The overwhelming trend of October trading will be defined by access to credit. Since March, the Federal Government has intervened many times in the economy. This has included loan payment deferrals, wage subsidies, rent deferrals, and bankruptcy protection. The S&P/ASX 200 Index (ASX: XJO) is likely to be rocked as the Government looks to reduce dependence on government funding.
For example, Federal Treasurer Josh Frydenberg has made two dramatic changes in the past few weeks. First, bankruptcy laws have changed to help companies trade out of insolvency. The changes to responsible lending are, of course, the second. Consequently, I expect to see higher levels of credit and spending. Furthermore, and likely to be the biggest impact, is the reduction to wage subsidies and JobSeeker payments.
Wage subsidies
Reductions in government payments will have many impacts. For example, revenue for ASX 200 discretionary retail companies like Premier Investments Limited (ASX: PMV) is likely to be lower. Nevertheless, buy now, pay later transactions through companies like Zip Co Ltd (ASX: Z1P) will increase as people use BNPL companies to extend their purchasing power.
One of the companies that I believe will see higher activity is Credit Corp Group Limited (ASX: CCP). On one side, the company is likely to see higher loan volumes through its series of payday lending companies. On the other hand, it will see a further rise in companies looking to sell bad debts.
Easier credit
The big ASX 200 winners here will be those directly involved in the mortgage or car sales markets. Starting in October with ASX 200 shares like Westpac Banking Corp (ASX: WBC) potentially seeing a rise in share price. Moreover, companies like Carsales.Com Ltd (ASX: CAR), and REA Group Limited (ASX: REA) should also see increased sales volumes. Lastly, building materials firms like Boral Limited (ASX: BLD) or James Hardie Industries plc (ASX: JHX) will see sales start to ramp up as housing starts to turn.
ASX 200 bankruptcy protection
Treasurer Frydenberg has flagged a change in bankruptcy laws. This provides companies with debts less than $1 million 20 days to restructure debts, followed by 15 days for approval. During this period, the business owner would also have protection from unsecured and some secured creditors. This is likely to impact ASX 200 shopping mall operators such as Scentre Group (ASX: SCG) and Vicinity Centres (ASX: VCX).
It means a second opportunity for many of their tenants, thus saving money on re-tenanting, shop repairs, as well as keeping vacancies low.
