Weekly Small Cap Wrap: ASX small caps manage a gain as we limp towards the New Year

• The Emerging Companies index managed to lift slightly this week to 0.61%
• All sectors finished the week in the red with Industrials leading, down 2.13%
• Retailers expected to rake in $23.5b over the Boxing Day sales

December has historically been the ASX200’s second-best month for performance, and while it’s always a weird period between Xmas and New Years, the bourse has managed to finish the week on a high.

The S&P/ASX Emerging Companies (XEC) is a benchmark for Australia’s micro-cap companies, containing up to 200 stocks that ranked between 350 and 600 by float-adjusted market capitalisation at the time of their index inclusion. By 4pm AEDT on Friday the ASX XEC had snuck up 0.61% for the past three trading days.

The S&P/ASX 200 (XJO) is Australia’s leading benchmark index, home to the top 200 ASX listed companies by float-adjusted market capitalisation – and it fared slightly worse this week, down 1.07%.

All sectors finished the week in the red, with Industrials leading the laggards, down 2.13%. Hot on its heels was Energy down 1.64%, Utilities, down 1.56% and Real Estate down 1.44%. The best performer was IT, only down 0.02% for the week.

Retailers could be looking good in the New Year though, with data from the Australian Retailers Associated and Roy Morgan expecting a massive $23.5 billion spend by Boxing Day bargain hunters between December 26 and January 15.

But after that point, the realities of the rising cost of living and inflation will catch up to consumers.

“Although spending has remained resilient throughout 2022, thanks to low unemployment and the pandemic savings buffer, escalating costs, power prices and interest rates will catch up with consumers in the new year,” National Retail Association interim chief executive, Lindsay Carroll said.

Weekly economic overview

 On the global front, markets are anxiously waiting to see how China’s plans to lifts Covid-19 quarantine requirements on international arrivals early in January goes – especially since its coming at a time when many nations have lifted interest rates in an effort to tame inflation.

Not to mention, the virus is still spreading rapidly as the country reopens, so we should take these ‘boosting the global economy’ hopes with a grain of salt.

“China has really gone full force into abandoning zero Covid and there are going to be some growing pains with that effort,” Glenmede vice president of investment strategy Michael Reynolds said.

“The explosion in case counts there is probably going to be economically disruptive to the downside for them.”

Overnight the United States joined Italy and Japan in requiring travellers from China to show a negative COVID-19 test as cases there surge. 

The country is also dealing with a struggling property sector and Beijing has been escalating tensions with Taiwan. 

State Street Global Advisors SPDR ETF equity strategist Julia Lee told AAP that she worries about China and what it could mean for growth were weighing on a thinly traded market.

ASX SMALL CAP WINNERS:

Here are the best performing ASX small cap stocks for Dec 28 – 30:

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Strategic Elements (ASX:SOR) was one of the biggest winners this week, after successfully demonstrating the power output of its Energy Ink battery, which generates electrical energy from moisture in the air, compared to the baseline power consumed by a glucose monitoring skin patch.

The extremely thin, flexible, environmentally friendly Energy Ink battery generated over 200% more power than required.

It’s a big market opportunity for the company, because electronic skin patches are currently a large US$10 billion market, and its forecast to grow to US$27 billion by 2033.

Millions of people worldwide use skin patches powered by rigid alkaline batteries or lithium materials to reduce the frequency of daily finger prick blood glucose checks and better manage glucose levels.

And the advantages of the Energy Ink technology include flexibility, thinness, and the ability to print various sizes whilst using environmentally friendly materials.

SOR is currently designing a program of work that will significantly increase the cell size under development, with further information on the program is expected in Q1, 2023.

ASX SMALL CAP LOSERS

Here are the worst performing ASX small cap stocks:

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