The Match Out: ASX down, still produces the best week in 2 years, Smokey Joe lights a fire under weed stocks
The market felt a bit like the weather in Sydney today with a soggy end to the week. The weakness came on the back of comments from the Fed and the ECB staying committed to crushing inflation, though the ECB was a little more dovish than previous comments. Energy was the standout today as oil traded higher - OPEC flagging production cuts earlier in the week despite the market remaining tight triggering a rally in the oil price.
- The ASX 200 finished down -54pts/ -0.80% at 6762
- The Energy sector was best on ground (+0.95%) and the only sector to close higher on the day.
- Property (-2%) and IT (-1.77%) the weakest links.
- Early last week, our Lead Portfolio Manager James Gerrish sat down with Ally Selby from Livewire Markets and IML Portfolio Manager Lucas Goode to talk tech. Two very opposed views around the sector with James backing recent calls made to buy the sector as bond yields peak, while Lucas sticks to IML’s deep value approach - Watch the episode here
- Despite the soft Friday, the local index posted its best week since the COVID rally 2 years ago, gaining ~4.5%
- Weed stocks rallied in the US overnight (& today in Oz) after Joe Biden - ordered a wide-ranging review of the drug’s treatment by law enforcement authorities.
- GQG Partners (ASX: GQG) -3.13% fell after the fundie announced FUM flows for September, seeing a fall of $US8.2b. Weak markets weighed, however, they also noted a $US1.5b outflow from UK accounts as institutions increased liquidity with higher volatility.
- Karoon Energy (ASX: KAR) +9.18%, the oil & gas company caught a bid after the Brazilian Government agreed to reduce royalties on production. The move also signifies a push for more production out of Brazil which could further benefit Karoon’s assets.
- Allkem (ASX: AKE) +2.72%, the lithium stock rallied after announcing a debt funding deal with IFC for their Sal de Vida project in Argentina. While the company said it could self-fund the remainder of the build, the $US200m will help free up more capital and brings on a significant investor, validating Allkem’s operation
- Gold was flat in Asia having fallen overnight – sitting at ~US$1711.
- Asian stocks were lower Hong Kong down 1.3% while Japan was -0.70%
- US Futures are down, around -0.20%
ASX 200 Chart
Cannabis stocks rallied in the US overnight (& today in Oz) after Joe Biden ordered a wide-ranging review of the drug’s treatment by law enforcement authorities. If the review results in marijuana’s removal from the US list of the most dangerous drugs, it would impact associated businesses in the US very favourably i.e. lower taxes, access to capital etc. Biden also pardoned thousands of Americans convicted for possession of the drug highlighting his stance around the drug.
Stocks on the ASX exposed to this theme include…Creso Pharma (ASX: CPH) +26%, Cann Group (ASX: CAN) +13%, Incannex (ASX: IHL) +12% & Althea Group (ASX: AGH) +16% - all had big moves today. Stocks in the US that are larger, more mature businesses include Aurora Cannabis (NASDAQ: ACB), Tilray Brands (NASDAQ: TLRY), Cronos Group (NASDAQ: CRON), SNDL (NASDAQ: SNDL). It seems like momentum for reform is building, most of the stocks have had a tough 12 months or so, and while it’s clearly a high-risk/volatile space no doubt interest is building in the monetisation of potentially big industry.
Sectors This Week – Source Bloomberg
Stocks This Week – Source Bloomberg
- Appen Cut to Underweight at Wilsons; PT A$2.41
- SCA Property Raised to Buy at Moelis & Company; PT A$2.95
- Neometals Rated New Outperform at RBC; PT A$1.83
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James is Portfolio Manager & Primary Author at Market Matters, a daily investment report with over 2500 subscribers that offers real market insight. He is also Senior Portfolio Manager within Shaw and Partners heading up a team that manages...
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