Global stock markets have witnessed some unprecedented times in the history of stock trading. Sky-high volatility in the market and grounded investor confidence due to the uncertainty surrounding the COVID-19 formed the basis for such times of crisis.
Investors, as well as companies, have undergone severe misery in recent times and stock markets across the globe were shaken and lost trillions of dollars of earnings. Liquidity crisis and maintaining strong financial performance were significant challenges for the companies. However, some ASX-listed companies were able to defend themselves from the threat through specific measures, including substantial capital raising, technology evolution, and many more.
Several companies have witnessed progressive growth even in the times of an economic standstill due to their unique offering through online platforms and technological evolution. They have adapted well to the lockdown norms and guidelines to maintain continuity in their operations, and now that the measures are expected to ease, and businesses are set to reopen, things are likely to get better for these companies.
Ever since the crash due to the outbreak of COVID-19, the benchmark index has bounced back significantly and settled at 5,384.6 points on 06 May 2020. The investors, whose confidence in the market was jolted due to the coronavirus outbreak, have been waiting to return to the market. Companies have been working to boost investor confidence and save themselves from crisis through capital raising and posing robust balance sheets.
Let us look at some of the critical measures that have shielded many ASX stocks from the crisis in recent times.
Australian companies rushed to raise money last month and raised $13. 8 billion, up 185% on the previous corresponding period, in April alone in a wave of capital raising during the pandemic-created crisis. However, total capital raised in March 2020 was $4.2 billion, down 22% on the previous corresponding period.
Companies have been wanting to tap investors for cash as businesses remain under or unoperated, and the uncertainty continues. The month of April saw seven new listings that collectively raised $97 million. As we look at the capital raising declarations from the companies, we find considerable support from the institutional as well as retail investors. This, once again, has proven that ASX investors have been eager to jump into almost every fundraising offer made till date.
Companies have raised enough funds to navigate through these unprecedented times by meeting working capital requirements and fortifying their financial position.
Technology has played a pivotal role for businesses to keep their employees in jobs by empowering them to work from remote locations as well as keep the business up and running at a time when workplaces are shut. Moreover, other companies driven by technology solutions have witnessed a considerable rise in their users, like Afterpay Limited (ASX:APT). APT is a Buy Now Pay Later service provider that has benefitted from the social distancing policies during the COVID-19, that demanded contactless payments, and achieved underlying sales at $7.3 billion on year to date basis, growing 105% compared to the prior corresponding period. Moreover, active customers jumped to 8.4 million as on 31 March 2020 from 3.8 million on 31 March 2019 reflecting a growth of 122%.
Moreover, video conferencing platform service providers, as well as cybersecurity firms, have also witnessed significant growth during these uncertain times as demand for technology-driven services saw a massive rise.
As businesses were ordered to shut their physical stores, and services related to essential needs were open, businesses saw a shift in consumer behaviour to buy products through online platforms. With social distancing measures in place, the retailers saw a massive increase in online orders and had to increase the labour force to meet the delivery targets for these orders.
As customers are following the guidelines to stay at home, retailers like Domino’s Pizza Enterprises Ltd (ASX:DMP) have observed a significant shift to food delivery in all its operational markets. Since the customers are now replacing their takeaway meal with Zero Contact Delivery, the retailer has been hiring a higher number of team members to support the change.
Efforts on Lockdown
As lockdown was imposed and the directions issued by the government required people to stay behind closed doors and operate businesses by staying at remote locations, the businesses have been making efforts to cope with the impact of the lockdown. Although essential businesses remained open, yet it required several safety protocols to establish in the workplace for ensuring the health and safety of workers as well as customers.
Several businesses, especially retailers, have emerged with innovative techniques to tackle the disruptions that could have had a severe impact on their day to day functioning. For example, companies are providing safety kits to the employees, ensuring contactless delivery, maintaining minimum distance among the customer and employees as well as among employees.
These extraordinary times require businesses to be highly adaptive and respond in a well-thought manner that offers maximum safety and security to its employees as well as customers. With the decreasing number of COVID-19 infected cases, we might witness easing in the lockdown restrictions in Australia as has been the case in several countries.
Being adaptive and responsive to the situation in every possible manner can help the ASX-listed companies to thrive in their operations. For example, the change in the shopping behaviour of people to shop online is likely to remain even after the lockdown is lifted. Therefore, identifying and adapting to such fundamental shifts shall play a pivotal role in successful endurance of the businesses in upcoming times.
Diversification is a well-pronounced technique of minimising the risk exposure of assets by distributing investments among various financial instruments, industries, and other classes. Investors with a reasonable level of diversification have managed to sail through the current tough times by minimising their exposure to risk assets.
While diversification does not guarantee complete immunity against losses, numerous investment professionals have formed a consensus that diversification if one of the most essential elements of minimising risk and arriving at long-term financial goals.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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