Pavan Sharma

This will be the final daily email of the year returning back mid-January and would like to take this time to wish everyone a Merry Christmas and happy new year.  It has been a volatile year, headlined by out-of-control inflation, aggressive rate hikes by central banks tightening loose monetary policy from the onset of the pandemic to cool demand, while the Ukraine invasion creating added fuel crisis. We believe next year would be another year dominated by more volatility as we see the full effects of the rate hikes play out to cool economic activity with stability in the market still some time away and think a soft landing (which some may still hope for) is now out of the picture. For that reason, we are on a more cautious and defensive position and would wait to see how the next 3-9 months play out before making any major positions.

The New Zealand market (NZX 50 Index, +0.2%) rose marginally on Thursday.  Auckland mayor Wayne Brown caused Auckland International Airport (-0.5%) stock to be placed in a trading halt after making unsubstantiated claims that the company plans to issue more shares to raise capital. Trading resumed after Auckland International Airport refuted the claim.

JPMorgan reported earnings of $3.12 per share, beating the street’s estimates of $2.88. Revenue slightly beat estimates, coming in at $33.29B. Third quarter profit fell 17% YoY as headwinds began to materialise in the company’s business – the bank wrote off $727M in bad debts and took ~$959M in paper losses on stocks.

Aristocrat shares have been slipping lower despite delivering a sound full year result where operating revenue rose +17.7% and net profit after tax rose +27.1% as casinos and travel reopened. Managment also expects to achieve modest growth in 2023, but investors appeared wary given slowdown in digital gaming growth towards the end of the year. 

We downgrade our rating on Argosy to a HOLD despite being attractively valued on a 30% discount to Net Tangible Asset, and much cheaper than office specialist Precinct and Industrial specialist Goodman.

US markets (S&P 500 Index -0.7%) struggled to hold onto gains after, in its final meeting of the year, the Federal Reserve hiked interest rates by half a percentage point(+0.50%), in a move widely expected by the market. The move brings the fed funds rate to a range of 4.25%-4.5%.  

The New Zealand market (NZX 50 Index, +0.8%) experienced a broad-based advance on Tuesday. Pacific Edge (+7.6%) rallied after announcing that new clinical evidence showed significant improvements in the performance of its Cxbladder product and had been accepted for publication in the American Urological Association (AUA) Journal of Urology.  Dairy shares performed well for a second day, with A2 Milk (+2.0%), Synlait Milk (+0.6%), and Fonterra Shareholders’ Fund units (+0.3%) advancing. 

Technical Analysis: Rio Tinto benefitted from strong iron ore boom, and trades in fairly volatile manner. Since the covid sell off its rallied to fresh highs and have been rangebound, being overbought and oversold multiple times, and see current levels (above $155) as an opportune profit taking opportunity and see downside risk from upcoming recession outweigh positivity setting from China reopen currently.

Tower (TWR) shares have held up well most of the year, and managed to delivery a solid result for the 2022, which was flagged earlier. Underlying net profit after tax, with the inclusion of large events, rose +31.2% from last year to $27.3m for the year.