Investors give thanks for a booming November – weekly review – Small Caps

November 2020 Investors ASXNovember 2020 Investors ASX

It’s called Thanksgiving for a reason and even here in Australia we should be grateful that the share market has produced a nice fat turkey of a month, albeit with a slight retreat for the second last trading day of the month.

The ASX 200 dropped 0.5% to close at 6601.1 points on Friday after a weaker day on Thursday but even that was not enough to erase the gains for what promises to be a record November rise of 11.4%, depending, of course, on Monday’s trade.

That would make it the best November trading performance for more than 30 years.

A Thanksgiving holiday lull with the US market closed for the holiday and escalating trade tensions with China were just enough to soften the market a bit and pull it back further from its nine-month peak.

Heavyweights slide back a little but gold and property stronger

Property stocks and the beaten down gold miners were the positive highlight of Friday trade but their rises were nowhere enough to overcome some of the losses from heavy weights including all four big banks, the two big miners in BHP (ASX: BHP), Rio Tinto (ASX: RIO) and blood products giant CSL (ASX: CSL) which all slumped into the weekend.

The reasons behind the fantastic performance in November is not too hard to find with the range of different COVID-19 vaccines, a supportive Reserve Bank, large amounts of stimulus payments and a US election result that pleased investors was more than enough to ensure the best monthly performance for the year.

Many market traders think the pullback could even be healthy for the longer-term market performance considering the strength of the market run so far.

Chinese tariffs on Australian disappointing

If there was a real downside for Australia it was the news that China will be imposing tariffs of up to $200 million on Australian wine exports, effectively making many exports uneconomic.

While the move was slammed by the Australian Government, investors were extremely wary about the outcome, marking shares in Treasury Wine Estates (ASX: TWE) down an alarming 11.3% to $9.23 before they were placed into a trading halt.

Dairy merger gets the thumbs up

It wasn’t all bad news though, with investors loving the idea of the $534 million merger between Bega Cheese (ASX: BGA) and Lion Dairy and Drinks, with Bega shares rising as much as 11.8% to $5.57 in early trade after it had successfully completed the first steps in raising its $401 million capital raising for the purchase.

The company has now completed its institutional placement and entitlement offer to help fund the acquisition, raising $284 million.

A retail share offer will now open next Wednesday.

Small cap stock action

The Small Ords index rose 1.55% this week to close at 3,034.8 points.

November 2020 chart ASX 200 XJO small ords chartNovember 2020 chart ASX 200 XJO small ords chart
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Fatfish Group (ASX: FFG)

Technology venture firm Fatfish Group has announced it will jump on the buy now, pay later wagon and launch a payments instalment service for south-east Asia’s corporate sector.

The business model will be managed through investee company Smartfunding and will issue loans of up to $1 million for the purchase of equipment and services, to be repaid with interest over a maximum 24 months.

The service will launch in Singapore before being rolled out throughout South East Asia and Fatfish expects it to be well received.

Kingston Resources (ASX: KSN)

Kingston Resources’ historic Misima gold mine in Papua New Guinea was the subject of a much-anticipated pre-feasibility study released this week, which highlighted the project’s compelling economics and low capital intensity.

The study showed Kingston could potentially resurrect the mine to produce 130,000oz gold per year over a 17 year life.

The company resumed an 8,000m infill and extensional drilling program at Misima last month to target resource conversion and test high-grade near-surface mineralisation.

Nova Minerals (ASX: NVA)

Alaska-focused gold explorer Nova Minerals said funds from a recently-completed $21 million share placement will be used to fast-track exploration and development of the Estelle project in the prolific Tintina gold belt.

Work will span into the new year and include drilling of Korbel Main and testing of targets at Block B south-eastern extension, Blocks C and D, Cathedral, You Beauty, Isabella and Sweet Jenny.

On Wednesday, Nova announced that assays from Korbel had confirmed a “wide swathe” of continuous mineralisation which could expand the deposit’s footprint by up to 2,000m (or 30%).

Golden Deeps (ASX: GED)

Golden Deeps received notice from New South Wales Department of Mining, Exploration and Geoscience that it intended to grant an exploration licence for the historic Tuckers Hill project in New South Wales.

The company has wasted no time mobilising a team of geologists to site for mapping and rock chip sampling work prior to drilling.

Tuckers Hill has had little modern exploration, with previous records showing about 1,900t of ore was mined at the project during the early 20th century at an average grade of 38g/t gold.

Golden Deeps plans to begin a drilling program at the project “as soon as possible”.

Lake Resources (ASX: LKE)

Samples of Lake Resources’ 99.97% high purity lithium carbonate from its Kachi project in Argentina have been sent to Novonix for testing.

The samples will be used with commercial cathode precursor materials to form a NMC622 cathode, which will then be processed into NMC622 lithium-ion batteries.

Lake said it was confident Novonix’s testing will prove its lithium carbonate has the necessary specifications required by tier one battery markets.

Incannex Healthcare (ASX: IHL)

An in vivo study has shown the anti-inflammatory properties of Incannex Healthcare’s lead drug IHL-675A make it an ideal candidate for the treatment of patients with sepsis-associated acute respiratory distress syndrome, which is the leading cause of death in COVID-19 patients.

It confirms earlier in vitro data that showed IHL-675A’s components cannabidiol and hydroxychloroquine have a stronger anti-inflammatory response than CBD alone.

Incannex is now chasing a meeting with the US Food and Drug Administration to discuss the fastest pathway for registration of the drug and its use during emergency COVID-19 cases.

Anax Metals (ASX: ANX)

Formerly Aurora Minerals, Anax Metals has hit massive sulphides during drilling at its Whim Creek copper-zinc project in WA.

“Significant” mineralisation was intercepted at the Mons Cupri target – with mineralisation also shallow.

Drilling results will underpin a prefeasibility study.

Anax is earning up to 80% of Whim Creek from VentureX Resources.

Race Oncology (ASX: RAC)

Following “impressive” preclinical results using its bisantrene drug for treating breast cancer, Race Oncology will begin planning clinical trials with an update on these to be released in the “near future”.

Collaborative pre-clinical research was carried out with the University of Newcastle and found when bisantrene was combined with existing breast cancer drugs, it was able to kill some cancer subtypes currently resistant to therapy with “significantly reduced” side effects.

“The findings are very encouraging as they show the clinical potential for combining bisantrene with standard of care for breast cancer patients,” Hunter Medical Research Institute associate professor Nikki Verrills (who was leading the UNSW collaborative research) said.

The week ahead

With summer now upon us the changing season is marked by a large number of statistical releases.

The biggest one to watch out for is the national accounts on Wednesday, which will show how the economy performed in the September quarter, with the economy expected to grow about 1.8% after recovering from the worst of the COVID-19 pandemic.

Other things to look out for include business indicators, home values, the Reserve Bank Board meeting, building approvals, the balance of payments, the value of home loans, and international and retail trade figures.

The Reserve Bank Governor, Dr Philip Lowe, will also be appearing before the House of Representatives Standing Committee on Economics.

Internationally, the main releases include China’s manufacturing and services numbers, US home sales and US manufacturing, payroll and international trade numbers.

US employment figures are expected to show the beginnings of a double dip in the jobs market.

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