ASX & NZX Recover | Fletcher’s Fall, A2 Up on China News

23 November 2018

Global markets were mostly lower overnight, in quiet trading given the US markets were closed for Thanksgiving. 

Closer to home, both the ASX & NZX markets snapped their losing streaks yesterday, with growth orientated shares leading gains after being hit hard in recent times. While the NZ market remains one of the only markets to still be up year to date, the Aussie market has not been so fortunate, managing to bounce off a 21-month low yesterday. 

As we discussed yesterday, it is important for medium-term investors to remain calm during periods of heightened volatility. While we do believe there will be buying opportunities across Australia & NZ once the dust settles, investors who wish to protect against downside moves may want to build cash positions. 


Stock in Focus: Fletcher Building (FBU:NZ / FBU:AX)

Shares in FBU have fallen to multi-year lows as they warned investors of weaker than expected earnings for the 2019 financial year.


Their attempts to turnaround the business have hit a speed bump as the slow-down in residential construction activity in Australia came sooner than FBU had initially anticipated. The slow-down in the Australian property market has been well documented. However, with macro factors remaining stable we believe the chance of full-blown collapse are limited. 

In other news, Steel & Tube have rejected FBU’s takeover attempt, which comes as a relief to us – as we believe the takeover attempt did not make sense given FBU’s new strategy to simplify and streamline its business. While there are challenging times ahead, FBU appears to be a multi-year turnaround play from here.

We currently have a BUY (High-Risk) recommendation on FBU. 



Australia & New Zealand Market Movers

The Australian share market bounced on Thursday (ASX 200 index +0.86%) from a 21-month low and ended a four-day losing streak, as lithium miners and major banks led the market higher. Chinese focused consumer stocks were among the best performers on the market after Chinese authorities agreed to delay the implementation of tough e-commerce regulations that had threatened sales into the country. A2 Milk, Bellamy's Australia, Blackmores, and Treasury Wine Estates shares all closed significantly higher.


The New Zealand market snapped a 6-day decline yesterday (NZX 50 index +0.35%) as a revival in global investor optimism boosted beat-up growth stocks such as Tourism Holdings, A2 Milk and Pushpay. Fletcher Building extended its decline. A2 shares rose 5% after saying China's current e-commerce retail import policies will remain in place, something its executive team is confident it can manage. A2 rallied on the improvement in sentiment, and while it is not without risk, it has done a good job in building its Chinese market.

Jeremy , who is part of the team here at , has mentioned A2 in his latest podcast which can be listened by clicking here: CLICK HERE


3 Things Markets Will be Watching this Week

1.              Trade relations between China and the US ahead of the G20 talks later this month.

2.              UK politics and whether Theresa May will face a vote of no confidence and then, what happens if she loses.

3.              Minutes from the last reserve Bank of Australia meeting are released on Tuesday.


Have a Great Day

both the ASX & NZX markets snapped their losing streaks yesterday, with growth orientated shares leading gains after being hit hard in recent times

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