Global markets continued to sell-off overnight as rising geopolitical tensions spooked investors away from equities and the extended US-China trade war stoked fears of impending global recession.
In Hong Kong, increasingly violent demonstrations have plunged the Chinese-ruled territory into its most serious crisis in decades, presenting one of the biggest popular challenges to Chinese leader Xi Jinping since he came to power in 2012. Flights out of Hong Kong were cancelled Monday after thousands of protesters packed the arrivals and departure areas.
Stock in Focus: Fonterra (FSF:NZX / FSF:ASX)
Dairy giant Fonterra saw its shares fall further as it is forecasting another big loss as it writes down the value of under-performing overseas assets. The co-operative is forecasting a loss of between $590 million and $675 million for the current financial year.
FSF will realise $820-860m of asset write-downs and cut the 2019 financial year dividend to zero. The company’s new strategy will be presented in September. While FSF will likely signal an exit from some of the businesses being written down, in a number of cases current earnings are likely lower than required to realise book value.
This was another disappointing update as the dairy giant continues to struggle, and we have no confidence in the company or the investment case at the current juncture.
We currently have a HOLD rating on FSF.
Members should look out for a full update on FSF to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was a touch higher on Monday (ASX 200 index +0.09%) extending to four a run of sessions with small gains. Earnings season continued apace, with JB Hi-Fi the day's highlight. The resilient retailer rallied as it continued to defy a soft consumer environment to post a 7.1 per cent lift in annual profits and a higher dividend. Miners were a heavy weight around the index as worries about the dampening effect of the trade war on Chinese demand for iron ore weighed on the bulk commodity's price.
The New Zealand market was flat yesterday (NZX 50 index +0.00%) as Contact Energy met earnings expectations in kicking off the reporting season. Contact decreased slightly after reporting a 12 percent increase in operating earnings and met expectations with a final dividend of 23 cents per share. Outside the benchmark index, Hallenstein Glasson rose after the clothing retailer said annual profit was up by about 2 percent, with sales growth across its Glassons womenswear chain in New Zealand and Australia.
3 Things Markets Will be Watching this Week
- Australasian earnings season kicks into full gear this week with a number of companies set to make profit announcements.
- Employment data in Australia will be released on Thursday.
- US inflation data is published Wednesday morning NZ/AU time.
Have a Great Day,