Global markets were higher overnight as largely upbeat economic data pointed to strength in the US economy and investors cheered Treasury Secretary Steven Mnuchin’s positive comments on tax reform.
Positive data out of China also helped create further positive momentum across the metals sector. All eyes will be on important monthly US employment and manufacturing data to be released tonight.
For the month of August, the Australian market (measured by the ASX 200 Index) was basically flat (down -0.1%), while the NZ market (measured by the NZX 50 Index) gained 1.6% over August.
Stock in Focus: Harvey Norman (HVN.AX)
Harvey Norman’s share price has tumbled -7% yesterday following the release of its full-year result. Although net profit after tax increased 28.8% to $448.98 million, the retailer surprised investors with a cut to its dividend which was not received well by investors.
HVN has cut its final dividend to 12 cents per share, down from 17 cents per share for the same period last year. A key driver of Harvey Norman’s profit growth was the big improvement in the performance of its retail operations in New Zealand, Singapore, Malaysia, Ireland, Northern Ireland, Slovenia and Croatia, which made the dividend cut even more surprising.
We have previously noted that we are very cautious on the outlook for Harvey Norman and would avoid the stock, particularly given the Australian Housing market looks to have peaked, and with the arrival of Amazon into Australia creating uncertainty across the retail sector.
We are currently SELL rated on Harvey Norman. Members should look out for our full update on Harvey Norman to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market made gains yesterday (ASX 200 index +0.79%) as reporting season comes to a close.
Among stocks to make announcements yesterday were data centre company Next DC, and live export business Wellard. Next DC jumped +7% as it posted an impressive 77% increase in operating earnings to $49m which was at the high end of management guidance. Wellard shares recovered +9% yesterday as it announced a large $77m loss for the financial year, although it had already issued an earlier profit warning which had flagged the result given extremely difficult trading conditions.
The New Zealand market rallied on Thursday (NZX 50 index +0.54%) with Sky Network Television and Contact Energy gaining while Chorus hit a five-month low. In other news, Smartpay Holdings, a listed payment terminal supplier, is considering a proposal from Pemba Capital Partners which would see the Sydney-based investment firm buy all its shares at an 11% premium. Its shares gained +9.5% yesterday.
3 Things Markets Will be Watching this Week
1. Corporate profits will be in focus as earnings season continues across Australia and NZ.
2. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
3. Closely watched monthly US employment and manufacturing data is released at the end of the week.
Have a Great Day,
Team