30 Nov 2021 – Markets Bounce Back | Oceania Healthcare

30 November 2021

Global markets were higher overnight, with US markets (S&P500 +1.5%) recovering from Friday’s sell off as the fear that enveloped markets late last week on reports of a new mutant strain of COVID19 spreading across the world subsided. But Omicron will remain in the spotlight for several weeks, as investors take bets on how much damage it will do to the world economy.

We expect market volatility will remain higher than usual until we get more clarity on this strain of the virus & the read through on vaccine effectiveness which is expected to take weeks rather than days.

All sectors were in the green, as investors favoured the virus immune tech sector leading the market, while travel stocks were up modestly. Moderna’s shares were up +9% after saying that they would have a vaccine for the Omicron variant could be ready by early 2022 – vaccine makers have announced measures to investigate omicron, with testing already underway.

Biden commentated that Covid lockdowns not needed for now and the USD has been well supported, seeing the NZD continue to struggle, going sub-0.68 to a fresh low for the year. 

European Markets (Stoxx 600 index +0.8%) partially recovered, but the bounce was  not as strong as the US, as oil and gas led gains with most sectors trading higher.

NZ will adopt the new traffic light system from Friday, Regions with lower vaccination levels and active Covid-19 cases will start on Red, while other regions including Wellington and the South Island will begin on Orange. Easing restrictions significantly for businesses and individuals who are double vaccinated. 

Oceania (OCA:NZX / OCA:ASX)

Oceania Shares ended the day flat after delivering a solid result for the first half of 2022 financial year despite covid restrictions.

Underlying operating earnings (EBITDA) rose +19.7% from last year to $36.5m, helped by strong sales volumes for both independent living and care suites up +10.6% from the same corresponding period last year and healthy development margins – the only drag was the rise in care expenses. Oceania’s total asset grew +9.7% from last year to $2.1 billion, lifting its net tangible asset per share from $1.20 to $1.27 per share.  

We remain BUY rated on Oceania as the most attractively priced retirement village operator on the NZX trading on just 1x its NTA (net tangible asset value) while also having healthy levels of debt.


Australia & New Zealand Market Movers

The Australian market was down yesterday (ASX 200 index -0.5%) ending the session in a calm tone recovering from a sharp sell-off early in the session, as risks of the new covid variant appear insulated.

While most sectors were in the red, losses were mainly mild other than travel and tourism stocks and retail real estate companies likely to feel the brunt of any restrictions.

Materials and Technology sector ended the day in the green, while Energy sector losses were minimal following a 5% rise in oil price, after initial -13% drop on Friday.

The New Zealand market was down on Monday (NZX 50 index -0.7%), recovering from a harsher sell off early in the session.

Most stocks were weaker, especially tourism facing stocks Air NZ (-3.2%), Tourism Holding (-1.8%), and Sky City (-2.6%). interestingly Auckland International airport ended the day up after initially slumping -3.4% early in the session.

Fisher and Paykel healthcare rose +1.3%, as a likely benefactor if the omicron variant were to spread rapidly.


3 Things Markets will be Watching this Week

  1. Key events this week US nonfarm payroll, the latest CPI data in the Eurozone and PMI data in China.
  2. Developments around the Nu variant of covid will be dominating headlines. 
  3. Locally, Australia’s third quarter GPD numbers and ANZ’s latest Business Confidence reading in NZ. Earnings release from Oceania Healthcare and AGM”s from Lynas, Orocobre, Synlait and Premier Investments. 
We expect market volatility will remain higher than usual until we get more clarity on this strain of the virus & the read through on vaccine effectiveness which is expected to take weeks rather than days.

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