Global markets rallied on Friday, as shares on Wall Street advanced with the S&P 500 and the Dow closing the book on their best June in generations, ahead of much-anticipated trade talks at the G20 summit in Japan. Closer to home, both the Aussie and Kiwi stock markets also had a strong June, up +3.5% and +3.8% for the month respectively.
Markets will likely be bolstered by the weekend US-China trade truce news. Presidents Donald Trump and Xi Jinping agreed to renew efforts to resolve the trade dispute between their two nations during a meeting at the G20 in Japan. Trump said US companies would be allowed to sell their equipment to Huawei, and opened the door to further concessions later.
Stock in Focus: Tourism Holdings (THL:NZX)
THL shares remain under pressure after it announced an $80m equity issue designed to provide Balance Sheet headroom and flexibility, and simultaneously has updated profit guidance for 2019 to be between $25m–27m (previous guidance was $25-28m),
There has been a $30m placement to Citic Capital who will now get a seat on the THL board, and a $50m rights issue. This is designed to provide Balance Sheet strength and help fund TH2 opportunities. Given current difficulties faced by THL in the US market, the raise seems to make sense.
We currently have a BUY recommendation on THL.
Members should look out for a full update on THL to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market experienced losses on Friday (ASX 200 index -0.71%) but the ASX still managed to end the month with a+3.5% gain. Australian shares are poised to open higher to start the new fiscal year, bolstered by the weekend US-China trade truce and with investors positioning for a rate cut as soon as tomorrow.
The New Zealand market rallied on Friday (NZX 50 index +0.67%) as the NZX Index rounded out a +3.8% gain in the June, with demand for infrastructure, utilities, and property firms driving the benchmark to another record. Interestingly, the Reserve Bank’s May lending figures are out and they show that, for the first time ever, first homes buyers borrowed more than investors did.
3 Things Markets Will be Watching this Week
- Trade related news flow is likely to remain in the headlines.
- The Reserve Bank of Australia makes an interest rate decision on Tuesday.
- Friday's US nonfarm payrolls (employment figures) will be the key event in terms of economic data.
Have a Great Day,
