Investors Rotate from Tech to Banks | Next DC Powers Higher

30 November 2017

Global markets were mixed overnight as investors sold off technology stocks and moved into financials that have gained on strong economic data and comments from Fed officials on future rate hikes.

As we touched on yesterday, all else equal, banks benefit from higher interest rates as lending margins improve, and de-regulation plans would be another boost for the sector going forward. Current Fed chair Janet Yellen was particularly bullish on the US economic expansion in what is widely seen as her final testimony to US lawmakers overnight, before her successor Jerome Powell takes over. This also saw the US dollar strengthen overnight. 

Stock in Focus: Next DC (NXT:AX)

Data centre company Next DC has seen its share price surge to new all-time highs, and we are already experiencing impressive returns since we initiated our buy recommendation in August.

In terms of recent news flow, at its AGM management provided the market with an update on its progress so far in the 2018 financial year, as well as providing a breakdown on its 2017 activities. NXT said they have made a strong start to 2018, and guidance was reaffirmed with revenues expected in the range of $146 million to $154 million. This will be an increase of 18% to 25% on the $123.6 million achieved in 2017.

The explosion of data is a powerful investment theme which are firm believers in. While there are several ways to play data company’s in the US for example, in the Australian and NZ market NXT presents one of the few ways to invest in the data thematic.    

We currently have a BUY rating on NXT.

Members should look out for a full update on NXT to be released in our weekly report.

 

Australia & New Zealand Market Movers

The Australian share market rallied yesterday (ASX 200 index +0.45%) as gains for the big four banks helped the ASX to advance, with the benchmark ASX 200 index closing firmly over the key 6000 level for the first time since the middle of November. In stock news, Seek shares were lower after the job site provider upgraded its earnings forecast for the current financial year while also indicated that its net interest expense is higher than previously anticipated.  
 

The New Zealand market was a touch higher on Wednesday (NZX 50 index +0.01%) with Fletcher Building rising as investors were lured back after its recent weakness, while Orion Health Group hit a record low. Sky TV shares were lower, as New Zealand's biggest pay-TV operator said it will ask the courts to force internet providers Spark, Vodafone, Vocus and Two Degrees to prevent consumers accessing free streaming sites such as The Pirate Bay and Putlocker.

 

3 Things Markets Will be Watching this Week

1.                 The US Senate Banking Committee holds a hearing on Tuesday to confirm the nomination of Jerome Powell to succeed Janet Yellen.

2.                 US economic data – with GDP released Thursday and manufacturing data at the end of the week.

3.                 US Politics with Tax Reform taking centre stage.

Have a Great Day,

Team

Global markets were mixed overnight as investors sold off technology stocks and moved into financials that have gained on strong economic data and comments from Fed officials on future rate hikes

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