ASX small-cap sector rallies strongly during April

The Australian small-cap sector performed particularly strongly during April. Here we examine what was behind this strong market rally.

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The ASX saw particularly strong growth during the month of April, following the lead of global markets, as the number of active coronavirus cases locally started to ease.

The Australian small-cap sector performed especially well last month. The S&P/ASX Small Ordinaries Accumulation Index was up strongly by 14.3%, driven by share price growth across a number of industry sectors.

Investment fund manager Perennial recently released its latest monthly report, citing regenerative medicine company Mesoblast Limited (ASX: MSB) as one of the best small-cap performers. Mesoblast shares rocketed 143% higher during April as the company continues to make good progress in its trials for coronavirus patients suffering from acute respiratory distress syndrome.

Some other ASX small-cap shares that performed particularly strongly in April were ones that had seen heavy sell-offs in March and subsequently rebounded during the following month. These include online lender MoneyMe Ltd (ASX: MME) which was up by 61% and Emeco Holdings Limited (ASX: EHL), an Aussie heavy-duty equipment provider that operates in the mining services sector, up by 39%.

ASX online retail shares rally

Perennial further noted that ASX retailers with a substantial online presence also started to see strong growth. Due to the harsh lockdown restrictions, there has been a surge in online spending at specialist retail sites.

This includes Kogan.com Ltd (ASX: KGN) which saw share price growth of 49% in April. In fact, Kogan shares have rocketed 150% higher since mid-March. The company released a trading update in April, reporting a 30% increase in gross sales and a 23% jump in gross profit during the March quarter. The month of March saw particularly strong growth, with sales increasing by more than 50% on the prior corresponding period.

In other news in the online retail space, the share price of manchester and homewares provider Adairs Ltd (ASX: ADH) was up by 76% during April, while City Chic Collective Ltd (ASX: CCX) rose by 49% as it continued to serve customers with its strong online channels.

Defensive shares appreciated by the market

In addition, there were strong share price rises from some of the more defensive shares in sectors that were caught up in the wider market sell-off despite not having significant direct exposure to the pandemic.

These include broadband provider Superloop Ltd (ASX: SLC), which saw an impressive 41% rally in its share price during April, as well as Integral Diagnostics Ltd (ASX: IDX), which enjoyed a 32% share price rise.

ASX resources sector bounces back

Perennial further pointed out that the small-cap resources sector also rallied strongly during April. This was on the back of heavy recent falls and the release of quarterly production updates. Gold and base metals mining company Aurelia Metals Ltd (ASX: AMI) posted a 38% gain in April, while the larger Sandfire Resources Ltd (ASX: SFR) was up by 37%.

Phil Harpur owns shares of Kogan.com ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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