Rudi's View | 10:00 AM
Against a darkening mood for the Australian economy and share market, ASX-listed technology stocks are staging a remarkable comeback, having spent most of the past ten months in the Do Not Touch basket
By Rudi Filapek-Vandyck, Editor
At face value, the direct trigger seems to be a revival in SaaS and software companies in the US where fears about AI disruption have been swiftly dismissed by Workday, Snowflake and the like through the release of much better-than-expected quarterly updates.
The iShares Expanded Tech-Software Sector ETF (IGV) is now up 44% since bottoming in early October last year, and up 29% from April 30th. Some 15% of those gains have been booked within the past two weeks.
One can easily tell from share prices in SiteMinder ((SDR)), Catapult Sports ((CAT)), Pro Medicus ((PME)) and Objective Corp ((OCL)), the local sector is again attracting steady inflows.
For once, shareholders are not complaining when the ASX200 is coloured deep red during Tuesday's trading session.
That, most definitely, has not been the case very often since August last year.
There's a local context behind the technology comeback too, one that was yet again highlighted on Monday by a not well-received trading update by car dealerships operator Peter Warren Automotive Holdings ((PWR)).
That update revealed operational momentum is running well below market projections, hence why that share price fell by circa -25% on the day.
The message underneath Peter Warren's disappointment is not dissimilar from market updates and financial result releases after the February results season: it's tough out there.
If rising costs in the wake of wars in the Middle East don't hit your bottom line, then maybe an increasingly anxious consumer will.
Also: The Fair Work Commission (FWC) has just raised the minimum wage rate for modern awards by 4.75%, to take effect from 1 July, covering 2.8m workers across the country.
Now the mainstream media are doing their best to convince Australians the value in housing is poised for decline --by how much nobody knows, but there are some dire forecasts out there-- while the financial media are en masse cursing Treasurer Chalmer's plan to tax growth assets more than conservative investments.
The FNArena Corporate Results Monitor is not painting a rosy picture as financial updates that miss the mark continue to outnumber those that surprise to the upside.
Disappointments do not stem from consumer-oriented businesses only. See also Champion Iron ((CIA)), miner of iron ore, Environmental Group ((EGL)), engineering, and Energy One ((EOL)), trading systems for energy traders, recently.
On FNArena's assessment, the in between season to date has seen more than 40% of all financial updates disappointing with 33.33% beating and almost 26% in line with expectations.
That 40% is on par with prior in-between seasons of late last year and that of twelve months ago. It also marks the highest percentage since 2018, when we first started including these out-of-season reporters.
As markets have become increasingly more volatile over the past two years, a trend that is likely to reshape general perceptions on risk versus reward, those 40% in 'misses' generate plenty of bombshells and booby traps.
Monday's instant punishment for Peter Warren is by far not the largest Wyle E Coyote drop this year. Shares in Healius ((HLS)), for example, have weakened by -50% over the past three months. Losses for Cochlear ((COH)) and IDP Education ((IEL)) are not far behind.
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