Global markets were mostly up overnight as nerves surrounding China eased slightly, but the US market (S&P 500 index -0.1%) failed to rebound, ending the session marginally down.
There has been no key news on Evergrande and the market will be watching out for any signal from the Chinese government about its possible involvement in any debt restructuring. After the holiday break for China yesterday, the Peoples Bank of China will resume its daily open-market operations today and there will be some interest in the size of any net liquidity injection. Tomorrow, there will be interest in whether Evergrande honours a large coupon payment due to bond holders. While we believe the Evergrande Group default will we troublesome for China and related stocks, we do not see it as creating panic selling for global markets, and it has been well flagged.
Investors also remain cautious heading into the US Federal Reserve’s decision on interest rates and release of economic forecasts on Wednesday night.
European Markets rebounded overnight (Stoxx 600 index +1.0%) recovering most of Monday’s losses, with a smaller bounce back occurring in Hong Kong (Hang Seng index up +0.5%).
Metro Performance Glass (MPG:NZX)
Metro Performance Glass (MPG) shares slumped -8% yesterday after announcing the current lockdown has disrupted operations with three of its four NZ plants located in Auckland was closed for full 5-weeks as well as ongoing restrictions in Australia that will impact profitability.
The financial impact of this period has been significantly greater than the April 2020 lockdown and Group first half earnings (EBIT) is currently expected to be circa. $10m below last year. In addition to the closure period, the NZ business has faced input cost pressure in a more competitive market, and a lower NZ Government wage subsidy compared to last year. The board has decided to postpone the resumption of its dividend which was expected to recommence from November due to the uncertainty.
We remain HOLD rated as business dynamics are likely to be extremely difficult especially if demand starts to tail off from current levels – and prefer Fletcher Building as our construction exposure play.
Australia & New Zealand Market Movers
The Australian market was up yesterday (ASX 200 index +0.4%), as the market partially recovered from Monday’s losses.
All sectors were up except for financiala. Tech and Energy shares were strongest performers recovering most of Monday’s losses.
Iron ore prices continued to slide but the major miners managed to find some support as investors at their current low’s for the year – most trading almost flat from 12 -month ago.
The New Zealand market was basically flat on Tuesday (NZX 50 index -0.01%) illustrating the defensive nature of majority of the local market.
The RBNZ also ruled out expectations of a 50-basis point rate hike for next month – settling some market nerves, as the market anticipated there was a chance of a 50 basis point rate increase.
Kathmandu Shares were flat after providing soft result for the 2021 financial year, given recent lockdowns impacted the late end of the second half.
Tourism Holdings climbed 1.3% as company considered the idea of dual listing on the ASX to gain access to further capital.
Stride property ended the day flat after it scraping plans to spin off its office portfolio as a stand-alone company.
3 Things Markets will be Watching this Week
- The key global events this week will be the US Fed meeting on Wednesday.
- RBNZ Assistant Governor Hawkesby’s speech as the market considers whether there will be a 0.25% or 0.5% hike at the October 6 RBNZ meeting
- Kathmandu’s annual result, AGM’S held by AGL Energy, Mercury and Stride Property and COVID and lockdown updates both sides of the Tasman.
