Global markets were generally higher overnight as US Technology stocks recovered after 2-days of sharp falls. Interestingly the pullback has been limited to the Technology sector in the US, as the Dow Jones (a closely followed US market index) hit a new all-time high.
The US Federal Reserve has begun its 2-day policy meeting, and will release an important interest rate decision announcement tomorrow morning (AU/NZ Time).
Closer to home, the ASX & NZX have largely dodged the Technology sector sell-off, with the ASX posting its biggest one-day gain in 7-months yesterday.
Stock in Focus: James Hardie (JHX.AX)
Construction company JHX recently announced its 2017 financial year results, with net operating profit of $276.5m, which was +13% above the previous year and above management’s earnings guidance set earlier this year.
However, the market did not react positively to the result, with negativity stemming from poor margins which were a result of higher manufacturing, marketing and freight costs as JHX invests heavily into building up capacity for US expansion.
We have been vocal supporters of JHX given its exposure to the US housing market recovery which we believe is set to be a multi-year theme. Further, JHX earns the majority of its revenue offshore, so is set to benefit from weakness in the Australian dollar.
We remain BUY rated on JHX and continue to believe the market is underestimating the profitability tailwinds for JHX over the medium term.
Members should look out for our full update on JHX to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market experienced a relief rally on Tuesday (ASX 200 index +1.67%) with the market experiencing its best day in 7-months. Returns were led by investor demand for Bank stocks, which have been hit hard in recent times.
In stock news, troubled infant formula exporter Bellamy's Australia went into a trading halt as it announced it will be raising capital to fund a “stabilisation plan”. As part of its plan to raise A$60.4m from shareholders, it will pay nearly half to Fonterra in order to change their milk supply contract in its quest to comply with Chinese import regulations.
The New Zealand market edged higher yesterday (NZX 50 index +0.10%) in subdued trading with Air New Zealand and Fletcher Building leading gains while Xero declined. In stock news, Vital Healthcare Property Trust continued its acquisition spree with the purchase of a private mental hospital in Sydney for A$30.3m.
3 Things Markets Will be Watching this Week
1. The US Federal Reserve makes an interest rate decision on Thursday morning AU/NZ time.
2. NZ quarterly economic growth (GDP) figures are released on Thursday.
3. How the US Technology sector trades following the sharp correction last Friday.
Have a Great Day,
Team
