Global markets were generally higher overnight amid a rally in tech and media stocks in New York
The Nasdaq (US Technology Index) closed at a record on Wednesday, lifted by a climb in large-cap tech and consumer discretionary names, while the Dow and S&P 500 were hemmed in as concerns over an escalation in the US-China trade skirmish simmered.
Closer to home, while the NZX is near its all-time high, the ASX is playing catch-up to other markets and hit a decade high as the Big Banks led a market surge yesterday. The financial sector in Australia has been plagued by the royal commission into the sector, and yesterday saw a relief rally with the Banks experiencing solid gains.
Stock in Focus: Telstra (TLS:AX)
Shares in Telco giant Telstra fell -5% yesterday as shareholder hopes that Telstra's strategic announcement would herald a new dawn were dashed the moment the ASX opened for trade on Wednesday morning.
Expectations were optimistic heading into the announcement, which was headlined by Telstra’s plans to split off its infrastructure assets (presumably with a view to offload them altogether) alongside some more cost cutting measures. Telstra’ CEO has promised massive cost savings $2.5bn per year with a plan to cut 8000 jobs, among other things.
As we have highlighted in our previous reports, we believe that the competitive pressures facing Telstra as the incumbent major Telco in Australia may likely be too much to handle. While at face value TLS trades at what appears to be an attractive dividend yield, we are well aware that the level of dividend pay-out may be a one off. While Telstra are cutting costs to offset declining revenue we do not see this as a sustainable answer and something drastic needs to happen to turn things around.
We currently have HOLD rating on Telstra.
Members should look out for a full update on Telstra to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market continued to rally yesterday (ASX 200 index +1.16%) with the ASX playing catch-up to other markets and hitting a decade high. The major banks soared, while Telstra plunged after announcing major job cuts and asset sales. The financial sector in Australia has been plagued by the royal commission into the sector, and yesterday saw a relief rally with the Banks experiencing solid gains. The rally in the bank stocks saw Macquarie hit a record high (Macquarie has been relatively immune to the negative sentiment hitting financials) and the headlines suggest we may be at “peak fear” levels in terns of concerns around the Aussie banks.
The New Zealand market was higher yesterday (NZX 50 index +0.48%) as it recovered from Tuesday’s losses, led higher by Precinct Properties and Westpac. Pushpay made gains a day after the mobile payment app company completed a $100 million bookbuild yesterday, letting executive director Eliot Crowther exit the firm he co-founded. The bookbuild was oversubscribed, with bids subject to scaling, and got offers from 19 institutional investors across New Zealand, Australia and the US. Shares in Synlait Milk were also higher after it said it will develop its second nutritional powder manufacturing factory for an estimated initial capital investment of $250 million at its new Pokeno site in Waikato, which will be commissioned for the 2019/20 season as it aims to keep up with growing demand for infant formula product.
3 Things Markets Will be Watching this Week
1. Investors will be watching the widening trade dispute between the US and China.
2. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday, while NZ economic growth (GDP) data is published on Thursday.
3. OPEC and its oil allies meet in Vienna this Friday and Saturday to review their production agreement..
Have a Great Day,
Team
