22 November 2023
The ASX has jumped around a fair bit since last Tuesday, but it closed out yesterday’s trading session with a healthy 1.4% gain over the past week. The XTX stacked on 4.18% just yesterday, with the technology index moving with heightened volatility as investors begin to question what has been oversold and who could be a takeover target.
Beaten down tech stocks on the ASX are starting to look attractive to hungry private equity funds who are in a market with fewer available deals and increasing leveraged buyout costs. There are companies with serious revenue and strong growth that have been labelled cash burners and viciously sold down, which is where private equity firms see opportunity.
Australia copped it particularly brutally, with ASX-listed tech companies now trading on average at 2.3 times revenue, compared with the 100 largest Nasdaq stocks running a 4.5 times multiple. A rising US dollar makes Aussie cash buyouts more appealing for American funds, and with US$120 billion FUM software private equity firm Thoma Bravo’s 67% premium to the six-month VWAP of Nearmap offer looking set to go through, a wave of deals could follow.
Long-time speculation has finally been confirmed that Westpac is in serious discussions to take over Tyro. A ferocious battle for business banking dominance, the hottest growth area in the sector, is characterising banking.
NAB is still firmly in the lead, but Westpac is determined not to be left behind. Tyro has 64,000 merchants and is expecting to process over $40 billion of transactions during FY23, giving Westpac a big potential client list and a treasure trove of data.
Surging demand for green exposure by environmentally conscious investors has led to Australia’s first carbon credit ETF trading on the ASX (under the ticker XC02). The Vaneck product, which started trading on Thursday, will map the price of carbon from the four major carbon markets around the globe by following the ICE Global Carbon Futures Index, which measures the performance of futures contracts on these exchanges.
A total of $684 billion of carbon credit instruments were traded in CY21 across the EU Emissions Trading Scheme, California’s Western Climate Initiative, the UK Emissions Trading Scheme and the Regional Greenhouse Gas Initiative. Investors are able to create incentives for big polluters to cut emissions by holding carbon credit exposure in their portfolios.
The XJO has rallied in the past few days and is close to passing the 50-day moving average, on its way to test resistance at 6894. The market has been trading sideways in a trading range between the support at 6405 and resistance at 6894 for weeks.
Implied volatility is at 18.26% with an IV rank of 47. A big week of central banks speeches and PMI releases (indicating global economic health) may increase the volatility in the domestic market. Depending on an investor’s directional view, being long a put or a call will benefit from the potential increase in volatility.
John will be joining us this Friday, 21st October at 12pm (AEDT), for The Insider: Meet the Fund Manager webcast, where he will provide insights into investing during an inflationary period and why he has a keen eye on renewables vs fossil fuels. He will also discuss his three favourite stocks, how Lowell is navigating a fluctuating 2022 and why a US recession could be sooner and tougher than people expect. Click here to join.
Past performance is not a reliable indicator of future performance.