Global markets were mixed overnight (S&P 500 index +0.4%) as Technology shares led US stocks higher, regaining favor on the last day of a quarter where they trailed the rest of the major market sectors, with President Joe Biden set to unveil his planned infrastructure package.
The three major Wall Street indexes registered their fourth straight quarterly rise as investors looked forward to details of President Joe Biden’s massive infrastructure plan, as bets on a strong economic rebound supported Wall Street during the quarter even as investors got jittery about a retail trading frenzy, a spike in interest rates (treasury yields) and a US hedge fund going bust.
NZ King Salmon (NZK:NZX)
NZ King Salmon shares fell -1.3% yesterday after reporting a net loss of $7.1m for seven months ended Jan 31 on the back of carrying excess inventory due to the covid-19 pandemic (with a change in balance sheet date to align with summer seasonality). Sales volumes for the 7-month period were up +1% from the same corresponding period last year, while revenue was down -6% at $95.2m due to covid-19 restrictions impacting food service demand and price.
Operating earnings (EBITDA) was modest considering the situation at $10m for the 7-month period, and came out of summer in reasonable shape with sea temperatures around average and strong sales momentum over November and December 2020.
It appears NZK has survived the worst of 2021 (financial year) and should be in a position to recover to normalised profitability once near-normal economy economic activity resumes later this year. We feel comfortable maintaining our High-Risk BUY recommendation on NZK. We believe the market is pricing in a challenging 2021 and we see upside potential over the medium-term, assuming normal weather conditions.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index +0.8%) rose yesterday, ending the March quarter with a gain buoyed by big banks and miners. The quarter experienced two halves with a strong January and February rally, which was partially offset by rise in global bond yields.
Financials and consumer discretionary were the best performing sector, while the Tech sector took a back seat being the worst performing as investors questioned their sky high valuations, with value stocks trumping growth names.
The New Zealand market rose on Wednesday (NZX 50 index +0.9%) closing off a tough quarter, which was heavily hit by rising bond yields with investors willing to have an appetite for risk as well as end of quarter portfolio rebalancing. A total of twelve stocks rose more than 2% on the top 50 index, helping to trim its loss for the quarter to just 4.2%.
The yield on the NZ 10-year government bond was sitting at 1.8%, double what it had been at the start of the quarter.
Electricity gentailer Mercury NZ led the market higher, jumping 4.8% as it tries to recover lost ground as utilities’ stock prices were run-up over the summer only to be brought back down by the higher interest rates. Pushpay Holdings also moved higher in the quarterly rebalance, advancing 4%.
3 Things Markets will be Watching this Week
- The pandemic will remain in focus, as rising case numbers have caused concern among investors. Further restrictions have been imposed in recent days, with the German lockdown extended until April 18 and French restrictions extended to more regions of the country. In contrast, the UK (which has vaccinated 47% of the population) will begin easing restrictions on Monday.
- US employment data – Nonfarm payrolls is released on Friday and the market is looking for a ~650k gain in employment in March and a 0.2% fall in the unemployment rate, to 6%.
- Domestically, the final release of the ANZ Business Survey comes out on Wednesday, while Synlait and NZ King Salmon are both scheduled to report 1st half earnings.