Global markets were higher overnight, with Wall Street’s main indexes rising as Apple and chipmakers boosted technology shares, while higher oil prices lifted energy companies.
In global stock news, Apple is attempting to reintroduce itself as an entertainment and financial services company that also makes iPhones as it launched a streaming television service, a credit card and an online gaming arcade. It will be interesting to see how dominant players such as Netflix respond, particularly given Apple has very deep pockets to fund expansion & develop/buy programming content. It also presents yet another potential headache for pay TV operators such as Sky TV.
Stock in Focus: Lynas (LYC:ASX)
The big gainer on the ASX yesterday was rare earth miner Lynas, which saw its shares jump +35% on the back of a takeover offer from conglomerate Wesfarmers (which saw its shares drop on the news, as Wesfamers is putting to work some of the cash it received from the demerger of Coles). Lynas have said they are assessing the proposal, which was unsolicited and highly conditional, and non-binding .
We are clearly pleased with the announcement as Lynas shares had taken a hit since we initiated research coverage, after the Malaysian government ordered it must remove the radioactive waste that it had accumulated due to its activities over the past six years if it wants to continue operating in this country and extend its license. Wesfarmers have clearly seen an opportunity.
In our view, Lynas provides an attractive investment for those wanting to gain indirect exposure to the electric vehicle (EV) theme – which is a strong multi-year tailwind as the rare earth minerals it mines are a key component of EV’s. However, as a miner of a commodity it is exposed to pricing risk, and the hazardous nature of processing the rare earths means it is also prone to regulatory risk (which has been highlighted in recent times).
We currently have a BUY (high-risk) recommendation on Lynas.
Members should look out for a full update on Lynas to be released in next week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was a touch higher yesterday (ASX 200 index +0.07%) as the ASX stabilised, with investors pausing after pushing the market sharply lower at the start of the week. By sector, consumer discretionary firms, banks and energy companies declined but gains for miners, real estate companies and industrials lifted the benchmark to its small overall gain. Coles Group climbed after the supermarket group entered into an exclusive services agreement with Ocado Group to create an automated fulfilment and home delivery solution to Australia by the 2023 financial year.
The New Zealand market was higher on Tuesday (NZX 50 index +0.58%) as the defensive companies offering stable dividends found favour with investors. Genesis Energy was among those beneficiaries, hitting a record high. In stock news, retailer Kathmandu fell after reporting a 14 percent gain in first-half profit as improved margins, the Oboz acquisition, and a tax refund offset flat sales in New Zealand and Australia. QEX Logistics climbed after signing new distribution deals with Open Country Dairy and Swisse Wellness.
3 Things Markets Will be Watching this Week
- Signals around the health of the global economy will remain a focus for investors.
- US economic growth (GDP) figures are published Thursday night (AU/NZ time).
- The Reserve Bank of NZ makes an interest rate decision on Wednesday.
Have a Great Day,
