were erased and replaced by declines.

Some of the more notable tech declines included Novonix (ASX:NVX), with shares falling a sharp 8.4% to $2.06, while shares in accounting software company Xero (ASX:XRO) were down a 2.3% and shares of WiseTech (ASX: WTC) fell. 2.1%.

There were a couple of sectors that helped stem the rot, with the biggest being big banks, with the defensive consumer staples sector the only sector to finish in positive territory for the week, up 0.3%.

Big banks recover

Broader financials rallied 0.7% as investors grew more accustomed to declines in new home loans as Commonwealth Bank (ASX: CBA) shares rose 0.9% to $96.95, NAB (ASX: NAB) and Westpac (ASX: WBC) shares were up 0.8%, while ANZ (ASX: ANZ) was the laggard, up 0.5% at $22.75.

One stock that disappointed was AMP (ASX: AMP), which fell 1.7% as it lost management of its $2.7bn AMP Capital Retail Trust after most unit holders opted for external control.

GPT Group (ASX: GPT), believed to be in the box to control AMP’s retail trust, was the best performer in the sector with shares rising 2.7%.

Small cap stock

The Small Ords index tumbled 4.46% this week to close at 2862.6 points.

September 2022 ASX 200 small order chart
ASX 200 vs Small Orders

The small-cap companies that made headlines this week were:

AD1 Holdings (ASX: AD1)

AD1 Holdings reported that group revenue increased 12% for fiscal 2022 to $6 million, which was driven by the company’s heavy investment in technology, product development, and sales and marketing.

“As we move into fiscal 2023, we are well positioned to capitalize on a strong portfolio of contract awards that is currently 200% stronger than the same period last year,” said AD1 CEO Brendan Kavenagh.

The company followed up strong fiscal 2022 performance with the news that it was acquiring Scout Talent Group for $65 million.

Kavenagh said the acquisition was consistent with AD1’s strategy of acquiring growing SaaS companies with rapidly expanding markets.

The Hydration Pharmaceuticals Company (ASX: HPC)

Revenue increased 80% for The Hydration Pharmaceuticals Company (trading as Hydralyte America) for the six months ending in June (first half of fiscal year 2022).

The company achieved US$4.1 million in the period, which was supported by a 95% increase in e-commerce net revenues, which reached US$1.8 million in the period.

Traditional retail net income was also higher, up 69% to $2.3 million.

Over the next six months, Hydralyte America anticipates further online sales growth, fueled by its ongoing marketing investments.

Archer Materials (ASX:AXE)

Archer Materials achieved its long-term development and technology goal of manufacturing biochip device components less than 10 nanometers (nm) in size.

The company has been able to fabricate sub-10nm features in a “reproducible and reliable” way. It has done this by developing a series of advanced lithographic processes on a layer of silicon in a clean room environment.

Archer CEO Dr Mohammad Choucair said reaching this goal was “a significant technical achievement” for the company.

“We are developing semiconductor devices that push the boundaries of modern technology,” he said.

Credit Settlement (ASX: CCR)

Another small cap with a large revenue increase in fiscal 2022 was Credit Clear, which revealed a 95% increase for the period.

Revenue rose to $21.5 million for the period, with $3.1 million coming from a record monthly return in June.

Credit Clear also achieved profitability in May and June and this is expected to continue through fiscal 2023.

Since fiscal 2018, Credit Clear has expanded at a compound annual growth rate of 183%.

The company ended fiscal 2022 with an annual rate of revenue of $37.4 million and with $10.2 million in the bank to fund its continued growth plans.

Limited TZ (ASX: TZL)

Smart locker and software technology company TZ Limited posted its first net profit after tax for fiscal 2022.

The net profit after taxes of $42,896 was considerably higher than the loss of $1.66 million in fiscal year 2021.

Adjusted EBITDA for fiscal 2022 soared to nearly $1.3 million from $137,364 in fiscal 2021.

Supported by higher EBITDA and opening profit was a 31% increase in revenue to $21.4 million.

TZ non-executive chairman Peter Graham said the revenue stream from its software platform made it easier for the company to turn around.


Another small-cap to hit record revenue was RLF AgTech, which reported that its revenue had risen 26% to $10.7 million in fiscal 2022.

RLF AgTech Managing Director and CEO Ken Hancock said the company had set milestones in fiscal 2022 to generate revenue and expand the company internationally.

“We have made a significant investment of time and resources, which will set us up for aggressive strategic expansion as a leading provider of high-value crop nutrition products,” he said.

RLF AgTech closed the period with $8 million in the bank to finance its growth strategy.

next week

Looking ahead to this week, there is one element that absolutely dominates.

On Tuesday, the Reserve Bank Board meets to decide on the latest level of the cash rate that will have wide-ranging ramifications in the housing and equity markets.

If you believe the experts, the key cash rate will rise 50 basis points to 2.35%, a decision that would be followed by a series of interest rate increases on floating rates on home loans, sure as hell. night follows day.

Increases in interest rates offered for deposits will decline more slowly, although that part of the transmission of monetary policy has been lagging for some time.

Rising official interest rates are also bad news for stocks and property because it raises the risk-free rate of return and makes current dividend and rental yields look less generous.

That often prompts a downward adjustment of property and stock prices to adjust yields to a more appropriate level.

If there is a 50 bps rally, it will be the fourth consecutive rally of that size and much of the focus will shift to reading the tea leaves to try and determine how far the RBA will go before deciding that it will take a break from rallying. types.

That speculation will also extend to a speech by RBA Governor Dr. Philip Lowe on “Economic Outlook and Monetary Policy” on Thursday.

Other releases to watch include Wednesday’s national accounts, which are expected to show the Australian economy expanded by around 0.8% in the June quarter.

Other local releases include consumer confidence, new car sales, job announcements and balance of payments.

Internationally, the main things to watch include Chinese inflation and international trade, US consumer credit, and Chinese services.

US markets will also be closed on Monday due to the Labor Day holiday.

This week’s top actions

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