ASX bargain hunters waiting for their moment

The market avoided an anticipated sell-off, but this week is loaded with hurdles for share investors.

The ASX 200 is down more than 4 per cent this year as fears of higher rates and rebounding inflation intensify. Picture: NCA NewsWire/James Gourley

Bargain hunters looking to profit from a widespread sell-off in Australian shares were left crestfallen on Monday as the local market failed to co-operate, ending the day broadly flat. But it may be a long week for shares as the serious tests come in the days ahead.

In fact the ASX was operating in a vacuum without any clear lead from Wall Street: traders were left to make the best of US futures that moved temporarily higher during the session, a signal that halted any serious local sell-off but offered little guidance on how Wall Street will move after the US Federal Reserve meetings wrap up later this week.

Similarly, investors are also waiting for direction from the much-anticipated inflation numbers from the Bureau of Statistics, due on Tuesday .

Either way the market may well fall further in the days ahead. Since the start of the year the US market has clocked up an 8 per cent drop and the S&P/ASX 200 is down more than 4 per cent as fears of higher rates and rebounding inflation intensify.

Clearly markets are indicating a full-scale correction of 10 per cent or more could be on the way as global markets reset around higher rates in the months ahead.

But if we do see extended falls, key figures in the Australian market are talking of opportunities to buy beaten-down top stocks rather than any sense of an impending rush out of shares.

One of the market’s leading investors, Mark Freeman from the $11bn listed investment company AFIC, put it this way: “While market volatility may emerge in the short term, periods of uncertainty often present good buying opportunities.”

AFIC bases that bullish view to the exceptional returns, improved corporate profits and the restoration of dividends that have contributed to the company of late – it returned a knockout 22 per cent including franking in the 12 months to December 31 against 19 per cent for the wider ASX 200.

While AFIC and other leading investors will be looking to buy the dip, the research team at ANZ also released a bullish global outlook.

The ANZ Private Banking Global Market Outlook Report has strongly recommended shares over cash and bonds in the months ahead, suggesting investors could be cautiously optimistic that shares will again outperform, though not to the degree we experienced in 2021.

Though Monday failed to offer the sell-off in the local market that Wall Street’s most recent sessions might have triggered, it did offer a potential dress rehearsal for future movements should the weakness in all markets extend.

On a sector basis, growth-focused tech stocks were twice as weak as the broader market as the All Tech index fell by 1.09 per cent against a modest 0.5 per cent for the ASX 200.

A selection of leading blue chips actually advanced over the day – CBA rose 0.07 per cent to $97.44 – once again showing the gulf between this stock and its banking peers, which all ended flat or lower.

Woolworths, a consumer staple stock in the top 10, also moved higher, gaining 0.78 per cent to close at $35.02.

Mining leaders were mixed, despite a lift of more than 2 per cent on the day in iron ore prices.

BHP, now the undisputed leader in the local market after its unification deal lifted its weighting to 10.7 per cent of the entire market, was off just 0.22 per cent, a stabiliser for the wider index.

Among speculative stocks, Life 360, the San Francisco-based, ASX-listed “family safety location services” group, fell sharply, losing 9 per cent to $7.39, down from near $14 late last year.

Bitcoin, a proxy for all market speculation, continues to drop and is now resting uncomfortably near $US32,000.

Analysts suggest it is becoming increasingly clear cryptocurrencies are starting to correlate with shares – falling in tandem with equities when “Mr Market” is in a bad mood.

However, the reality underpinning most market movements remains linked with hard facts such as management skill and financial performance.

Among the worst performers on Monday were two mining companies that have failed to deliver operationally in recent months: South32 dropped by 4 per cent while gold miner Regis Resources managed a sharp 14 per cent reversal when it downgraded production guidance.

Originally published as ASX bargain hunters waiting for their moment