Fed Taper Timeline | Kathmandu Update

23 September 2021

Global markets were mostly higher overnight US market (S&P 500 index, +0.95%) as market jitters seemed to ease. 

Overnight the market the US Federal Reserve finished its latest monetary policy meeting with mixed read through. The Fed indicated that it does see an imminent rollback of the monetary stimulus whilst holding interest rates near zero. Adding however that tapering would be coming and that rate hikes could be coming sooner rather than later, and that the “economy was strong enough to stand on it sown two feet”. 

China Evergrande's debt woes eased, after it agreed to make a scheduled coupon payment on domestic bonds today which soothed contagion concerns, as well as news the Chinese Communist Party could be finalizing a deal to restructure operations into three state owned entities.

European Markets were up overnight (Stoxx 600 index +1.0%) as concerns in China ease with travel and leisure stocks leading gains.

Kathmandu (KMD:NZX /KMD:ASX)

Outdoor clothing and equipment Retailer Kathmandu  (KMD) shares were up +2.7% yesterday as investors digested its 2021 full year result, which came in soft and management guided that current disruptions would result in the 2022 half year earnings lower than the previous year, due to the majority of their in-store sales are still suspended in Australia and NZ.

We believe Kathmandu are still on track for a healthy a recovery as a retailer which did not benefit as much from retail spending boom locally with many of their products being travel and outdoor related – with strong performance of Rip Curl an indicator.

We maintain Kathmandu as a High-Risk BUY as our preferred retailer pick, as we believe KMD is more attractively valued when taking into account a fully encumbered 2023 financial year in contrast to many overvalued ‘stay at home’ retailers, which have surged and have likely hit peak sales growth.   


Australia & New Zealand Market Movers

The Australian market was up yesterday (ASX 200 index +0.3%), as concerns surrounding Evergrande eased.

This saw stocks linked to the globally economy trade higher, Energy and Materials leading the way as well as real estate sector.

Zip rose +4.3% after announcing it would enter the India market by acquiring a minority stake in buy now pay later company ZestMoney.
Financials were lower as banks and insurance companies were weaker following a 6.0 magnitude earthquake hitting Melbourne.

The New Zealand market was up on Wednesday (NZX 50 index, +0.3%) as  investors maintained some appetite for risk while being mindful over the Evergrande situation.  

Synlait shares led the market jumping +3.8%, and2 Milk rose +2% as investors snapped up their shares which were trading at 4-month lows.

Tower shares were down -2.2% yesterday after downgrading their earnings guidance by $3m down to $19m to $21m as large house claims continue to be above average due to covid-19 capacity constraints  and supply chain descriptions impact cost inflation.

Restaurant Brands NZ climbed +1.6% after sharing its interim report adding that “trading remains strong across all divisions,” but warned covid-related uncertainties, particularly in Australia and NZ made it “difficult to provide firm profit guidance”.

3 Things Markets will be Watching this Week

  1. The ​key global events this week will be the US Fed meeting on Wednesday. 
  2. ​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
  3. Kathmandu’s annual result, AGM’S held by AGL Energy, Mercury and Stride Property and COVID and lockdown updates both sides of the Tasman. 
Global markets were mostly higher overnight US market (S&P 500 index, +0.95%) as market jitters seemed to ease.

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