Market Wraps

Evening Wrap: ASX 200 rallies, Woodside bounces 4.8%, Liontown bid brings life back to lithium stocks

Tue 28 Mar 23, 5:35pm (AEST)

 The S&P/ASX 200 closed 72 points higher, up 1.04%.

Lithium stocks green across the board after Liontown received an unsolicited $2.50 bid from Albemarle, energy stocks bounce after oil prices rally 5% overnight, Australian retail sales level off in February as shoppers reign in discretionary spending, trades are piling into bullish gold bets and a few Macquarie notes of interest.

Let's dive in.


Today in Review

Tue 28 Mar 23, 4:32pm (AEST)

Name Value % Chg
Major Indices
ASX 200 7,034.1 +1.04%
All Ords 7,219.4 +1.06%
Small Ords 2,768.2 +2.19%
All Tech 2,161.9 +0.48%
Emerging Companies 2,056.9 +1.17%
Currency
AUD/USD 0.669 +0.60%
US Futures
S&P 500 4,011.75 +0.11%
Dow Jones 32,678.0 +0.14%
Nasdaq 12,799.75 +0.09%
Name Value % Chg
Sector
Energy 10,377.4 +4.14%
Materials 17,678.9 +2.20%
Financials 6,036.2 +1.11%
Consumer Discretionary 2,964.0 +0.46%
Real Estate 2,996.9 +0.44%
Consumer Staples 13,259.4 +0.35%
Utilities 8,251.2 +0.25%
Communication Services 1,498.3 +0.02%
Industrials 6,525.0 -0.03%
Information Technology 1,470.0 -0.61%
Health Care 42,101.0 -0.94%

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ASX 200 Session Chart

ASX 200 intraday
ASX 200 rallies in the first hour of trade and closes a little off session highs (Source: Market Index)

Markets

A pretty positive session led by Woodside, banks and a bunch of lithium stocks. A few more insights below.

  • Energy stocks rallied after oil prices surged 5.3% overnight

  • Materials outperformed thanks to a broad-based rally among lithium stocks, which was triggered by an unsolicited takeover offer for Liontown (+56%)

  • Financials were generally higher amid constructive bank sector headlines in the US, whereby First Citizens Bank acquired the failed SVB

Economy

Australian retail sales rose 0.2% month-on-month in February after a 1.8% rise in January.

  • Ben Dorber, ABS head of retail statistics, said retail sales rose modestly in February and appear to have leveled out after a period of increased volatility over November, December and January.

  • “On average, retail spending has been flat through the end of 2022 and to begin the new year.”

  • Spending in food-related industries has continued to grow modestly in February while non-food industries continued to reflect a pullback in consumer discretionary spending 


Latest news


Market Insights

Albemarle's bid revives lithium stocks

Albemarle has knocked on Liontown's door for a third time in four months with an unsolicited, non-binding offer of $2.50 per share or a 64% premium to the stock's last close.

You can find my piece about the takeover as well as observations about lithium shorts, M&A and rejecting the offer here.

After pondering about the takeover a little more, here's some more food for thought:

Short interest: Several lithium stocks are among the top most shorted stocks on the ASX. Names like Core Lithium, Liontown, Sayona, Vulcan Energy and Lake Resources all currently have short interest of more than 6%.

Intraday bids: Pretty much all lithium gainers today experienced strong intraday price action. Core Lithium closed 15.4% higher but rallied 7.8% from its open price. Allkem opened up 1.8% but closed 13.7% higher. You get the gist.

Covering shorts: It's difficult to gauge whether or not the intraday rally was genuine buying or a whole lot of short covering. And on that note, does short covering keep going for a few more day(s), where we something like a three day rally into a pullback into who knows what? (Hypothetically speaking)

A floor: Albemarle made non-binding proposals for Liontown on 3 March at $2.35 and last October at $2.20. These bids are offering cash in an environment where everybody is saying 'cash is king'. They seem pretty adamant on trying to buy the company but Liontown management viewed this as "opportunistic timing ... coinciding with recent softness in companies exposed to the lithium sector." Does this somewhat support a floor for lithium names, many of which are down 20-30% from recent highs?

Gold bets are surging

March is set to be the first month of net inflows for gold ETFs since May last year while volumes for call options tied to the funds are approaching record levels, according to the Financial Times.

In the last three sessions, gold has eased from highs of US$2,009 an ounce and back towards US$1,950.

Nevertheless, the amount of bullish positioning sure makes the gold trade that much more interesting.

Gold bets
Source: Bloomberg, FT

Interesting news and movers

Trading higher

  • +68.5% Liontown Resources (LTR) – Albemarle takeover proposal

  • +30.8% United Malt (UMG) – Indicative proposal from Malteries Soufflet

  • +12.9% Strandline Resources (STA) – Fourth HMC shipment

  • +9.0% Paladin Energy (PDN) – Upgraded by Jefferies

  • +8.9% Chalice Mining (CHN) – Gonneville resource increase

  • Oil and gas sector move: Beach Energy (+7.8%), Woodside (+4.8%), Santos (+3.1%)

  • Coal sector move: Terracom (+7.1%), Whitehaven (+6.1%), Coronado (+4.6%), New Hope (+4.2%)

  • Lithium sector move: Global Lithium (+20.5%), Argosy (+16.3%), Core Lithium (+15.4%), Allkem (+13.7%), Pilbara Minerals (+11.9%), Sayona (+10.8%)

Trading lower

  • -25.4% Kingsgate Consolidated (KCN) – Completes capital raising

  • Gold sector move: Bellevue Gold (-4.0%), Perseus Mining (-1.7%), Evolution Mining (-1.4%)


Broker updates

Macquarie notes: 

Ampol (ALD): Outperform with $39.45 target price

  • “The FCCU outage comes at a disappointing time, given gasoline cracks have significantly improved – however it is relatively contained, and does not materially detract from dividend yield or our investment case.”

Allkem (AKE): Outperform with $17.00 target price

  • “The 27% resource upgrade at Olaroz is impressive with drilling to date indicating potential future upside.”

  • “At the end of January, Stage 2 of Olaroz reached 97% completion, with pre-commissioning activities underway.”

  • “Updates on AKE’s key development projects at Sal de Vida, Olaroz and James Bay present key near-term catalysts for AKE.”

Premier Investments (PMV): Outperform with $30.50 target price

  • 1H23 sales up 17.6% to a record $905.2m which drove 4.6% EBIT growth to a record $221.8m

  • Total sales in early 2H23 are up 7.7%, even though PMV is cycling 6.2% sales growth in the first five weeks of 2H22

  • “1H23 further validates its track record in robust operating performance, supporting our preference for PMV in the sector.”

Rare earths market: Expects NdPr market to remain tight despite small surplus in the near term

  • Lynas (LYC): Neutral with $6.80 target price

  • Iluka Resources (ILU): Outperform with $12.30 target price

  • Hastings Tech (HAS): Outperform with $3.60 target price


Scans

Top Gainers

Code Company Last % Chg
LTR Liontown Resource... $2.57 +68.53%
LLI Loyal Lithium Ltd $0.32 +52.38%
TRT Todd River Resour... $0.016 +45.46%
UMG United Malt Group... $4.50 +30.81%
AQC Australian Pacifi... $0.12 +30.44%
View all top gainers

Top Fallers

Code Company Last % Chg
FTC Fintech Chain Ltd $0.019 -26.92%
KCN Kingsgate Consoli... $1.50 -25.37%
HIL Hills Ltd $0.02 -20.00%
TZN Terramin Australi... $0.017 -19.05%
ODM Odin Metals Ltd $0.018 -18.18%
View all top fallers

52 Week Highs

Code Company Last % Chg
LTR Liontown Resource... $2.57 +68.53%
UMG United Malt Group... $4.50 +30.81%
MDX Mindax Ltd $0.14 +27.27%
RNX Renegade Explorat... $0.016 +14.29%
LCE London City Equit... $0.60 +9.09%
View all 52 week highs

52 Week Lows

Code Company Last % Chg
KAL Kalgoorlie Gold M... $0.041 -18.00%
SAN Sagalio Energy Ltd $0.011 -15.39%
GBZ GBM Resources Ltd $0.024 -14.29%
LYK Lykos Metals Ltd $0.06 -14.29%
AZI Altamin Ltd $0.064 -13.51%
View all 52 week lows

Near Highs

Code Company Last % Chg
CNEW Vaneck China New ... $7.83 0.00%
SEMI Global X Semicond... $9.86 -1.70%
RSG Resolute Mining Ltd $0.385 +1.32%
MSTR Morningstar Inter... $8.73 +0.35%
BILL Ishares Core Cash... $100.56 +0.02%
View all near highs

Relative Strength Index (RSI) Oversold

Code Company Last % Chg
AEF Australian Ethica... $2.87 +1.77%
SM1 Synlait Milk Ltd $2.00 -8.26%
CE1 Calima Energy Ltd $0.115 +4.55%
GRR Grange Resources Ltd $0.73 +5.04%
C29 C29 Metals Ltd $0.13 +13.04%
View all RSI oversold

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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