Global markets were mostly higher overnight (S&P 500 Index +1.5%) despite a spike in covid-19 cases over the weekend prompting some States to re-tighten lockdown measures such as in public spaces and dining.
However, this was offset by better than expected economic data with US pending home sales posting a record gain, another indicator that this recession may not be as bad as feared. Investor expectations are also geared for more stimulus measures from the US Federal Reserve and/or Congress.
Fisher and Paykel Healthcare (FPH:NZ)
Fisher and Paykel Healthcare (FPH) shares continued on an amazing run up +4% yesterday after delivering another record profit.
FPH 2020 net profit after tax rose +37% from last year $287m, benefiting from strong covid-19 related demand through the Hospital division – both in Hardware and an accelerated adoption profile for Nasal High Flow, as well as on the back of favourable currency movements (a weaker NZ dollar). FPH expects 2021 profit to grow about ~15% at the mid-point of guidance which we think may be too conservative. The company assumes a significant fade in growth after a strong first quarter, but clearly if covid-19 remains an issue for longer than expected then there is upside, making FPH the ultimate hedge against the risk of a second covid-19 wave.
Remain BUY rated on FPH,
We will release a full update on FPH in our weekly report and remain positive on FPH but new investors should time their entry point given its recent rally
Australia & New Zealand Market Movers
The Australian market fell on Monday (ASX 200 -1.5%) as covid-19 cases across Australia start to creep higher sparking fears of a second wave coupled by a weak lead form Wall street (on Friday). The big banks and miners led the decline as being most sensitive to economic activity, with energy stocks performing the worst as a rise in covid-19 cases threaten demand for oil.
Likewise travel stocks continued to remain most sensitive to covid-19 related news which saw Flight Centre (-5%), Webjet (-5.3%), Sydney Airport (-1.8%) as well as Qantas (-5%) continue to drop sharply.
The New Zealand market managed to buck the trend yesterday (NZX 50 Index +1.1%) despite weak lead from Wall street. A better than expected result from Fisher and Paykel healthcare helped lift the market higher. However, investors had switched to a risk-off mood shifting towards more defensive companies.
Air NZ, Tourism Holdings and SkyCity were lower yesterday as stocks sensitive to economic growth but also benefactors of a Trans-tasman bubble which could be delayed with covid-19 cases in Australia continuing to rise.
3 Things Markets Will be Watching this Week
- Covid-19 newsflow around a second wave and re-opening of economies remains front of mind.
- Key US data including monthly employment numbers are released at the end of the week
- Minutes from the last US Federal Reserve meeting will also be released this week.
Have a Great Day,