Economic Optimism | BHP Dividend Boost

17 February 2021

Global markets experienced minor moves overnight (S&P 500 -0.06%) and were almost unchanged after a positive start of trading after the long weekend saw the US market index hit fresh record highs intra-day.

The market is pricing in optimism over an economic recovery with energy and financials performing well, which was offset by a sell-off in real estate and healthcare sectors. The same can be said in NZ and Australia, with the economy recovering, consumer & business confidence strong, and labour market much more resilient than feared – with unemployment lower than expected. This view has been re-iterated in results from the Big Banks stocks so far.  

Closer to home, NZ has reported 2 new covid-19 cases and an announcement regarding lockdown measures is due later this afternoon. 


Mining giant BHP shares have jumped after announcing its 2021 financial year first half result.
The main headline was that the BHP board decided to increase its interim dividend by 55% to US$1.01 per share – as their view on commodity prices and economic growth continues to remain upbeat.

BHP reported that its profit from operations rose by +17% to US$9.75 billion. on the back of higher iron ore prices and copper prices with strong operational performance. Statutory attributable profit fell by 20% to US$3.9 billion which included an ‘exceptional’ loss of US$2.2 billion predominately relating to the impairments of New South Wales Energy Coal (NSWEC) and the associated deferred tax assets, and Cerrejon.

We continue to remain BUY rated on BHP due to its attractive dividend and will release a full report in our weekly. 


Australia & New Zealand Market Movers

The Australian market was up yesterday (ASX 200 index +0.7%) buoyed by BHP's result lifting market sentiment on the sector and the general market.

National Australia Banks reported $1.65 billion of cash earnings for the first quarter of the 2021 financial year -with cash earnings +47% higher than the 2020 financial year  second half quarterly average.

Crown resorts fell -2.1% after the Independence Liquor and Gaming Authority said it was consulting with Crown on becoming suitable to hold a casino licence. 

The New Zealand market was up on Tuesday (NZX 50 index  +0.8%) ending its five-day slide as global equity markets continued to run further into record territory.

Contact energy -fell -2.1%, remaining a touch above its capital raise price of $7.00, closing at $7.05, while Meridian and Mercury also sold off as investors potentially used those holdings to fund Contact's capital raise. 

Auckland International Airport and Kathmandu Holdings both rose 3.1%, and Air New Zealand was up +2.6% on positive news of no new covid cases the prior day.

Infrastructure investment firm Infratil edged higher after (+0.5%) holding a virtual investor day in which management reiterated its view that both takeover bids and the market undervalued its portfolio.


3 Things Markets will be Watching this Week

  1. ​​​​​​​​​​Local COVID news-flow – a reminder that COVID news is still relevant on both sides of the Tasman, with both Victoria and Auckland entering fresh lockdowns. 
  2. The week ahead is dominated by corporate earnings. In NZ & Aussie. Contact Energy, Fletcher Building, EBOS, SkyCity and Auckland Airport are all scheduled to report. In Australia, key results include BHP, Treasury Wine, Rio Tinto, Wesfarmers, Fortescue, CSL, Crown, Woodside, and QBE. In addition, NAB hands in its quarterly report on Tues, with Westpac on Wed, and ANZ on Thu. 
  3. In Australia, the latest employment data is due along with retail sales and minutes from last month’s RBA meeting. 


The market is pricing in optimism over an economic recovery with energy and financials performing well, which was offset by a sell-off in real estate and healthcare sectors.

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