Growth stocks hang tight despite Wall Street lead

Local ‘growth stocks’ held firm again on Monday as the broader sharemarket endured another sell-off.

The drop on the S&P/ASX 200 of 1.34 per cent to 6923 was not as bad as traders had been expecting.

Local “growth stocks” held firm again on Monday as the broader sharemarket endured another sell-off, this time sparked by Wall Street’s late awakening to fears around the coronavirus.

Market favourites such as CSL were little changed at the close, offering a substantial buffer to another wave of selling across oil, transport and industrial stocks linked to China.

The strong resistance offered by leading ASX stocks also came in the face of a very sharp fall on the Shanghai stock exchange, which was down 9 per cent at one stage on Monday. The drop in Shanghai reflected a prolonged closure in that market since January 23.

Weakness in China sharemarkets — despite local interest rate reductions — threatened to worsen ASX trading sentiment, however a turn in US futures in the early afternoon signalled Wall Street’s first session this week may start with a rebound — a feature which calmed local trading.

Indeed, by the end of the day the drop on the S&P/ASX 200 of 1.34 per cent to 6923 was not as bad as traders had been expecting.

In common with last week’s worst ASX session (on Tuesday January 28), two key sectors held up against the wave of selling – gold and growth stocks (where profit growth is favoured over dividend income).

In what is now a recurring pattern, the majority of the top movers over the day were gold miners such as Evolution (up 3 per cent) and Gold Road (up 2.8 per cent).

However, it was the ability of market leaders to remain barely changed which was the key support for the local market. The blood products group CSL was virtually unchanged (down just 0.2 per cent) at $311.41.

1 2 3 4 5

Similarly, key stocks did not wilt under pressure. Afterpay was little changed, down 1.3 per cent to $38.06. Earlier in the day rival FlexiGroup — which has run hard on the back of its buy now, pay later Humm product — fell after an unexpected profit downgrade which the company attributed to softer than expected retail conditions. With traders on red alert for companies failing to make the grade in earnings season, Flexigroup was down 11 per cent to $1.87 by the close.

Meanwhile, banks were steady. Commonwealth Bank — which has been the strongest of the bank stocks in recent months – had another convincing session, losing just 0.8 per cent at $84.55

Several of the market’s top tech stocks were also steady, with Appen gaining 1.4 per cent to $25.71.

In contrast, Monday’s session saw particularly sharp selling in energy and materials. Oil stocks moved lower as crude oil prices hit their lowest level in three months. Oil Search fell by a hefty 7.2 per cent to $6.72 and Woodside dropped by 3 per cent to $33.70.

The big miners were also soft, with iron ore prices sliding – BHP down 3 per cent at $38.25 and Rio Tinto now below the $100 price once more, falling 2 per cent on Monday to $96.86.

One of the worst falls of the day came for the global engineering services group Worley, which has been struggling since the takeover of US based Jacobs group: the departure of its CEO Andrew Wood saw the stock fell 8.5 per cent to $13.95.

With the market still taking its lead from Wall Street despite the proximity of the coronavirus dramas in Asia, the immediate momentum on the ASX depends almost entirely on trading sentiment on Wall Street in the days ahead.