Global markets were mixed overnight as US stocks retraced (S&P 500 Index -0.2%) as investors weighed further positive vaccine news flow from Pfizer/BioNTech and news of fresh restrictions to curtail the spread.
Pfizer announced a final analysis of clinical-trial data showed its Covid-19 vaccine was 95% effective. To date, the vaccine protected people of all ages and ethnicities, with no significant safety problems in a trial that includes almost 44,000 participants. The vaccine’s efficacy in people older than 65 was more than 94%.
A2 Milk (:NZX / A2M:ASX)
The big news locally was the A2 Milk update at its annual general meeting – in which management reaffirmed 2021 financial year profit guidance. A2 shares fell -4.9% despite initially surging higher as the market opened.
It appears some investors had hoped the milk marketer would upgrade earnings and there is scepticism in the market that A2 will not get the second half rebound they are hopeful for. While the update was light on specifics, commentary was consistent with our more positive expectations.
Our base case is that we expect a large second half recovery is achievable thanks to continued growth in China label and improvement in the daigou channel. While there are no doubt shorter term risks, we think there is valuation support, and strong China direct channel sales growth should provide a cushion against what will most likely be temporary disruption in daigou sales.
We will release a full report on A2 in our weekly, but continue to remain BUY rated.
Australia & New Zealand Market Movers
The Australian market was in positive territory on Wednesday (ASX 200 Index +0.5%) as a 6-day coronavirus lockdown of South Australia only mildly concerned investors. South Australians have been told to stay home and many businesses will be closed in an attempt to limit the spread of a COVID-19 cluster in Adelaide.
The banks were the primary driver of the local benchmark's rise after comments from Australian Prudential Regulation Authority chairman Wayne Byres at The Australian Financial Review Banking & Wealth Summit gave investors hopes the dividend-limit guidance would be eased.
Crown Resorts shares fell -0.6% before going into a trading halt ahead of news that the gaming giant has been blocked from opening its $2.2 billion Sydney harbourfront casino next month by the NSW gambling regulator until a review of its licence is completed in February. Also in gaming, Aristocrat Leisure shares rose after reporting its full year results. The company slashed its final dividend 70% after its normalised operating revenue and profit slumped during the year but this was widely expected.
The New Zealand market was lower yesterday (NZX 50 Index -1.3%) snapping an 11-day winning streak following negative market updates from A2 Milk, Serko and Napier Port.
Napier Port Holdings fell -4% after giving some cautious forward guidance in its full year result. The port met its profit forecast at $20.4m but signalled next year’s earnings will be lower.
Travel management software company Serko dropped -3%, after it reported a $10 million net loss in the six months through September due to travel restrictions during the pandemic. Booking volumes were just 23% of pre-covid levels in the six months ended in September, but climbed to 35% in October. While the shares fell, the stock has experienced a tremendous rebound from $1 a share in March to $5 and back at all-time highs.
3 Things Markets Will be Watching this Week
- Second wave COVID-19 news is back at the top of headlines with social distancing measures being re-introduced, while vaccine developments are also front-of-mind.
- Highlights this week include the latest employment data in Australia and earnings from Aristocrat, Ryman Healthcare, Orica, Serko and Napier Port Holdings.
- The AGM season continues with Afterpay, a2 Milk, Pointsbet Holdings, REA Group, Precint Properties, Altium, BlueScope Steel, Goodman Group, Mirvac, Resmed, Seek, Lendlease and Kogan.com scheduled to meet with shareholders