November 30, 2022

ASX As Of Late – Supermarkets Outperform As All Sectors Stoop Once More

As All Sectors Stoop Once More

After Friday’s miracle late-session comeback, Australian stocks resumed their beatdown today as the ASX lost almost a tenth of its value in just one session.

Today’s slump was deepened by some drastic Federal Reserve rate cuts before Wall Street reopens from its weekend break. On Friday, the Dow Jones rallied an impressive 1985 points — its most since the Global Financial Crisis — but things aren’t looking as promising today.

About Today:

ASX Today: Supermarkets outperform as all sectors slump again

About Supermarkets
A supermarket is self-service shop offering a wide variety of food, beverages and household products, organized into sections. It is larger and has a wider selection than earlier grocery stores, but is smaller and more limited in the range of merchandise than a hypermarket or big-box market.

The supermarket typically has aisles for meat, fresh produce, dairy, and baked goods. Shelf space is also reserved for canned and packaged goods and for various non-food items such as kitchenware, household cleaners, pharmacy products and pet supplies.

Some supermarkets also sell other household products that are consumed regularly, such as alcohol (where permitted), medicine, and clothes, and some sell a much wider range of non-food products: DVDs, sporting equipment, board games, and seasonal items (e.g., Christmas wrapping paper in December).

A larger full-service supermarket combined with a department store is sometimes known as a hypermarket. Other services may include those of banks, cafés, childcare centres/creches, insurance (and other financial services), Mobile Phone services, photo processing, video rentals, pharmacies or petrol stations. If the eatery in a supermarket is substantial enough, the facility may be called a “grocerant”, a blend of “grocery” and “restaurant”.

The traditional supermarket occupies a large amount of floor space, usually on a single level. It is usually situated near a residential area in order to be convenient to consumers. The basic appeal is the availability of a broad selection of goods under a single roof, at relatively low prices.

Other advantages include ease of parking and frequently the convenience of shopping hours that extend into the evening or even 24 hours of the day. Supermarkets usually allocate large budgets to advertising, typically through newspapers.

They also present elaborate in-shop displays of products. Supermarkets typically are chain stores, supplied by the distribution centers of their parent companies thus increasing opportunities for economies of scale. Supermarkets usually offer products at relatively low prices by using their buying power to buy goods from manufacturers at lower prices than smaller stores can.

They also minimise financing costs by paying for goods at least 30 days after receipt and some extract credit terms of 90 days or more from vendors. Certain products (typically staple foods such as bread, milk and sugar) are very occasionally sold as loss leaders so as to attract shoppers to their store.

Supermarkets make up for their low margins by a high volume of sales, and with of higher-margin items bought by the attracted shoppers. Self-service with shopping carts (trolleys) or baskets reduces labor cost, and many supermarket chains are attempting further reduction by shifting to self-service check-out.

The Fed slashed its target interest rate by 100 basis points to near zero today. The move is designed to prevent the severe market disruptions last time such a drastic cut was made.

Further, the central US bank said it will buy up US$700 billion in government bonds to mitigate as much damage as possible. However, the immediate effect of the drastic action was widespread panic-selling as US futures slumped.

 

ASX Today: Supermarkets outperform as all sectors slump again

On the Aussie market, our benchmark ASX 200 index fell 9.7 per cent to 5002 points today.

The market was heavily weighed down by the finance sector which generally benefits from high interest rates. With the threat of more rate cuts on the horizon, the sector declined 11.1 per cent.

Our big four banks untwisted Friday’s comeback gains and then some. ANZ was the heaviest hitter, declining double digits at 12.5 per cent. Westpac lost 11.8 per cent, NAB 12.44 per cent, and Commonwealth Bank 10.01 per cent. Investment banker Macquarie Group fell 12 per cent.

A fresh decline in an already-suffering Brent crude price sent energy stocks tumbling. Woodside lost 14.35 per cent, Origin Energy 10.19 per cent, and Santos 17.69 per cent. Oil Search took the biggest blow and lost 19.83 per cent today.

Our big miners couldn’t escape the barrage either, with gold producers losing their “safe-haven” status and leading today’s losses. Newcrest lost 13.19 per cent, Northern Star Resources 17.13 per cent, and Evolution Mining 11.35 per cent.

Meanwhile, our iron ore producers didn’t fare much better. BHP and Rio Tinto, who have their toes in the oil pool, declined 5.69 per cent and 4.23 per cent, respectively.

Meanwhile, Fortescue Metals once more outperformed the sector with a 2.82 per cent loss. Moreover, with Fortescue continuing to fight off the worst of the sector’s losses, the company has officially overtaken Rio Tinto as the second biggest stock by market cap in the materials sector. When the ASX closed today, Fortescue had a $30.6 billion market cap compared to Rio’s $30.1 billion.

Despite the heavy losses across the board, consumer staples stocks kept their declines fairly muted. As terrified Australians flock to supermarket shelves to stockpile goods, increased buying activity means these retailers could be the saving grace of our stock market.

While the A2 Milk Company, Coca Cola Amatil and Treasury Wine Estates still dragged the sector down, our supermarket giants shook off the losses. Coles lost just 1.06 per cent and Woolworths 1.97 per cent. Metcash, which owns IGA, lost 0.82 per cent.

Over to the east, Asian markets were having a similarly red day today. When the ASX closed shop, the Asia Dow was down by 2.26 per cent and the Hang Seng by 2.65 per cent. Japan’s Nikkei 225 kept the losses to a minimum, however, down just 0.34 per cent.

The Australian dollar slumped again over the weekend. Currently, one dollar buys 61.69 US cents, 49.97 pence, and 10.08 South African Rand.

On a where winners were hard to find, small-cap biotech company TBG Diagnostics (ASX:TDL) surged a whopping 438 per cent. More interestingly, however, is the fact that the company has released no news since late February. While a TBG subsidiary was selected by Chinese authorities as a coronavirus testing lab on February 27, the hefty jump in shares today suggests that perhaps somebody knows something the rest of us don’t. Shares in TBG closed at a 30-month high of 14 cents each.

Meanwhile, shareholders in embattled fintech company iSignthis (ASX:ISX) are fearing a de-listing notice after an update in its Federal Court case against the ASX today. The share market operator said iSignthis applied for an injunction to stop the ASX’s decision regarding ISX forced trading suspension from going public today.

The injunction hearing is set for April 9. Shares in iSignthis were locked up at $1.07 in early October and the company has been fighting the ASX to get them back up for trade ever since. ISX took the matter to the Federal Court in early December 2019.

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