• ASX to open flat after a mixed session on Wall Street
  • Semiconductor stocks slumped in US and Europe after China’s iPhone ban
  • This expert says small caps are undervalued


Australian shares are set for a muted open on Friday after a mixed session on Wall Street overnight. At 8am AEST, the ASX 200 index futures was pointing up by +0.1%.

In New York, the S&P 500 was down by -0.32%, the blue chips Dow Jones up by +0.17%, and tech heavy Nasdaq slumped -0.89%.

Apple fell another -3% taking its loss to -5% this week after China reportedly banned iPhone use by government officials.

According to the WSJ, in recent weeks Chinese officials at government offices and state-owned companies were given instructions by their superiors via chat groups and in meetings not to use iPhones. China is Apple’s most lucrative territory after US and Europe.

Microchip stocks including Nvidia, Skyworks, Qualcomm and Qorvo all fell after the news broke out.

In Europe, Apple supplier STMicroelectronics slumped 4%, along with other semiconductor chips including BE Semiconductor, Nordic Semiconductor, and ASM.

Meanwhile, US bond yields fell after US jobless claims hit the lowest level since February and productivity was revised downwards.

And back home, the labour account and business turnover data are scheduled for release later today.


US small caps look ‘undervalued’ at these levels

Unlike their bigger siblings, small caps in the US remained in a bear market at the end of June; that is, a decline of at least -20.0% from its prior peak.

“Yet we are optimistic both in spite of the relative disadvantage of small-caps and, in some ways, because of it,” says Francis Gannon, co-chief investment officer and managing director, Royce Investment Partners.

Gannon believes valuations looked highly favourable for the Russell 2000 index – the main index for US small caps – because they remain close to a 20-year low, and also based on Royce’s preferred valuation metric which is enterprise value over EBIT.

The average stock in the Russell 2000 was -28% off its 52-week high at the end of June, which gives some sense of the opportunity that exists within small cap space, says Gannon.

“We looked at data going back to the 1940s to see what happened to small caps in recessionary periods,”Gannon said.

“The historical pattern is that small caps tend to trough before recessions end, advancing 33.3% on average from the trough to the end of the recession.

“As we have said previously, investors typically pay a steep price for waiting, whether for the market to bottom or a recession to end.

“And a recession remains a possibility, despite recent developments,” Gannon said.


In other markets …

Gold rose by +0.25% overnight to US$1,920.48 an ounce.

Most base metal prices fell, with the copper futures price dipping 0.6% on weak imports by China.

Iron ore futures were down US$1.57 or around 1.3% to US$117.40 a tonne.

The Aussie dollar slid from US63.93c to US63.80c at the time of writing against a strong US dollar.

Bitcoin meanwhile was up 1.9% in the last 24 hours at US$26,254.

Just 22 people worldwide can lay claim to the title of cryptocurrency billionaire by owning crypto worth in excess of US$1 billion, the first ever Crypto Wealth Report has found.

Among them are Changpeng Zhao, founder and CEO of crypto exchange Binance, Jed McCaleb and Chris Larsen, co-founders of digital payment network Ripple, and Brian Armstrong, CEO and co-founder of US crypto exchange Coinbase.


5 ASX small caps to watch today

Balkan Mining and Minerals (ASX:BMM)
Gorge drilling campaign to test outcropping spodumene pegmatite at Koshman and Nelson lithium occurrences is set to commence. BMM plans to initially drill up to 12 diamond drill holes for a total downhole length of up to 1,000m to systematically test the vertical plunge extensions along prospective pegmatite strike.

Proteomics (ASX:PIQ)
The biotech says latest results from its novel blood test for oesophageal adenocarcinoma will be presented tomorrow at the 19th ISDE World Congress for Esophageal Diseases in Toronto, Canada. The conference presentation builds upon earlier work which validated a panel of glycoprotein biomarkers using 300 samples from two independent clinical cohorts.

Noble Helium (ASX:NHE)
Noble reports that the MV Bohwa Tsingtao carrying Marriott’s Drillmec HH102 #16 rig has arrived in Dar es Salaam, Tanzania. The rig and all of the required ancillary equipment will then be transported to the Mbelelele-1 wellsite ahead of drilling later this month. The company’s campaign to demonstrate the North Rukwa basin as a world-class helium province is now one step closer, says Noble.

M3 Mining (ASX:M3M)
Follow-up aircore program at El Capitan extends the gold mineralised zone to a minimum length of 400m. Top intercepts include: 4m at 1.09g/t Au from 76m, 8m at 0.56g/t Au from 20m, and 4m at 0.53g/t Au from 20m. Reverse circulation (RC) drilling is now planned to test the depth extent of mineralisation.

Widgie Nickel (ASX:WIN)
Significant nickel mineralisation intercepts have been confirmed at Widgie 3, which include thick intercepts of high-grade nickel sulphide and PGE mineralisation. Notable significant nickel intercepts include:15.47m @ 3.17% Ni, 0.27% Cu, 0.04% Co, 1.51g/t 3PGE.