IGO to Benefit from $23B Investment in ‘A Future Made in Australia’

The recent budget announcement unveiled a $23 billion dollar investment plan titled "A Future Made in Australia," aimed at bolstering domestic manufacturing and fast-tracking the nation's progress towards achieving net zero emissions. Instead of delving into the intricate details of its broader impact on Australia, which will likely unfold over time, the question it raises for investors is which ASX-listed companies will benefit significantly from these transformative policies.

How will IGO benefit from the Government’s initiatives?

One I believe will benefit is IGO, which, if correct, will potentially make it an attractive buying opportunity. This is because the budget has earmarked $13.7 billion for production tax incentives in critical minerals processing, which is great news for IGO, given its involvement in mining and processing crucial minerals like nickel and copper.

To further sweeten the deal, a significant portion of the budget, approximately $19.7 billion, will target initiatives promoting renewable energy, including tax breaks for lithium-ion investments. This aligns perfectly with IGO's joint venture with Tianqi Lithium Corporation, which specialises in lithium mining and refining, making the recent budget announcement seem tailor-made for IGO.

Looking at the share price, despite IGO's prolonged market underperformance, characterised by a decline of over 60 per cent from its all-time high in November 2022, the recent budget announcement has the potential to signify a turning point for this company.

The price of IGO appears to have stabilised at $7; therefore, I am keenly waiting to see signs of an upward movement in price. More specifically, if the price can rise above $9, then it will be time to start taking this stock seriously. So, keep a vigilant eye on IGO, as momentum may soon sway decisively to the buyers.

What were the best and worst-performing sectors last week?

The best-performing sectors included Consumer Discretionary, up 3.23 per cent, followed by Materials, up 2.49 per cent, and Consumer Staples, up 1.42 per cent. The worst-performing sectors included Energy, down 3.59 per cent, followed by Industrials, down 1.82 per cent, and Information Technology, down 0.77 per cent.

The best-performing stocks in the ASX top 100 included Aristocrat Leisure, up 17.40 per cent, followed by Bendigo & Adelaide Bank, up 8.06 per cent and A2Milk up 7.50 per cent. The worst-performing stocks included Reece Limited, down 4.82 per cent, followed by Whitehaven Coal, down 4.74 per cent and NIB Holdings Limited, down 4.29 per cent.

What's next for the Australian stock market?

Last week, the All-Ordinaries index rose again, closing over half a per cent up by weeks end. This is great news, especially after the previous week's nice rise, as it showcases that the strength of buyers may be here for the longer term. In my previous report, I highlighted the resurgence of buyer dominance was particularly evident after finding support at the critical 7,800 level. However, despite this support, uncertainty loomed, given that last week marked the first up week since late March.

So, with the continued momentum from buyers last week, it's becoming increasingly evident that we're on the brink of breaking the all-time high in the next week or so. Additionally, while I previously entertained the possibility of a mid-year low in May or June, the current strength of buyer activity suggests otherwise. It's now more plausible that April marked our mid-year low, signaling a potential entry into the next bullish phase—a particularly thrilling prospect.

Considering this development, the crucial question arises: what lies ahead as we venture into uncharted territory? While I've previously identified 8,200 to 8,400 as probable next targets for our market, it's imperative to closely monitor the reaction of the All Ords when it breaks the all-time high. This will offer insights into the level of bullish sentiment that we can anticipate heading into the third quarter, which historically is a period marked by market declines, notably into September or October.

If the market breaks above the all-time high and maintains its strength beyond June, the next significant market falls will likely be postponed until September to November. Therefore, if you haven't already prepared to seize the market opportunities that will present, now is the time, or you risk missing out on one of the few significant buying opportunities remaining this year.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.