Global markets sold off on Friday, as mounting worries over the scope of the coronavirus outbreak overshadowed positive corporate earnings
The sell-off deepened overnight on growing concern Coronavirus will impact markets beyond initial expectations, with US market down the most in four months. China-exposed names were the hardest hit. Wall Street’s main indexes fell more than 1% as investors worried about the economic fallout of a virus outbreak in China that has prompted the country to extend the Lunar New Year holidays and businesses to close some operations.
At the same time, it is a big week ahead for US reporting season including Apple, Microsoft, Amazon, Facebook, Tesla, Coca-Cola, Visa, Mastercard, Deutsche Bank, Boeing, and General Electric
Stock in Focus: Metlifecare (MET:NZX)
Metlifecare (MET) shares have been on a strong run lately due to positive news flow, largely from increasing takeover bids. MET’s board are now proceed further with a takeover bid for $7.00 per share which meets their internal valuation. The price is very pleasing to see as we have argued MET has been undervalued for sometime now.
The takeover will be subject to regulatory approval and shareholder approval at a special meeting set to held in April 2020, with MET board recommending shareholders to vote in favour of the transaction. The $7.00 per share offer sits just ahead of MET’s NTA per share of $6.96, and it has traditionally traded at a heavy discount over the past few years. We would advise MET shareholders to take up the offer and there would be no reason for new shareholders to enter a position at this stage.
We currently have a BUY rating on Metlifecare.
Members should look out for a full update on MET to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian market was closed on Monday for Australia Day, but a touch higher on Friday (ASX 200 Index +0.04%). In stock news, Lynas posted a 7% rise in quarterly revenue as higher demand for rare earth elements countered weaker prices. IAG fell as the general insurer slashed its insurance margin guidance for the 2020 financial year on Friday following hailstorms in Canberra, Victoria and NSW.
For the week profit downgrades shook confidence in the earnings outlook for a handful of companies but investors shrugged off the news to push the broader market to another weekly gain, stretching January's remarkable run.
The New Zealand market was lower on Friday (NZX 50 index -0.2%) and added to losses yesterday (-0.59%) in very light trade given Auckland Anniversary day holiday.
The outbreak of coronavirus continued to weigh on tourism-related companies. Coming amid the Chinese new year, the most significant holiday for travel, tourism officials are already warning of a "significant impact" on the industry and the economy. Domestically, NZ businesses are preparing for a weaker period following a packaged group travel ban from the Chinese Govt. In February 2019, 40,000 Chinese tourists visited NZ.
Oceania Healthcare was little changes as the retirement village operator and developer announced underlying earnings from continuing operations were up 17% at $24.1 million. Other retirement village stocks also performed well as the Metlifecare takeover bid continued to stoke demand for rival companies.
3 Things Markets Will be Watching this Week
- US Earnings get into full swing with a number of market heavyweights reporting profits.
- Coronavirus Headlines.
- The Us Federal Reserve makes an interest rate decison on Thursday
Have a Great Day,
