Barclay's bull or Pearce take? Paralysis by analysis

Each Friday, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.

Trading highlights

The post-COVID bull market resulted in a flurry of IPO activity last year, which ramped up to around one IPO per day in the lead-up to Christmas.

And for Barclay’s head of trading Trent Primmer, a spate of successful ASX debuts continued to be one of the main stories in markets this week.

“There’s still a massive amount of on-market buying volume coming into these listings, which shows the (IPO) markets are staying pretty red-hot,” he told Stockhead.

Among the IPOs that caught Primmer’s eye this week were mining company Iceni Gold (ASX:ICL), which raised $20 million and floated at 20c a share.

The stock closed at 29c on Wednesday for a day-one gain of around 50 per cent before falling back to 24c on Thursday.

It was a similar story for bioenergy company Delorean (ASX:DEL), which raised $14 million at 20 cents per share and popped as high as 38c on Monday before closing at 28c on Thursday.

Momentum themes

In a word, cryptocurrency.

Primmer highlighted Bitcoin’s move to new all-time highs above $US63,000, while Ripple’s XRP token caught his eye after posting a gain of more than 700 per cent so far this year.

And as someone involved in capital markets directly, he’s noticed a rise in the level of interest among professional investors.

“Right now it almost always gets brought up in conversation among clients and brokers, in terms of investment experience or where funds are at currently,” he said.

“Even outside of work talking to friends, I’m always getting asked my thoughts on crypto. I still don’t have a strong opinion either way but that’s probably a gauge of how much interest is in the market.”

Paralysis by analysis

And in terms of allocating capital, crypto is one of many asset classes that has posted strong returns in the post-COVID period.

Primmer noted that over the course of the past week, and the fact the ASX200 has broken through 7,000, while the S&P500 is at record highs.

In addition, the latest Westpac consumer confidence index came in at 118 — its highest level in 11 years.

That was accompanied by a similar surge in NAB’s business confidence index, while Primmer said Australian house prices are now tipped to rise by 25 per cent over the next three years, based on the RBA’s own scenario modelling.

The net result is that “there’s a lot of (investing) thematics in this market”, Primmer noted.

Citing the early success of the Delorean IPO, he said “you’d expect massive amounts of money to be thrown at green energy initiatives” in the months and years ahead.

“Then you’ve got a housing theme now as well, off the back of the economy strengthening.”

“Business confidence and consumer confidence is picking up, and there’s obviously strong demand for IPOs and on-market placements.

“In terms of investing in equities, there’s a multitude of sectors like commodities — copper, gold and iron ore are all taking a tear. So it’s a bit of paralysis by analysis when you’re going through all these options.”

In that context, Primmer said the surge in activity stemming from historic levels of monetary and fiscal stimulus will be “a good case study” in the years ahead.

“I think it will be interesting to look back on down the track because what it’s shown is that even in down markets, people know there’s government stimulus packages available which will support the economy,” he said.

“So if we take another big dip, how much buying momentum will there be in the short term if the stimulus comes through and assists with strengthening a weakened economy? I think it sets an interesting precedent for the years ahead.”

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.