Global markets sold off overnight as technology shares pulled back sharply following a -7% fall in Facebook shares.
Facebook's shares sank after reports that its user data was misused led to concerns over broader privacy violations and sparked a sell-off in technology stocks. Tech companies all use data one way or the other as part of their businesses and the concern is around potential regulation on the sector and more scrutiny around how data is used. We would point out that the Tech sector has been the best performing sector in the US by some margin, and the bar for investor profit taking would likely not have been high.
The key event for the week remains the US Federal Reserve's next interest rate announcement, as the Fed begins its two-day policy meeting tomorrow.
Stock in Focus: Sydney Airport (SYD:AX)
Sydney Airport (SYD) shares have been on a decline over the last few months primarily due to concerns around global interest rates rising (which implies a lower valuation for the airport and reduces the relative attractiveness of the stock as a dividend yield investment). The moves have come despite SYD once again recording passenger numbers. We continue to favour the tourism sector as an investment given the current tourism boom across Australia & NZ, with Airports and Airlines being clear beneficiaries of the tourism tailwind.
Sydney Airport released another sound result for the 2017 financial year. Australia’s gateway airport experienced strong international passenger numbers of 15.9m up +7.2% from last year, which was predominately driven by growth from Asia and America. As a result, total revenue for the period rose +8.7% to $1,483.3m, and operating earnings (EBITDA) also increased in-line with revenue growth up +8.3% to $1,198.9m. Management also announced their full year dividend of 34.5 cents per share, which continues to rise year on year.
We currently have a BUY rating on SYD.
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Australia & New Zealand Market Movers
The Australian share market ended a choppy session on a mildly positive note (ASX 200 index +0.17%) as energy firms and miners hauled the benchmark higher. Investors welcomed some upbeat economic data and as oil rose sharply provided a firm base for ASX gains with Australian investors buying energy and resource companies such as Woodside Petroleum, Santos, and Origin Energy. However, the banks lost ground on Monday as the sector continues to face scrutiny from the ongoing royal commission into the financial sector.
The New Zealand market made a small gain on Monday (NZX 50 index +0.18%) with Kathmandu Holdings up and Sky Network Television continuing to bounce while Chorus and Comvita fell. In stock news, Spark New Zealand launched a pilot programme for fifth-generation mobile technology framework, known as 5G. The pilot will run for a month, giving Spark information to further refine how to build a 5G network in a real environment, and it will set up a 5G lab later this year to use the data to help build businesses and applications based on the new technology.
3 Things Markets Will be Watching this Week
1. Global politics remain in focus as details around trade tariffs to be implemented by the Trump Administration are announced.
2. The US Federal Reserve makes an interest rate decision Thursday morning (AU/NZ time).
3. The Reserve Bank of New Zealand also Reserve makes an interest rate decision Thursday morning..
Have a Great Day,
Team