Banks Bounce Back | Select Harvests

1 June 2020

Global markets were higher overnight with the US market (S&P 500 +1.4%) climbing as gains were again led by bank stocks. Banks have powered higher as investors rotate into "value", with the S&P 500 financial sector index up +10% over the last two days. Meanwhile, Walt Disney announced plans to begin reopening its Walt Disney World resort in Florida, the world’s largest theme park, in phases beginning July 11, and MGM Resorts said it would reopen its four Las Vegas casinos on June 4.

While the rally may continue, at current heightened valuations we caution investors not to get too optimistic. The market appears to have priced in a lot of near-term positivity, and is not discounting much for near-term risks.  

Select Harvest (SHV:ASX)

Australian almond producer Select Harvest (SHV) shares were down after delivering their first half result of the 2020 financial year which missed the markets optimistic expectations which saw net profit after tax fall -13.4% from last year down to $17.4m, due to challenging drought conditions and disruptions to supply chain caused by covid-19. Prior to this SHV shares held up reasonably well after announcing its facilities and almond harvest would continue to operate as usual and was exempt from state and federal government lock down restrictions.

Part of the recent sell off is also attributed to California reporting a strong almond harvest after experiencing near-perfect growing conditions which is likely to create some pricing pressure (with California being a major almond producing region).  

We currently have a High Risk BUY recommendation on SHV


Australia & New Zealand Market Movers

The Australian market  (ASX 200 Index -0.1%) edged lower, as recent market winners (Healthcare and miners) were sold off by institutional investors to make room to pump $17.8 billion across the banking sector which had been heavily sold off. Banks were recently underweight and positivity around Australia's' economic recovery and lower than expected jobkeeper payment meant investors saw risks associated with the banks as being reduced. 

The New Zealand market closed higher on Wednesday (NZX 50 +1.2%), led by Mainfreight which jumped up +13.9% after maintaining its final dividend and reporting a small increase in its annual underlying earnings. The market had anticipated worse for the logistics company, which has managed to weather the covid-19 crisis relatively unscathed, with some weakness across the Americas, but activity across NZ Australia, Asia and part of Europe were surprisingly positive. 

Travel and tourism related stocks continued to recover as investors speculate the possibility of  a trans-tasman bubble may arrive earlier than expected.

3 Things Markets Will be Watching this Week

  1. ​​Covid-19 and US-China trade tensions are likely to once again dominate headlines.
  2. 1st quarter GDP, Consumer confidence and housing data (new and pending home sales) in the US dominates the data flow this week.
  3. Locally, earnings are due from Mainfreight, Goodman Property, Sanford, Infratil, Gentrack, Tilt Renewables and Napier Port.


Have a Great Day,


Banks have powered higher as investors rotate into "value", with the S&P 500 financial sector index up +10% over the last two days.

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