Global markets were mixed overnight with US and European markets edging higher with most US sectors advancing as the market shifts its focus onto corporate earnings slightly offsetting Coronavirus negativity.
Asian markets continued to slip as investors remain wary of the economic impact of the Coronavirus, as the number of cases outside of China continue to rise. Markets are monitoring the potential restart of Chinese factories and key ports as General Motors will restart production in China beginning 15 February. In the meantime, monetary authorities across emerging markets have stepped in to help shore up the financial system. The People’s Bank of China moved to keep liquidity ample Monday through reverse-repurchase agreements.
Stock in Focus: Delegat Group (DGL:NZX)
Shares in Delegats continue to slide lower largely due Coronavirus scares impacting NZ exporters as well as news regarding oversupply of wine in the US market (largely created by last year's trade war, as China restricted US wine imports).
News released this week showed New Zealand wine exports increased by +8% in 2019, reaching $1.86 billion in export value with the US remaining NZ's largest export market followed by the UK followed by Australia.
The two concerns (coronavirus and US supply gut) appear to be fairly limited to Delegats as China does not represent a significant export market to Delegats yet, and the US market continues to be favourable for Delegats as it focuses on 'Super premium brand', as consumption for imported wines continues to grow in the US.
Delegats are set to report their 2020 first half results later this month and Members should look out for a full update to be released then.
We currently have a BUY rating on DGL
Australia & New Zealand Market Movers
The Australian market was a touch lower yesterday (ASX 200 Index -0.14%) marking a second week of falls on the first day of trade following a weekend dominated by news of the coronavirus outbreak. A number of stocks with an exposure to the outbreak slid, including Flight Centre and Corporate Travel.
The earnings season provided some respite for some investors, as JB Hi-Fi's shares jumped 11.5% to a record high of $44.71 off the back of a strong half-year report card. The electronic goods retailer consolidated its reputation as a top performer in a challenging sector after reporting earnings above market expectations for the six months to December 31 and increasing its full year guidance. This was a stark contrast against the sharp fall fell from building materials company Boral, who's shares fell -10.7% due to costs of "financial irregularities" in its North American windows business, as it overstated its pre-tax earnings by $US24.4 million ($36.6 million) spread across the last two financial years.
The New Zealand market was down (-0.5%) on Monday as investors were unnerved by news that the coronavirus fatality rate passed that of the SARS outbreak. Investors will likely keep a close watch on the reopening of Chinese factories and ports. Tourism Holdings led the market lower as tourism stocks remain under pressure with New Zealand still closed to Chinese visitors. SkyCity Entertainment Group also fell, with the casino operator set to report first half earnings on Wednesday. Contact Energy shares were flat as the company said first-half operating earnings fell 21% amid tight gas supplies and reduced sales volumes to the firm’s commercial and industrial customers. Gentrack broke the trend, as shares in the utility software developer recovered from losses earlier in the year.
3 Things Markets Will be Watching this Week
- Local earnings season starts across Australia & New Zealand this week.
- The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.
- US corporate earnings season gets into its latter stages.
Have a Great Day,
Team
