Yesterday, the Australian share market witnessed an event that has not been seen since 2010. For more than 11 years the cash rate has been falling, but now investors are grappling with rising interest rates and their impact on ASX shares.
The Reserve Bank of Australia (RBA) made the call to bump the cash rate up to 0.35% amid higher than expected inflation numbers. While the response had been anticipated for some time, the S&P/ASX 200 Index (ASX: XJO) still slipped on the news.
Now, the challenge for market participants is to find the opportunities that might arise from this situation.
Why certain ASX shares might get a boost
Over the years, interest earned on cash has faded away to the point of being a negligible amount. However, with Governor Philip Lowe remarking that the cash rate could reach 2.5% over the next couple of years, the potential for earned interest is looking more appealing.
The balance sheet of a company has always been important but if rates continue to rise, they might become even more important. In short, debt will become expensive and cash will receive a greater return.
For this reason, let’s review three ASX shares with little to no debt and a tonne of cash stashed away.
IGO Ltd (ASX: IGO)
The first ASX-listed share on our list is also one of the most loaded up with cash. With around $440 million at the end of the March quarter, mining and exploration company IGO holds a considerable amount of cash with zero debt.
In addition, the battery metals miner recorded a solid quarter recently in terms of net profits after tax (NPAT). During the third quarter, IGO raked in $133 million in earnings, representing an increase of 154% from the previous quarter.
Zimplats Holdings Ltd (ASX: ZIM)
Another ASX share that could be set to capitalise on higher interest rates is Zimbabwean platinum metals group miner Zimplats.
According to the half-year report, the company had approximately US$429 million (A$603 million) in cash and cash equivalents at the end of December. Meanwhile, Zimplats’ debt level is non-existent with $0 owing on the balance sheet.
In the latest quarterly report, Zimplats managed to increase production by 6% while costs only climbed 2% higher.
GQG Partners Inc (ASX: GQG)
Lastly, our final ASX share that could be set to earn some extra interest is boutique asset management firm GQG Partners.
To be clear, this company does not hold hundreds of millions in cash like IGO or Zimplats. Though, at $78.1 million of cash and $0 of debt, the financial operator is still poised to benefit from higher interest rates.
This would be a pleasant turn of events for GQG shareholders, considering the share price is down 15% year-to-date.