Australian shares advanced at the start of the week helped by a push into the mining sector, as technology stocks sank again.
The S&P/ASX 200 index rose 0.7 per cent, or 40 points, to 5899.50.
Stocks were also higher across Asia, with Japan’s Nikkei 225 index up 0.7 per cent after news that Yoshihide Suga has won a ruling party leadership election, virtually ensuring he will replace Shinzo Abe as prime minister.
On Friday, the Dow and the S&P500 ended mildly higher. However, the tech-heavy Nasdaq fell anew, with investors still wary about the prospects for technology stocks.
Technology stocks have been pummelled as investors question whether the sector’s sky-high valuations are tenable.
“I’d say broadly, and not just in the US, technology should continue to benefit from the fact that we have changed structurally how we consume, how we behave,” said Esty Dwek, head of global markets strategy at Natixis Investment Managers.
“These companies are healthy, they are growing. Their share of their profits is huge, they have a lot of cash,” the strategist said. “I don’t think we are at the beginning of the end of technology stock performance just because of last week’s episode.”
But she noted that, even with a constructive medium-term sector view, that doesn’t mean there will not be more episodes similar to last week’s after what has been a “very, very quick rally” since March.
Australian tech stocks have suffered the damage from the US, especially some of the high-profile buy now, pay later companies. Afterpay extended its decline on Monday, dropping another 1.8 per cent to $72.58.
Broadly, markets can continue to move forward from this point, the Natixis strategist believes. “The support aspect, whether monetary or fiscal, and the mountains of cash sitting on the sidelines suggests that for now, at least, we’re constructive on risk assets even beyond the end of the year.”
Strong gains for the miners helped underpin the trading session, with Rio Tinto climbing 3.9 per cent to $103.73, BHP Billiton up 1.9 per cent at $37.2 and Fortescue Metals rising 2.1 per cent to $17.71.
Gold miners finding buyers included Newcrest up 3.6 per cent at $32.38, Northern Star, which rose 4.4 per cent to $13.89, and Evolution Mining, up 5 per cent at $5.90.
Monadelphous Group rose 3.2 per cent to $10.79 after it secured construction and maintenance contracts with a combined value of about $120 million from mining giant BHP.
Notable decliners included Macquarie Group, which fell 4.7 per cent to $120.20 after telling shareholders that it anticipates a 35 per cent decline in its first-half 2021 result compared with a year ago. The result will drop 25 per cent lower from the second half of the year ended March 31, Macquarie said.
Cleanaway shares dropped 7.1 per cent to $2.34 after its board said chief executive Vik Bansal had had “some issues with overly assertive behaviour” in the workplace and that he had acknowledged he needed to address them.
Mr Bansal said in a statement that he accepted the feedback and was committed to creating a “progressive culture” at Cleanaway.
In deal news, Citadel shares surged 40 per cent to $5.57. Pacific Equity Partners said it will buy Citadel for $5.70 a share, in a deal with enterprise value of $503.1 million, one that values Citadel’s equity at $448.6 million.
The purchase will take place via a scheme of arrangement, with the offer price representing a 43.2 per cent premium to Citadel’s last closing price of $3.98 a share.
Skin restoration business Avita rose 2.8 per cent to $7.40 after it said its trial into the effectiveness of its AVITA Therapeutic’s Recell system to repigment skin in patients who have vitiligo has started in Miami, Florida.
Starpharma shares rose 8.2 per cent to $1.72 after completing additional antiviral testing for its SPL7013 COVID-19 nasal spray. The data generated at the Scripps Research Institute in the US showed the spray rendered inactive more than 99.9 per cent of SARS-CoV-2 , the virus that causes COVID-19.
Incitec Pivot gained 2.4 per cent to $2.14 after UBS upgraded it to a “buy” from “neutral”. The broker raised its price target to $2.40 from $2.25, saying its valuation was attractive given the recovery in global fertiliser pricing.
Clean TeQ Holdings fell 1.5 per cent to 32¢ after it said it was reviewing a potential spin-out of its Sunrise and water businesses into two separate listed entities.
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Australian shares closed higher on Monday; Oracle reportedly wins bid for TikTok; ASX queries FAR accounts; Pacific Equity Partners has secured a $500m deal to buy The Citadel Group; Yoshihide Suga to become new Japanese PM.
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