A month in markets: October 2021

October was a wild rollercoaster for the market. A steady start quickly turned to high rises and dips as bullish sentiment grew stronger in anticipation of the holiday season. The bond market crashed, and with rising yields investors are expecting an interest rate hike to come sooner rather than later.

Mixed metals

Base metals received an inflationary price boost. IGO (ASX:IGO) ran green through the month – nickel, copper and zinc are IGO’s specialty, whose prices are rising in tandem with inflationary concerns. IGO could see a record valuation soon if the run continues through the winter of the northern hemisphere. Oz Minerals (ASX:OZL) also gained modestly, while iron – Fortescue (ASX:FMG) a prime example – had to roll with the punches.

Gloves off as pandemic-led bubbles burst

Analysts downgraded personal protective equipment provider Ansell (ASX:ANN), which triggered a sell-off. The COVID-19 pandemic saw PPE shortages worldwide, and thus companies like Ansell saw their share prices skyrocket. However, October saw a fundamental shift in the global recovery effort, with vaccination rates increasing rapidly and supply catching up to demand. Because of this, profits and margins in companies that saw massive growth due to pandemic conditions have started to fall, with Ansell hitting new 52-week lows.

Redbubble (ASX:RBL) would learn this all too soon as they suffered a similar fate to Ansell later that week. What goes up must come down – online retailers that saw a boom during the pandemic lockdowns are being set up for a harsh correction as vaccination targets are reached, lockdowns end and people start to spend less time online. The drop in mask sales made the bulk of the lost revenue for Redbubble. However, the company is still trading 200% above its pre-Covid high.

Milking market sentiment

A2 Milk (ASX:A2M) began to rise again as their Q1 activity report announced a doubling of revenue compared to last quarter’s performance. The opening of international channels contributed to the company’s growth, particularly in the case of China, where infant formulas from international brands are consistently in high demand.

As October pressed on, the ASX performed stronger and took the lead from the US in mid-October. Tech stocks maintained their steady rise as the economy began to warm up, preparing for a launch. There was a bullish sentiment among investors when unemployment rates for the previous month were released, which was below expectations. Investors gained confidence but were still anxious to see the data for October to calculate economic recovery.

Netwealth Group (ASX:NWL), a superannuation and wealth management company, rose rapidly to nearly $18 a share after the stock dropped at the beginning of the month. Netwealth recorded a $4 billion inflow of funds under administration, which set a company record. Another superannuation platform, HUB24 (ASX:HUB), brought in $3 billion and gained a rapid rise.

Significant dips from blue-chip banking stocks such as Commonwealth Bank (ASX:CBA), Westpac (ASX:WBC), ANZ (ASX:ANZ) and Bank of Queensland (ASX:BOQ) saw investors quickly buying up the welcome discounts.

Double Dutch

BHP proposed the unification of its dual-listed company structure. The two parent companies are BHP Group Limited (ASX:BHP), incorporated in Australia and BHP Group PLC (LSE:BHPL) in the United Kingdom. The unification will combine the two as one company incorporated in Australia with their primary listing on the ASX and other listings on the LSE, JSE and NYSE.

Fans of the dirty bird in the Netherlands will be excited to hear that Collins Foods (ASX:CKF) is currently expanding its operations within the country. Collins Foods, which operates KFC franchised in Australia and the Netherlands, has penned a deal to take control of all KFC operations there.

Crown Resorts (ASX:CWN) shareholders breathed a sigh of relief after the announcement that Crown Casino in Melbourne was allowed to continue operation for at least the next two years. However, the casino will have several regulatory hoops to jump through if it continues rolling dice. Crown Resorts dropped over 50% when inquiries were announced earlier in the year. Star Group (ASX:SGR) also tanked 30% due to the inquiry.

Openmarkets september movers and shakers.

Major M&As in October

HomeCo Daily Needs REIT (ASX:HDN) announced a multi-billion dollar merger with Aventus (ASX:AVN), resulting in a bump in value. Shareholders will now receive 2.2 shares of HDN for every share of Aventus they hold, as well as shares in Home Consortium (ASX:HMC), the parent company.

Telstra (ASX:TLS) purchased Digicel Pacific, the largest telecommunications company in the South Pacific. The purchase was met with wide support from investors and the Australian government, preferring the company to be in Australian hands given its operating area.

The Australian Brazilian meat processing company JBS fought with Twiggy Forrest over Huon Aquaculture (ASX:HUO). Twiggy was keen to buy more shares and increase his stake in the Tasmanian Salmon producer. Huon has ultimately lodged a bid for the merger with JBS to the ASX.

Twiggy Forrest is also in a bidding war with BHP over the Canadian mining company Noront Resources (TSXV:NOT). The company mines electric battery ingredients such as nickel and lithium.

JUDO bank (ASX:JDO) had a successful IPO at the end of October and soared up 5% on their second day listed on the ASX. Judo is the first Australian bank in over two decades to have a full banking license during their IPO.

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