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10 shares to watch this reporting season

Posted: 7 July 2022 3:00 pm
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With reporting season fast approaching, these are the 10 ASX shares you need to keep an eye on.

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As we enter the new financial year, Australia's main index, the ASX, is experiencing a period of volatility.

Inflation fears and interest rate rises were the catalyst for the recent bloodbath, but there's one other big factor that's sure to contribute to a volatile market in the coming weeks and months: reporting season.

IG's market analyst Hebe Chen points out to Finder that nobody can predict the future direction of the economy and that investors should instead focus on what they own.

"A sound strategy to keep your head above water during rough times is to dismiss all such forecasts and concentrate on what's actually happening to the companies in which you've invested," she says.

The state of the market

This reporting season takes place during an already rocky time for global share markets. The ASX's June plunge came hot on the heels of May consumer price figures from the US, which were higher than many expected and plunged the S&P 500 into a bear market.

Inflation is the word on every investor's lips, with falling consumer sentiment and high oil and gas prices continuing to drive market uncertainty. The Westpac-Melbourne Institute index of consumer sentiment dropped 4.5 percent to 86.4 in June, its lowest level since the COVID-19 pandemic and the Global Financial Crisis.

As a result, Australia's central bank, the RBA, is expected to keep the rate rise cycle rolling with another five to six hikes to push the interest rate above 3% by Christmas this year. Similarly, policymakers around the world are implementing a raft of measures to put the brakes on rising prices and potentially trigger a global recession.

Trading opportunities to watch this reporting season

While the outlook for global markets may be murky, it's not all doom and gloom. Even in a bear market there are opportunities.

"During difficult times in recent history, there are often a handful of stocks that outperformed the major index", Chen explains.

However, she goes on to state that Australia's market has shown resilience in the past even through rough periods.

For example, the ASX 200 jumped up 30% in 2009 after the bear market in 2008 and kicked off a decade-long bull run," Chen continues.

"And this is especially so during reporting season, when the market can overreact to positive or negative news. As a result, heightened volatilities would have the potential to offer diverse trading opportunities. Apart from the share trading, traders may choose to exercise CFD trading to profit from either long or short positions."

For now, if you can stay abreast of economic and financial news in Australia and around the world, you'll be well placed to take advantage of the opportunities presented by reporting season.

[Sponsored] If you're ready to make a move this reporting season, IG has a special offer for customers who create an IG share trading account. Until the end of August 2022, you can trade Australian shares for a commission from just $2.50. T&Cs apply. Learn more at IG.

But regardless of whether you're looking to trade right now or in the heart of reporting season through August and beyond, which ASX shares should you keep an eye on in the weeks and months ahead?

Let's take a look at the top 10 shares to watch based on their popularity among IG traders.

Mining

Rising electricity prices could impact the bottom line of Australia's major miners in coming times, while fears of a global recession could reduce demand for commodities. But in positive, the exceptional high yield from the major miners is often viewed as a strong advantage among long-term and dividend investors, especially when the economy is in the doldrums.

BHP Group Limited | ASX: BHP
Mining giant BHP is the largest company on the ASX in terms of market capitalisation and has outperformed the ASX 200 index YTD. While the ASX 200 has fallen more than 12.5% as of June 16, BHP's share price has risen by 4.27%
BHP made headlines in May this year after shareholders approved the merger of its oil and gas portfolio with Woodside Petroleum, a move to further consolidate its market-leading position.

Fortescue Metals Group Limited | ASX: FMG
WA-based Fortescue Metals Group has also trended slightly upwards in 2022, rising 1.01% YTD. One of the world's largest producers of iron ore, Fortescue announced in May this year that billionaire founder Andrew 'Twiggy' Forrest will take the reins as executive chairman of the company's iron ore business in August.

Energy

Companies that provide essential infrastructure services are always an option worth considering in an uncertain market. However, fuel demand worries thanks to rising oil and gas prices and the ongoing energy crisis could impact the performance of shares in the energy sector.

AGL Energy Limited | ASX: AGL
The AGL share price has enjoyed sizable gains in 2022, up over 33% YTD. The biggest news surrounding the company has of course been the impact of tech billionaire Mike Cannon-Brookes, who launched two rejected takeover bids for AGL earlier in the year.

But looking passed the current issues, AGL as Australia's leading integrated energy company has its unique stand in an industry that is heavily regulated with limited competition, which is often viewed as a strong defensive character.

Consumer staples

In times of uncertainty, consumer staples stocks have the potential to deliver better returns than much of the rest of the market.

Wesfarmers Limited | ASX: WES
Headquartered in Perth, Wesfarmers is the company behind a host of well-known retail brands including Bunnings, Kmart, Target, Officeworks and Priceline.

Wesfarmers shares are down over 30% YTD. Trading at $41.79 at the time of writing, the share price has dropped significantly from its August 2021 high of over $67 a share. But IG analyst Hebe still feel positive about the company's outlook as: "While the company is facing the headwinds from the soaring inflation and cost pressure, from a long-term perspective, the services, and products it provides remain firmly on top of the priority list for every single Australian family during the downtimes."

Woolworths Group Limited | WOW
The company behind Woolworths supermarkets and Big W has a market capitalisation of $40.42 billion. In May 2022, Woolworths Group announced that it had acquired an 80% stake in online retailer MyDeal.com.au. Woolworths shares are down 13.34% YTD. It has a 52-week low and high of $33.20 and $42.66, respectively.

Technology

2022 has been a tough year for tech shares, with the S&P/ASX All Technology Index down 39.76% YTD. Higher interest rates spell bad news for growth stocks, so the RBA's rate rise could have repercussions for some tech sector companies.

BrainChip Holdings Limited | ASX: BRN
BrainChip is a developer of neuromorphic AI computer chips. With products targeting the automotive, industrial, and home electronics sectors, the company has seen its share price increase substantially since a value of $0.04 in 2020.

BrainChip shares are up 9.49% YTD, with a 52-week low and high of $0.365 and $2.34, respectively. It has a market cap of $1.48 billion.

Zip Co Limited | ASX: ZIP
Buy- now- pay- later company Zip Co was founded in 2013. Headquartered in Sydney, Zip's shares are down 87.94% YTD, with the company hampered by cost-of-living pressures and interest rate rises. Shares in the company fell by a whopping 15% amid the market chaos of June 14 this year, and factors such as increased competition and regulatory scrutiny could also impact their recovery.

Travel

After the COVID-19 pandemic, Australians and people all around the world are ready to travel once again. Although high interest rates can increase the cost of doing business for airlines, and rising cost of living could impact down the recovery pace for the travel sector, the strong appetite for the long-missed holiday still surprise the market. The total overseas departure number has tripled during the past six months and is expected to keep increasing by 10% every single month towards the end of the year.

Qantas Airways Limited | ASX: QAN
Australia's flag carrier can trace its roots all the way back to outback Queensland in 1920. Today, Qantas flies to over 65 destinations around Australia and points all over the globe, plus operates the subsidiary Jetstar low-cost airline.

Qantas shares have fallen 10.68% YTD, with a 52-week high of $5.97 and low of $4.20. Like many shares in the travel sector, they were hit hard by the news of the latest US inflation figures and speculation surrounding rate rises.

Flight Centre Travel Group Limited | ASX: FLT
Headquartered in Brisbane, Flight Centre is one of the world's largest travel companies with operations in 23 countries. The company made headlines this month when it announced it would gift an additional share rights to employees around the globe as part of a $30 million staff retention program.

Flight Centre shares are down 7.44% YTD, with a 52-week low of $13.67 and high of $25.28.

Finance

The spectre of rising interest rates has been a major force driving the financial sector in recent weeks. In theory, higher interest rates would be in favour by banks while lifting their net interest margins and net profit after tax, and that in turn could benefit their share prices. Although higher interest rates could hurt the bank with potential higher debts, but in the long run, the sectors' stability (especially the top banks) and their high yield still attract eyes from the long-term investors.

Commonwealth Bank of Australia | ASX: CBA
CommBank is the largest of Australia's "big four" banks and has a market capitalisation of $155.16 billion. Headquartered in Sydney, it also operates in Asia, North America, the UK, Europe and New Zealand. CommBank is currently carrying out a $2 billion share buyback to reduce excess capital.

CBA shares are down 11.75% YTD, with a 52-week high of $110.19 and low of $88.44.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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