- The ASX 200 closes lower
- Small caps lose around 18% in June
- Control Bionics jumps 60%
June was a grueling month for Australian small caps. Falling again on Thursday as the energy sector weakens, the S&P Emerging Companies (XEC) lost 18% in a horrible month of trading.
A difficult month, certainly, but let’s not dwell on it. The ASX 200 is down 2% today and more than 9% for June.
The markets tried to hide and had good reason to do so with weak leads, falling prices in global commodity markets and, as the country’s largest lender, the Commonwealth Bank said it increase its fixed mortgage rates by 1.4%.
Diana Mousina, Principal Economist and Chief Legend at AMP Investments, says several things are happening here at once that you should be aware of:
- Consumers react to rising interest rates: housing market indicators are slowing (the decline in house prices has accelerated and auction rates are falling), consumer confidence is weakening and retail spending is slowing
- This is the expected reaction of consumers when interest rates rise because the RBA wants to see a slowdown in economic activity to reduce current inflation and inflation expectations.
- The concern is that too many rate hikes are crushing the consumer and causing a significant slowdown in growth. It depends on how high the interest rates are.
- We see the peak in the cash rate around 2.6%, but the risk is that it is higher
UBS agrees, with analysts saying the central bank will cap at 2.6% in November. Crossed fingers.
Meanwhile, some of the greatest minds in the Australian economy are already chewing an imaginary slice of the cake from next Tuesday’s RBA meeting.
These include the ABC’s Kristina Clifton, who said alongside her former colleague Gareth Aird that, based on Governor P Lowe’s recent comments on the ABC, it appears the RBA will opt to raise the cash rate of 25 or 50 basis points and not a mega 75 basis points.
And today vacancies in the three months to May are up 13.8%, Kristina added. A tighter labor market would add weight to the central bank’s case for raising the policy rate.
“Our Australian economic team expects a 50 basis point increase, which would take the cash rate target to 1.35%. They expect the governor to probably refer to the increase in the 2022/23 minimum wage of 5.2% and the RBA’s recent upward revision of its assessment of the short-term inflation outlook as justification for a consecutive 50 basis point rate hike,” said Mrs Clifton.
THE BIGGEST SMALL CAP WINNERS TODAY
(Stocks highlighted in yellow rose after making announcements during the trading day).
Scroll or swipe to view the table. Click on the headers to sort.
Control Bionics (ASX:CBL) is up around 60%. It’s not great journalism, but terrific honesty and self-awareness when I say I don’t know why.
I can tell you that CBL is a medtech with fascinating ambition and pedigree – CEO Rob Wong is an interesting guy. The rebound could be tied to progress in Japan, a market the wearable communications device developer is monitoring.
Basically, CBL is a manufacturer of assistive technology devices that uses electromyography (EMG) – waveform recordings of muscle action potentials – and 3D spatial control to capture minute signals to help connect people with motor function and speech difficulties by giving them control of communication and movement through ‘NeuroNode’ – it’s EMG technology which is actually wireless wearable technology that captures and processes neuroelectric signals via a joystick or a touch screen, for example.
The company was founded in Sydney in 2006 and listed on the stock exchange in 2020 with the help of a number of partners in the United States and abroad, including the late Stephen Hawking, who suffered from amyotrophic lateral sclerosis (ALS), and has developed EMG solutions based on the results of research and development with bioengineering experts, medical universities and hospitals.
THE BIGGEST SMALL CAP LOSERS TODAY
(Stocks highlighted in yellow fell after making announcements during the trading day).
Scroll or swipe to view the table. Click on the headers to sort.
WHAT YOU MAY MISS ON THURSDAY
First of all, the Kaolin Monks of Corella Resources (ASX:CR9) let’s say the company is onto something big, After testing High Purity Alumina (HPA) work on a 25kg composite sample from its Tampu Brilliant White Kaolin deposit came back super pure. We’re talking pure 5N+, which is what the industry refers to as the “five nines” – 99.99957% pure aluminum oxide, to be exact.
This is huge news for Corella, as this level of purity in HPA feedstock is extremely rare, highly sought after for a number of applications, and extremely lucrative. Corella says the news is also fantastic because it is able to remove raw materials of 5N+ and 4N purity using a simplified, inexpensive and more environmentally friendly method. Drilling is expected to start in August.
Barton Gold (ASX:BGD) just made a monster gold sale, pocketing a merry and rubenesque payment of $1,000,000 from ABC Bullion, a Sydney-based precious metals refiner and bullion dealer.
Payment is an upfront deal, with the remainder coming from ABC after final processing at its Gawler operation. Barton says he plans to spend the money on large-scale exploration programs at Southern Hub, which hosts the Tarcoola and Tunkillia gold projects.
And last but not least, as we head into the final minutes of the exercise, The Environmental Group (ASX:EGL) landed $17.8 million-dollar contract for the supply part of the Hastings Technology Metals (ASX:HAS) emission monitoring system at the Yangibana Rare Earths Project in Onslow, Western Australia.
EGL is on track to have its part of the emissions control system in place by the first quarter of 2024, to support the plant’s commissioning date, so that operations can begin without spitting sulfur dioxide. stinky in the air, saving everyone from having to sit inside an ultra-big egg fart all day. Oh, and fart gas isn’t good for the environment at all, so that’s another tick in the Well Done EGL column.
PRE-LOVED TRADING STOPS
Openn Negotiation Limited (ASX: OPN) – Capital R, capital A, Capital I, Capital… raise funds. This will be written “raising”.
Balkan Mining and Minerals Limited (ASX:BMM) – BMM is not BMMed at all, as it has some exciting acquisition news.
Australian Rare Earths Limited (ASX: AR3) – There is an upgrade on the way to the The company’s JORC Compliant Mineral Resources…and who doesn’t love an upgrade?
3D Oil Limited (ASX:TDO) – Incoming news regarding a proposed transaction related to one of the Company’s exploration licenses.
Aquis Entertainment Limited (ASX:AQS) – AQS hit the pause button on the Canberra casino sale after a mysterious stranger arrived at the table and tabled a brilliant new offer. Put it all on Red and see who wins, we count…