After months of waffling over the longer term impact of the COVID 19 Pandemic on global economies, market action beginning with the trading week of 25 October appears to indicate an acceptance of the pandemic as the preeminent issue troubling investors.
In the US, the twin factors of rising coronavirus cases and disappearing stimulus relief sent markets there plunging, with the ASX following suit. Rising cases in Europe added to the wall of worry.
Perhaps the strongest indicator was the immediate response of US investors to the 29 October release of better than expected third quarter GDP of +33.1%. Instead of welcoming the news, investors drove down the Dow Jones Industrial Average (DJIA) 200 points in the first half hour of trading, rallying later in the day to close up led by big name tech companies Apple, Alphabet, Amazon, and Facebook. The US market rally was short lived, with the DJIA closing down 157 points on Friday, marking the worst weekly and monthly performance since March.
It would appear then US investors are focusing on the alarming rise of COVID 19 cases in their own country and in Europe and the impact of the massive amount of stimulus poured into the US economy by both the US Federal Reserve and the US congress.
The few remaining stimulus measures in the US will fade away at the end of the year with the prospects for additional stimulus uncertain at best.
The ASX has not been spared the pain, despite the fact Australia presents a virtual mirror image of what is going on in the much of the rest of the world. We are not immune to the backlash against mask wearing and lockdown restrictions, yet those measures appear to have contained recent spikes in COVID 19 cases. Restrictions in Victoria drove down the new cases numbers of 700 in a single day a few short weeks ago to 0 cases as of 27 October, ushering in the easing of restrictions there.
The ASX had its worst week since April, ignoring the positive COVID news and the growing number of economists offering their view our recession is over. Some commentators in both the US and Australia cite the uncertain outcome of the upcoming US elections as contributing to the declines.
A deputy governor at the RBA suggests the Australian recession might already be over. The weekly ANZ-Roy Morgan consumer confidence rating rose to an 8 month high. The reality Aussie investors face is the situation in the US and in Europe is likely to continue throwing cold water on the improving situation here.
While the current status suggests tailwinds for stocks working on COVID related issues — such as testing, treatments, vaccines, personal protection equipment, and hygiene products — not all ASX companies showing gains in past months continue to reward their shareholders at prior levels.
There are two posting triple digit gains over the last three months – Harris Technology Group (HT8) and AnteoTech (ADO). From the asx.com.au website:
There is one other stock up triple digits year to date – Reece Pharmaceuticals (RCE).
Harris Technology Group has a long history as an online marketplace provider of IT/CE (information technology/capital equipment) products, initially targeting small and medium sized businesses and now expanding into the consumer market. Once a part of Office Works/Wesfarmers and Coles/Myers Group, Harris no longer operates any brick and mortar locations.
Harris products are now available on Amazon Australia and was recently recognised as the top ranked marketplace seller on Amazon Australia by independent US market research firm Marketplace Pulse, based on feedback from purchasing customers.
In April of this year Harris announced the launch of a Pro-Hygiene Division, with a wide variety of personal protective equipment as well as personal hygiene products. I
Harris face masks, hand sanitisers, alcohol wipes, and its foot operated hand sanitiser dispenser should remain in demand once the pandemic ends as it is likely consumers and companies will not forget the need for protection and sanitation.
The company provided a quarterly update on 29 October, announcing solid financial results. Revenues increased quarter over quarter from $2 million in Q3 of 2019 to $9.8 million, while profit rebounded from a 2019 loss of $110 thousand dollars to a profit of $835 thousand dollars. Harris plans to expand its product offering to kitchenware and homeware products, available initially on Amazon. HT8 shares closed the week at $0.14, two cents lower than its 52 week high and 13 cents higher than the 52 week low of $0.01.
AnteoTech Limited (ADO) is another company expanding its technology for use in COVID 19 needs. The company has “globally patented surface management technologies” for applications in the life sciences and in the battery subsector within the energy sector.
AnteoCoat™ is a high-tech process for combining silicon particles with other composite particles to increase the silicon content and reduce the cost of lithium-ion batteries. The company has filed for registration for two new lithium-ion related battery offerings – AnteoX and AnteoLink.
AnteoBind™ is another complicated high-tech process for the life sciences sector, focusing on applications for point of care (POC) diagnostic testing. Following the announcement earlier in the year of a collaboration agreement to use AnteoBind™ in combination with products from Merck Inc, the ADO share price got a boost in mid-July when AnteoTech entered the race for better COVID 19 diagnostic tests.
AnteoTech announced two internal “proof of concept” — tests or trials demonstrating feasibility – for rapid, point of care COVID 19 diagnostic tests. The tests produce results without off site lab analysis in 15 minutes, with AnteoTech owning the intellectual property (IP) for test materials and Australia based biomedical diagnostic testing provider Axxin owning the IP for the reader platform.
The company estimated 5 to 8 months to complete further trials and get regulatory approval both here in Australia and in the United States. Investors loved the 8 September announcement of the completion of the design verification stage of development earlier than forecast, with clinical trials to follow.
On 21 October investors were unimpressed with the release of the first positive results from a Spanish study conducted at the research facilities of Operon, a diagnostic testing researcher and manufacturer. The Operon study validated the internal findings from AnteoTech’s internal research. The announcement did not provide any updates on the completion time frame, saying only that investors could “expect further announcements on validation studies from Operon and other collaborators as they are completed.”
Reece Pharmaceuticals (RCE)
One of the unintended consequences of the explosion in the development of antibiotics was the emergence of “superbugs” that have developed resistance to antibiotic treatments. Recce is working on a new class of synthetic antibiotics to combat not only existing superbugs, but also emerging viruses.
Recce’s entrance into the COVID 19 battle came about in early July when two of its treatment compounds — RECCE® 327 and RECCE® 529 – were chosen by the CSIRO (Commonwealth Scientific and Industrial Research) in conjunction with the University of Melbourne to investigate their efficacy against SARS-CoV-2 (the virus underlying COVID 19.)
Later in the month, the share price jumped 31% into the close following the announcement US company — Path BioAnalytics – would also investigate the efficacy of RECCE 327 and RECCE 529 against SARS-CoV-2 at a prominent research university in the US. Path BioAnalytics planned to conduct an “ex vivo” – outside an animal or human organism — where the virus would first be implanted in an “organoid (artificial mass of cells mimicking an organ) and then treated with the Recce compounds.
Positive results from the Path BioAnalytics study were included in a 21 October investor presentation from Recce, including the next steps of an in-vivo animal study to be completed by the end of the year.
Of the many stocks in markets around the world involved in COVID 19 related issues, these three stocks with their varied offerings minimise a risk that should be obvious to all long term investors – COVID 19 will eventually recede from its current dominance.