Global markets were higher overnight with the US market rallying back to near all-time highs. The rally was experienced as Hurricane Irma weakened dramatically, and the expected financial losses shrank (at least in the US) which saw insurers and banks lead the market higher. This also saw the US dollar snap an 8-day losing streak.
At the same time, geopolitical tensions eased as North Korea refrained from any missile tests over the weekend.
Stock in Focus: A2 Milk (.NZ / A2M.AX)
Shares in A2 Milk continued to defy gravity yesterday as the company hit a new all-time high and are now up +177% this year alone.
The milk marketer released a presentation from an investor conference in Hong Kong and reiterated the board is evaluating capital management alternatives. Among its options, A2 is looking at a special dividend depending on progress of its planned $40 million on-market share buyback, which it intends to launch in the next year (a share buy-back indicates that management believe shares of a company are undervalued).
The prospect of a special dividend was first raised last month when the milk marketer announced it had tripled its annual profit and said it would use some of its accumulated cash to buy back shares, with yesterday’s announcement further boosting investor confidence.
We are currently HOLD rated on A2 Milk.
Members should look out for a full update on A2 Milk to be released in our weekly report.
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Australia & New Zealand Market Movers
The Australian share market rallied yesterday (ASX 200 index +0.71%) helped by a strong performance from the banks, with Macquarie a notable gainer. Macquarie Group released an upbeat trading update as it expects stronger performance fees to support its guidance for its first-half result to be "up" year-on-year and "broadly in line" with the second-half of 2016-17. The investment bank reiterated that full-year earnings would be "in line". The Mining sector retraced yesterday and was the drag on the ASX.
The New Zealand market was essentially flat on Monday (NZX 50 index +0.00%) as shares were mixed with exporters A2 Milk Co and Fisher & Paykel Healthcare hitting record highs, while CBL Corp dropped amid a gloomy outlook for insurers. The retirement villages sold off and there are concerns by market commentators around the housing market and uncertainty with taxes from a potential change in government.
3 Things Markets Will be Watching this Week
1. Important Australian employment data is set to be released on Thursday.
2. US inflation data is published at the end of the week.
3. US politics as investors are concerned around the Trump Administration’s ability to pursue its pro-growth agenda.
Have a Great Day,
Team
