ASX 200 (XJO) set to rise – Vulcan & Credit Corp shares in focus

The S&P/ASX 200 (INDEXASX: XJO) is set to rise when the market opens this morning according to the latest SPI futures. Here’s what ASX investors need to know.

ASX 200 rallies after RBA doubles down on QE

The ASX 200 continued its strong start to the week, finishing 1.5% higher on Tuesday after news that the Reserve Bank of Australia would be keeping rates on hold. Every sector barring healthcare finished higher, with IT once again leading the way with low rates used to justify ‘perceived’ inflated valuations due to the lack of alternatives.

In an apparent ‘surprise’ to experts in the industry, the RBA announced it would be doubling its quantitative easing policy, ramping up bond-buying in the hopes of supporting a continued recovery in the economy.

Comments from the RBA meeting suggest the real concern is around the strengthening AUD, with Australia’s world-leading 10-year government bond yield of over 1.0% causing a flood of demand for the currency and pushing shares with overseas earnings like CSL Limited (ASX: CSL) lower as a result; the AUD fell to $0.76 on the news. The Governor also confirmed that the cash rate is unlikely to be increased until such time as inflation is well above 2%, flagging 2024 as the planned timing.

Tabcorp Holdings Ltd (ASX: TAH) jumped another 8.8% after management confirmed the existence of confidential and unsolicited bids or proposals for the group’s wagering and media arm.

Credit Corp surges, Vulcan Energy enters trading halt

Global debt collection agency Credit Corp Group Limited (ASX: CCP) moved 8.8% higher after announcing it would reinstate dividends following a strong finish to 2020. Despite widespread concerns around the world, the pandemic has had less impact than expected on debt servicing, thus far at least, with Credit Corp reporting a 10% increase in first-half profit to $42.3 million.

The group’s US collections increased 36%, doubling profit to $8.0 million and the company now expects full-year profit to fall between $85 and $90 million compared to the $70-85 million forecast in December. The acquisition of struggling competitor Collection House’s (ASX: CLH) debt ledger, the largest investment in Credit Corp’s history, appears well-timed and will contribute in the second half.

Vulcan Energy Resources Ltd (ASX: VUL) may be the hottest stock on the ASX at the moment, increasing 41 times from a low of $0.16 in March to $7.84 today. The company hits the two most popular themes, decarbonisation and battery storage, as it is building what is reported to be the first zero carbon lithium mine in Europe.

Vulcan shares entered a trading halt on Tuesday as the company sought to raise $100 million to fund construction at a price of $6.50 per share. The volatility of these smaller companies makes them difficult to invest indirectly, with more diversified exposure generally warranted.

GameStop tumbles, US markets push higher

Both the key US markets finished higher, 1.6% for the Nasdaq and 1.4% for the S&P 500, offering another strong lead for the ASX today. The short-selling driven by Reddit users slowed with both GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) falling 60% and 40%, respectively, proving that what goes up must come down and the market may not be ‘broken’ just yet.

Featured video: What on earth is short selling?

Chinese e-commerce and payments giant Alibaba (NYSE: BABA) showed its continued resilience, reporting a 37% increase in quarterly sales and a 52% increase in profit. Alibaba’s continued focus on cloud computing and its core e-commerce business is paying dividends, with revenue increasing 50% and 38% amid the distraction of regulatory pressure from the Chinese government around the separation of its ANT Financial business; shares fell 3.8%.

Ahead of Amazon’s (NASDAQ: AMZN) after-market results, United Parcel Service (NYSE: UPS) reported revenue from the giant jumped 31% in the quarter, accounting for 13.3% of total sales, which jumped 21% in total after processing some 2 million daily packages.

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Disclosure: At the time of publishing, Drew owns shares in Alibaba.

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