Global markets were higher overnight, US Markets (S&P500, +0.5%) ending a choppy session in the green as investors were mixed between recession calls and if the Federal Reserve may be positioned to take a break from its interest rate hikes.
However, Fed Vice Chair Lael Brainard also said it’s unlikely the central bank will stop raising rates after the next two meetings, where hikes of 50bps each are expected – but its didn’t stop markets from trading higher.
Late session recovery saw tech share performed well as investors saw ‘value’ in the beaten down sector, despite Microsoft warning its lowering its fourth quarter earnings guidance due to unfavourable foreign exchange rates. Hewlett Packard Enterprise was down -1.2% after its result missed profit and guidance expectations
European markets (Stoxx 600 index, +0.6%) traded higher partially rebounding previous session losses with building and materials leading gains.
Kiwi Property Group (KPG:NZX)
KPG’s shares have been sold off with the greater market, as a property stock sensitive to rising interest rates. It managed to deliver a sound result for the 2022 financial year, benefiting from a strong revaluation gain and the impacts of covid lockdown not as bad as feared with lower rental abatements.
KPG have revealed a promising plan for growth intensifying its mixed asset use, when plenty of growth in the pipeline which should be partially funding by their strong balance and the eventuate disposable of its non-core pure retail properties which have seen delays due to covid-19.
KPG’s NTA (net tangible asset) value is now $1.45 per share, so the stock is trading at an attractive -31% discount to NTA, well ahead of peers and command highest dividend yield. A switch in sentiment as seen the broader sector now trade a discount to NTA as market wary of softening in property valuations over the near-term given heavy interest rate hikes and economic uncertainty.
KPG remains our top sector pick given its attractive valuation both relative to peers and in absolute terms, with a solid pipeline of activity – at its existing mixed-use sites and especially from its Drury site which looks set to create strong growth and leverage mixed use property plans.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index, -0.8%) as tech sector sell off weighed down on the market.
Energy and Utilities were the only sector to trade in positive, Woodside Energy leading gains on its first day of trade after completing the merger with BHP.
Wesfarmers shares dipped -0.6%, following their strategy day, as the look to focus on new growth areas such as lithium and healthcare.
The New Zealand market (NZX 50 index, +0.3%) dipped lower following another day of mixed trading.
Market heavy weights were generally weaker, while Pacific Edge gave back some gains down -2.4% following its pop the previous session.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Macro level data this week includes, Inflation (CPI) from Eurozone, key employment data from the US and PMI data from China and US
- Locally, Australian first quarter GDP data and NZ business confidence measure. Also, earnings starts to tail off with results from Arvida and Metro performance Glass.
