The S&P/ASX200 gained 97.90 points or 1.36% to 7,280.60, crossing above its 125-day moving average. Over the last five days, the index has gained 1.84% but is down 2.20% for the last year to date.
Top-performing stocks in this index are ZIP CO LTD up 12.28% and The A2 Milk Co Ltd up 9.95%.
Woodside will attract investors
According to JP Morgan, the incorporation of BHP Petroleum into Woodside Energy will increase its index weighting.
Weighting in the S&P/ASX 200 should increase to approximately 270 basis points, while its Energy sector weighing will increase to about 530bp, improving from the market's 10th largest to its seventh.
"Of the fund managers we track, over 70% are Overweight Energy, while just 37% are Overweight Materials, " JPM Australia head of Research Jason Steed said.
"We believe much of the Materials Underweight is concentrated in BHP.
"As a result, managers are likely to need to up-weight in Woodside and or the sector to hold their Energy Overweight. As a result, we envisage upward pressure on Woodside and the sector as managers look to maintain their Energy Overweight.
"Notwithstanding this view, there is a prospect of near-term pressure should more ESG sensitive BHP holders look to make a quick exit from their newly created Woodside positions."
What’s ‘Appen’ed?
Appen Ltd continues its downward trend, losing 3.75% today, following on from Friday’s plunge of nearly 25%, after Telus International walked away from takeover talks.
Twenty-four hours is a long time in the markets.
On Thursday morning, shares in Appen had soared before it entered a trading halt on the back of the non-binding takeover offer from Telus with an indicative offer of $9.50 a share.
Late last week, Wealth Within analyst Dale Gillham called on the Appen boards to reject the offer, even though Appen’s performance over the last two years has been dire.
“Appen has been falling heavily for almost two years and prior to Thursday it was down around 85% of its all-time high price set back in August 2020 and is down over 40% since January 1 this year," he said.
"While it is reasonable to assume that the stock has been oversold in the recent tech sector meltdown, it makes sense that the board has not jumped at the offer as yet. It also requested that the trading halt remain in force until May 30, so that they can carefully consider their next steps.
“In my opinion, the board should reject the offer because I believe Telus is being very opportunistic given the current market conditions with the tech sector.
"As such, I believe the company is worth more, particularly given that if Appen has not already bottomed, it is very close to it; therefore, it is likely that it will turn the corner and start rising in the not too distant future.”
Gillham hinted that investors should avoid the stock. “If you don’t own Appen, I wouldn’t be looking to buy because the stock may fall heavily if the board rejects the offer but if it accepts the offer, there may be very little upside potential.”
How right he was.
On the small cap front
It was a generally good day for small caps, as evidenced by some of the bigger gains below.
- Firefinch Ltd finished 3.05% higher.
- Paradigm Biopharmaceuticals Ltd finished 4.56% higher.
- Hartshead Resources NL finished 16.67% higher.
- Anson Resources Ltd finished 7.69% higher.
- GTI Energy Ltd finished 3.13% higher.
- Chase Mining Corporation Ltd finished 7.14% higher.
- Creso Pharma Ltd finished 3.77% higher.
- Azure Minerals Ltd finished 1.92% higher.
- Clearvue Technologies Ltd finished 10.53% higher.
- International Graphite Ltd finished 3.51% higher.
- Aruma Resources Ltd finished 32.84% higher.
- Critical Resources Ltd finished 1.27% higher.
- Alkane Resources Limited finished 6.7% higher.
- Meeka Gold Ltd finished 4.92% higher.
- Archer Materials Ltd finished 13.89% higher.