Healthcare and IT lead ASX higher

By Trevor Hoey. Published at Mar 30, 2020, in Market Wrap

The Australian stock market opened on a positive note today, ignoring the negative lead from the US, but arguably playing catch up against the strong run experienced by the Dow Jones last week, as it rallied from less than 19,000 points to pass 22,500 points before closing at 21,636 points.

It was a very different story at home last week with the S&P/ASX 200 (ASX: XJO) trading erratically before finishing at 4842 points, only slightly above the previous Friday’s close.

While the index was up by about 65 points at midday, this followed a period in negative territory not long after the open.

Consequently, these aren’t the signs of a market ready to rebound, understandably so given the constant flow of negative news on the business front, and the fact that initiatives announced on the weekend will only further dampen the stressed business environment, and an Australian economy struggling under the burden of continually dipping into the coffers to assist with social and business packages.

One of the interesting themes to look out for though are telehealth stocks which have come to the forefront after the government put in place several measures to allow consumers access to health professionals via telephones and digital links.

These stocks generally sit outside of the ASX 200, but they have delivered some outstanding gains on Monday morning.

Two of the best performers were HeraMed (HMD +25%) and ResApp Health Limited (RAP +43%) with the latter announcing on Monday morning that it had completed an initial integration of ResAppDx-EU into Coviu’s telehealth platform.

This integration will allow clinicians using Coviu’s platform to perform a remote respiratory assessment using ResApp’s clinically validated and Therapeutic Goods Administration (TGA) approved diagnostic test.

ResApp and Coviu have signed a binding commercial terms sheet and have agreed upon a per test fee for the use of ResAppDx-EU on Coviu’s telehealth platform.

The per-test fee received by ResApp is within the previously targeted range of $5.00 to $10.00 per test.

What is ResApp?

Healthcare stocks lead market higher

Not surprisingly, it was the Healthcare Sector which includes a number of companies with heavy index weighting that helped to provide positive momentum for the broader market.

The S&P/ASX 200 Healthcare Index (ASX: XHJ) surged more than 4.9%, led higher by Ansell (ASX: ANN), a global manufacturer and distributor of health and safety protection solutions.

Aside from the relevance of Ansell’s products in relation to the coronavirus, the company also reaffirmed its 2020 earnings guidance on Monday morning - setting it apart from most other companies which are either withdrawing guidance or lowering their expectations.

While Ansell led the way with a gain of 18%, there were also strong performances from Cochlear (COH +7.3%) and diagnostics groups, Pro Medicus (PME +8%) and Sonic Healthcare (SHL +4.3%).

The latter two companies should benefit from an uptick in medical tests.

Information Technology was another strong performer with the XIJ index up nearly 3%.

It would appear that investors are targeting companies with particularly strong intellectual property that should remain resilient despite challenging conditions.

These included Altium (ALU +5.2%), Appen (APX +5%) and NEXTDC (NXT +6.4%), with the latter having reaffirmed its fiscal 2020 revenue and underlying earnings guidance in mid-March.

Importantly, the majority of NEXTDC’s income is derived from contracted and recurring revenues with counterparties carrying investment-grade credit ratings.

Property -related stocks cop a hit

Given the pressure on savings and disposable income, it isn’t surprising to see property related stocks out of favour.

The REIT Index (XPJ) was down more than 1% and the S&P/ASX 200 Materials Index (XMJ), home to both mining companies and building materials stocks was down 1.7%.

It was a mixed bag across the building materials sector with BlueScope Steel (BSL) up 3%, while Boral (BLD) and Brickworks (BKW) were down 4.5% and 1.4% respectively.

Elsewhere, Fletcher Building (FBU) was a casualty as it lost 3.4% and CSR (CFSR) was also in the red, down 1%.

With more shops closing it wouldn’t have been surprising to see the S&P/ASX 200 Consumer Discretionary Index (XDJ) succumb to further pressure.

However, the index was up 2.7% and there were strong performances from takeaway foods chain Collins Foods (CKF +4.2%), travel group Corporate Travel Ltd (CTD +4.6%) and provider of gaming equipment, Aristocrat Leisure (ALL +4.1%).

In the financial sector, the big banks were all in the black, pushing the index 2% higher.

Across the four big banks, the Commonwealth led the way with a gain of 3.1%, followed by ANZ (+1.2%), NAB (+0.6%) and Westpac (+2.5%).

Insurance Australia Group (IAG +5%) was the best performer in the sector.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

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