Finding Finding Finding

Finding beneficiaries in bear markets. And celebrating International Women's Day

Equities 7 minutes to read
Jessica Amir

Australian Market Strategist

Summary:  With European stocks down 20%, US stocks down 12%, and likely to head lower as the world faces an energy and food crisis, investors are increasingly seeking stocks and sectors that will thrive. Investors are moving toward commodity rich markets, like the Australian stock market and the Brazilian stock market, with both outperforming this year. We explore the stocks leading the charge and what you need to know. Plus, as its international womens day, we look at commodity companies with high amounts of female leadership


Co-written by Market Strategists Jessica Amir in Australia and Redmond Wong in Hong Kong.

What’s happening in equites markets?

It's always a valuable exercise to see where funds are flowing and where they are coming out of. So let's check in, who are the best performers this year? 

  • Brazil’s market is now the best performing market up 6% year to date; chemical, mining and electricity generation company Bradespar is up the most, up 43%, followed by iron ore giant Vale up 35% this year.
  • Australia’s ASX200 is the second best performing market this year, even though its down 5% this year. In the ASX200, coal giant Whitehaven Coal (WHC) is up the most in the ASX200, up 54%. Oil and gas giant Woodside Petroleum (WPL) is up 52% as the second best performer, and you’d expect these gains to be extended until something breaks (.i.e.. unless consumption slows). So, what’s keeping the ASX from making further gains this year? Well the ASX tech sector in Australia is crumbling ahead of rates rising, with Zip (Z1P) share are down 62% with the stock also facing increasing competition. While family tracking app backed by the Phelps family and Bryant family Life360 (360) is down 53% year to date.

So who are the worst performing markets so far this year? 

  • The world’s biggest market, is the US. Its benchmark, the S&P 500 (US500.I) is down 13% this year, the Nasdaq 100 (USNAS100.I) is down 19% after falling 3% and 3.6% respectively overnight.
  • In Europe, the German DAX is down 23%, while London’s market (FTSE 1000) is down the least in Europe (down 9.5%).
  • In Asia, Hong Kong’s Hang Seng (HSI.I) is now down 11% this year, China’s CSI300 (000300.I) is down 13% YTD, as its costs of imports grows. Inversely, new stats reveal China's export growth in the first two months of 2022 slowed to +16.3% YoY (vs +20.9% in Dec 2021).  The growth of exports to the U.S. decelerating to +13.8% YoY (vs +20.5% in Dec 2021). Export was a major growth driver of the Chinese economy last year but its momentum seems moderating in 2022.

So what to consider now?

  • A recession is likely; markets are pricing in that markets are tackling an energy crisis with oil heading towards its record high of $150 (that we last saw in 2008).  Secondly, we are amid a food crisis, with wheat price up 50% this year. And thirdly, we have a refugee crisis, over 1.5 million people are displaced from Ukraine. Plus, the US is likely to rise interest rates with a suite of rate hikes. There is so much uncertainty at the moment. And companies are facing an earnings squeeze, with consumer spending, consumer discretionary and tech and airlines companies to do it tough amid rising prices and decreasing sales. Meanwhile, beneficiaries of the crisis, are companies involved in and selling Gas, Oil, Wheat, Palladium and Nickel and Iron ore. These commodities prices will likely continue to rise until consumptions slow.
  • It is international women’s day. Our research has found companies with high female leadership outperform massively from a share price perspective. Globally, 6% of companies have 40% or more women in leadership. We found companies with women in leadership, produced a 59% better return over five years. But diving to Australia, there are more women at the top. In the ASX200, most companies have women in leadership. The average board is 33% female. And as commodities are outperforming it’s vital to highlight that commodity companies with high female leadership, include BlueScope Steel (BSL), Lynas Rare Earths (LYC), Fortescue Metals (FMG), Alumina (AWC) and Paladin Energy (PDN). 

Need some potential trading ideas?

  • Rising wheat prices? How to benefit? With the price of wheat skyrocketing out of control, and some CFD providers stopping clients buying Wheat contracts, there are a couple of alternatives to consider and to advantage of surging wheat prices, which are up 50% this year and likely to rise even further. GrainCorp (GNC) is Australia’s biggest grain seller and its shares popped to an all time. In the US, there is Archer-Daniels-Midland (ADM) a multinational food processing and commodities trading company, which is also benefiting from higher grains and wheat prices.
  • Inversely, if you want to take view that Chicken producers like Ingham's (ING) and Tyson Foods (TSN) could see their shares continue to fall as their costs (wheat) rise, then you could consider shorting stocks like these. Why? The price of wheat and Ingham's shares for example, tend to have an inverse relationship. Remember, the biggest cost of growing/raising a bird is the wheat price, so rising wheat, not only hurts consumers, but meat companies.
  • We also see a case for investing in fertilizer stocks, like CF Industries (CF) and Nutrien (NTR) as mentioned in yesterday’s APAC Market Digest. Alternatively can find further discussion and more North American fertiliser stocks here.

For a global look at markets – tune into our Podcast 

For prior Australian market and APAC updates - click here. 

  

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Saxo Markets
Most of our staff in Singapore are working from home to help limit the spread of the coronavirus. We remain at your service on the details below. Thank you for your understanding.

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.