Is the Bear Market Button Switched On – Key ASX Stocks Plunge!

With the heavy sell down at the Wall Street, ASX was seen to crash for the first time in last 18 months following the weak global cues coupled with commodity prices pressure. Investors were concerned over a possible faster rate hikes in the US and other major economies post the wages data outcome.

As per the latest US employment data, the Average Hourly Earnings improved by 0.3% for January 2018 as compared to the last month and rose 2.9% against the same month last year. The unemployment level continues to be very low at 4.1%. This solid data led to a sell off among bonds and other risky assets across the globe on concerns over possible rate hikes, which is quicker than forecasted by investors. In turn, fall in Australian dollar coupled with volatile commodity prices led to the decline of major stocks in Australian market. Thus, the key stocks that witnessed the brunt of this equity market collapse were from the mining sector and the banking sector, while S&P/ASX200 was seen to slide by 1.6% on February 05, 2018. While the market might be having a negative view on the current scenario, nonetheless, this also calls for a review of any buying opportunities given the dips.
 

BHP Billiton Ltd

BHP Details

Rising production: BHP Billiton Ltd (ASX: BHP) continues to enhance its production despite operational pressure to offset the commodity prices pressure. The group maintained their full year production and unit cost guidance for Petroleum, Copper, Iron Ore and Energy Coal for 2018. For Western Australia Iron Ore (WAIO) project they delivered a solid annualized production rate of 284 Mt (100 per cent basis) in December 2017 quarter. The Los Colorados Extension project was successfully ramped up during the December 2017 quarter. BHP also built a wider portfolio during the second quarter and accordingly forecasted a better second half of 2018 operating performance. For 2018, they forecast a volume growth of six per cent for the full year.
 

2018 Guidance (Source: Company reports)
 
BHP stock has seen a sell off by 2.14% on February 05, 2018 at the back of the market crash. But at the moment, we see every correction in the stock as an opportunity given its solid portfolio and effective measures for withstanding commodity prices pressure. While we keep an eye on the market trends, we maintain a “Hold” on the stock at the current price of $30.15
 

BHP Daily Chart (Source: Thomson Reuters)
 

Commonwealth Bank of Australia

CBA Details

Ongoing pressure from allegations: Commonwealth Bank of Australia’s (ASX: CBA) stock was seen to slip by 1.2% while the bank continues to face allegations over money laundering via their ATMs. Moreover, ASIC has now filed a claim against the Commonwealth Bank of Australia on market manipulation and unconscionable conduct related to the Bank Bill Swap Rate (BBSW). The misconduct occurred between January 2012 and around October 2012. The group has now made reporting changes on its 2018 interim profit to improve the transparency. Based on the new reporting changes, the Cash NPAT for the whole group fell to $4,827 million for half year ended on June 2017 as compared to $4,828 million in prior corresponding period.
 

Cash NPAT (Source: Company Reports)
 
We maintain our “Expensive” recommendation on the stock at the current price of $79.80, while the group will release its annual results on February 07, 2018.
 

CBA Daily Chart (Source: Thomson Reuters)
 

National Australia Bank Ltd

NAB Details

High dividend yield:National Australia Bank Ltd (ASX: NAB) delivered solid performance across all segments in FY17, with Consumer Banking & Wealth cash earnings rising 4.3%, while Corporate & Institutional Banking earnings surged by 12.3%. Business & Private Banking earnings increased 6.3% and continue to see the positive momentum in 2018. Net Promoter Score has improved placing the group in market-leading position against its peers as compared to last year. NAB is investing over $1.5 billion over the next three years to enhance their customers’ experience, reshape capabilities as well as grow their business. Trading at a solid dividend yield, we give a “Buy” recommendation on the stock at the current price of $29.19
 

NAB Daily Chart (Source: Thomson Reuters)
 

South32 Ltd

S32 Details

Positive guidance: Down 2.6%, South32 Ltd (ASX: S32) lately announced about maintaining the FY18 guidance for all operations while production at South Africa Manganese has been indicated to be up by 8% given the market demand and performance. At the Appin Colliery, the group restarted one underground longwall in October and is on track with regards to ramp-up plan while improving productivity to an acceptable level.
 
S32 production summary (Source: Company Reports)
 
The group is reshaping their portfolio with South Africa Energy Coal now being a stand-alone business from April 2018. With this strategic initiative, they are aiming for a simpler organization. S32 distributed US$333 million in shareholder dividends during the December 2017 half year while bought more 37M shares for US$93 million. We maintain a “Hold” on the stock at the current price of $3.73, in light of the trading scenario and the recent market wipe out.
 

S32 Daily Chart (Source: Thomson Reuters)
 

Western Areas Ltd

WSA Details

Improved cash flow: Western Areas Ltd (ASX: WSA) was one of the commodity stocks that plunged heavily with a 6.9% fall. The group had otherwise enhanced the operating cash flow to $22.1 million as of December quarter 2017 from $9.5 million in the prior quarter. The mill achieved a record quarterly throughput of 161,218 tonnes of ore during the December quarter driven by a better throughput of low grade fines (24,402t @ 1.4% nickel) from the recent ore sorter project. The ongoing Odysseus DFS work is delivering several positive outcomes, with a larger project and longer mine life currently expected. The Unit cash cost of nickel in concentrate was A$2.50/lb and A$2.49/lb for the half year, which is on track with guidance. We maintain a “Hold” on the stock at the current price of $3.12\


WSA Daily Chart (Source: Thomson Reuters)
 

Resolute Mining Ltd

RSG Details

Witnessed a heavy plunge: With rise in US dollar, investors were seen to dump the safe haven gold stocks. As an effect, Resolute Mining Ltd.’s (ASX: RSG) stock lost over 9.5% on February 05, 2018 following the pressure across the global markets while the stock is currently trading at an attractive P/E level. Recently, the group made a further opportunistic hedging of 72,000oz forward sold at A$1,715/oz to withstand the volatile gold prices, placing them in a better market position. Moreover, they maintained FY18 guidance of 300koz at AISC of A$1,280/oz (US$960/oz). Their core Syama Underground Resource has been enhanced by 39% to 5.7Moz. Syama Underground mine is on track with ground breaking mine-of-the-future Sandvik framework agreement executed while Ravenswood Expansion Project is progressing well. With the dip being considered to be proffering an opportunity, we maintain a “Buy” at the current price of $1.05
 

RSG Daily Chart (Source: Thomson Reuters)

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