The biggest news coming today is that the RBA has decided to keep interest rates low at 0.1%. However, given the strength of Australia’s economic recovery, the bond buying program or Quantitative Easing as it is referred to in the finance world will be scaled back. The RBA has been on a $5 billion a week bond buying program during the past 6 months. Now, the Federal Bank has scaled it back to $4 billion a week, with another review pending in November later this year.
While we should know exactly what the broader market thinks of the change in policy when markets open tomorrow, the ASX declined 0.73% today, as the bears came roaring back following the ASX 200 posting gains initially.
Two shares that are constantly in the news and are subject to high volume trading are BNPL heavyweight – Zip Co. and troubled milk producer a2 milk. These are the top 2 growth stocks on the ASX with Zip growing faster than all its peers and A2M shares starting to move in the right direction once again.
Headquartered in Sydney, Zip Co. is one of the largest BNPL players in Australia. Zip has operations across Australia, New Zealand, South Africa, the United Kingdom, and the USA. With Zip’s acquisition of QuadPay, the firm has entered the highly lucrative North American market. In the firm’s latest quarterly report, Zip US (Quadpay) was again a standout, delivering significant growth in what is typically a seasonally quieter trading period, achieving record results across all core metrics –$762.0m in transaction volume (up 234% YoY), $54.4m in revenue (up 188% YoY) with 674k new customers joining the platform (up 153% YoY to 3.8m customers). The group has had a fantastic quarter with revenue up 80%, transaction volume up 114%, and customer numbers going up by 88% to 6.4 million.
Zip has been subject to lots of attention recently and data reveals that it is also among the top 10 shorted stocks on the ASX. It comes as no surprise given the level of competition with the BNPL sector. However, Z1P has been performing exceptionally recently and they are expanding across all continents. Given the aggressive expansion and if you can stomach the volatility in Z1P share price, this is one of the ASX shares to Buy now.
The a2 Milk Company is a producer of milk containing just the A2 protein by using cows that naturally produce just the said protein. The a2 Milk brand was expanding very quickly across ANZ and parts of SouthEast Asia. Their entry into China proved to be very successful and A2M was growing at over 60% year-on-year. In order to sell in China, A2M relied heavily on the Daigou channel and given that travel has been non-existent between the two countries and with no resumption not in sight, shares began to plunge in early December as soon as the company downgraded its outlook for the financial year once again. The stock has continued to fall in 2021 as things haven’t really gotten better for the Daihou channel.
In the past month, however, A2M shares have finally started to climb up the ladder. The company has been shoring up its marketing department with the addition of Edith Bailey as Chief Marketing Officer. She comes with expertise and experience in the infant nutrition markets of China and SouthEast Asia – markets and segments that are crucial to A2M. Yesterday, A2M confirmed that it has the approvals required to complete the acquisition of a 75% interest in Mataura Valley Milk (MVM), a dairy nutrition business, located in Southland, New Zealand. The transaction is set to be completed in July. A key feature of a2 Milk’s proposed investment in MVM is that MVM’s current majority shareholder, China Animal Husbandry Group (CAHG), will retain a 25% interest in MVM alongside a2MC. CAHG is a wholly owned subsidiary of China National Agriculture Development Group Co., Ltd, which is also the parent company of a2MC’s strategic logistics and distribution partner in China, CSFA Holdings Shanghai, Co., Ltd. (China State Farm).
A2M continues to rely on the re-opening theme and is continuing to push its Chinese segment as it is the most lucrative. With shares trading at a massive discount to the highs of pre-pandemic, A2M is a growth share to buy now, again, if you can stomach the volatility.
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