The fall in oil price futures overnight has added to the range of issues setting the ASX trends for next week. In addition, the federal government will unveil its budget next week. Consequently, I expect several market forces to buffet the share market. These include changes to Australian government subsidies, relaxed responsible lending laws, uncertainty surrounding the United States and loosening COVID-19 restrictions.
ASX trends in defence spending
Much of the defence spending over the next decade has already been announced. However, it will highlight recent discussions with Electro Optic Systems Holdings Ltd (ASX: EOS), and Orbital Corporation Ltd. (ASX: OEC). Meanwhile, aside from domestic spending, purchases continue to roll in from overseas. Just yesterday, DroneShield Ltd (ASX: DRO) announced an additional contract with one of the ‘Five Eyes’ nations.
I think all of these companies are potential options to buy early next week. They are well priced and I believe the ASX trend of high global defence spending is going to be with us for a long time to come.
Formalised responsible lending changes
The proposed changes to the responsible lending laws are likely to be a game changer for the nation in our battle against the economic impacts of COVID-19. This ASX trend is likely to impact the share price of companies in lending or building residential houses. On the development side, I expect to see a big impact to blue chip companies like Stockland Corporation Ltd (ASX: SGP) and Mirvac Group (ASX: MGR).
In the area of mortgages, I tend to shy away from the banks. These companies continue to face headwinds from loan defaults and regulator imposed constraints to dividend payout ratios. However, mortgage brokers like Mortgage Choice Limited (ASX: MOC) are likely to see increased interest from this ASX trend. So too non-bank lenders like Resimac Group Ltd (ASX: RMC).
The opening borders
Queensland opened its borders to New South Wales again yesterday, sparking a flurry of activities across the borders. Furthermore, today there is talk of re-admitting students, and opening flights to New Zealand. I think the obvious implications for the ASX surrounding this trend will be for travel and tourism shares. For example, companies like Alliance Aviation Services Ltd (ASX: AQZ), or Event Hospitality and Entertainment Ltd (ASX: EVT) are likely to see an immediate impact.
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Daryl Mather owns shares of DroneShield Ltd and Electro Optic Systems Holdings Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited and Orbital Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. 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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