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DigiCo ASX Debut Amid ASX200 Decline Led by Miners

DigiCo ASX Debut Amid ASX200 Decline Led by Miners

Australian shares slumped to a four-week low as the S&P/ASX200 dropped 47.90 points or 0.58% to 8,282.40 by midday, around 2:00 pm AEDT. Miners led the decline, mirroring weak Wall Street performance, as investors recalibrated expectations regarding interest rates.

Figure 1: ASX200 Performance on Friday, December 13th, 2024

ASX200 Today: Market Declines as Miners Weigh

The ASX200 today faced its largest weekly loss since August, shedding 1.7% since Monday. This followed Thursday’s 0.3% fall, triggered by a strong jobs report that reduced hopes for an imminent Reserve Bank interest rate cut.

Over the past five days, the index has dropped 1.64% and remains 2.73% below its 52-week high. Regis Resources Limited and Vault Minerals Limited were the bottom performers on the ASX200 today.

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DigiCo ASX Listing: Volatility Marks Debut

DigiCo Infrastructure REIT made its ASX debut, marking Australia’s largest IPO in over six years. Priced at A$5 per share, the stock fluctuated between a 2% rise and a 0.8% fall.

The A$2 billion IPO helped elevate 2024’s IPO proceeds to A$2.4 billion, surpassing the combined total for 2022 and 2023, according to Bloomberg data. DigiCo’s listing reflects the growing appeal of the data centre sector amid the artificial intelligence boom.

“DigiCo breathes a little life back into the market and may augur a reawakening in the year to come,” noted Morningstar strategist Lochlan Halloway in a Dec. 5 analysis.

Figure 2: DigiCo ASX Performance on Friday, December 13th, 2024

High Demand for Data Centres

DigiCo’s listing underscores rising investor demand for data centre infrastructure. Companies in this sector are racing to expand their portfolios as artificial intelligence drives global demand.

A McKinsey & Co. report projects global demand for data centres to grow at an annual rate of 19% to 22% between 2023 and 2030.

The DigiCo IPO follows another major transaction in the sector. In September, Blackstone Inc. and the Canada Pension Plan Investment Board acquired AirTrunk in a deal valuing the company at A$24 billion. This marked Blackstone’s largest-ever investment in the Asia-Pacific region.

DigiCo expects to operate 13 properties across Australia and North America. Currently, it holds three properties, according to its prospectus.

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Concerns Over DigiCo Valuation

Despite optimism for the data centre sector, DigiCo’s IPO valuation has drawn criticism. Morningstar valued the stock at A$3.40 per share, 32% below its IPO price.

The listing was spearheaded by HMC Capital Ltd., an asset manager led by former UBS dealmaker David Di Pilla. Following the IPO, HMC Capital retains an 18% stake in DigiCo.

ASX200 Sector and Index Performance

All 11 ASX200 sectors recorded losses today. The materials sector led the decline, dropping 1.93%. Real estate and utilities also fell significantly, losing 0.89% and 0.86%, respectively.

Among ASX200 indices, the ASX 200 Resources Index suffered the sharpest drop, falling 1.73%. The ASX All Ordinaries Gold Index followed closely, declining 2.35%.

Top Gainers and Fallers on ASX Today

Energy Resources of Australia Ltd topped the gainers list, surging 20%. Mesoblast Ltd and Insignia Financial Ltd followed, gaining 10.22% and 8.82%, respectively.

On the flip side, Vulcan Energy Resources Ltd recorded the largest decline, falling 11.30%. Sayona Mining Ltd and St Barbara Ltd also posted significant losses, dropping 7.81% and 7.46%, respectively.

Broader Market Challenges

Investors remain cautious as high interest rates, inflation concerns, and weak commodity prices continue to weigh on market sentiment. IPO activity in Australia has slowed in recent years, impacted by these challenging economic conditions.

While DigiCo’s listing signals growing interest in data centre infrastructure, broader market recovery will likely hinge on economic stabilisation and interest rate clarity.

The ASX200’s decline today reflects ongoing uncertainty, while DigiCo’s volatile debut highlights investor interest in data centres. As markets adjust to economic conditions, sectors like technology and infrastructure may offer long-term growth potential.

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