Global markets were mixed overnight as the major Wall Street indices ended down slightly with gains in Apple and Amazon offset by losses in energy shares.
Closer to home, the Reserve Bank of New Zealand (RBNZ) kept the official cash rate at 1.75%. While that was widely expected, Governor Orr also said he now expects to keep rates on hold into 2020, at least a year longer than previously thought, and reiterated the next move could be up or down.
The NZ dollar has plummeted post the news and is currently trading at 66 cents versus the US dollar, and at 89 cents versus the Aussie dollar (all else equal a lower cash rate implies the return on holding a currency is lower and makes holding currency/cash less attractive). The news is positive for many of our stock names given a weaker currency is positive for sectors such as exporters, tourism, and offshore earners.
Stock on Focus: Crown Resorts (CWN:AX)
It looks like the VIP’s have returned to Crown after the 2016 incident in China where its employees were detained.
Foreign high-rollers are returning in large volumes to gamble at Crown Resorts' flagship Melbourne casino, with turnover from its VIP program rising 55% to more than $51 billion in the past financial year. Looking at the numbers, Crown reported an 8.4% increase in normalised revenue to $3,511.3m and a 12.7% increase in normalised net profit after tax to $386.8m. Crown also announced a fresh $400m share buyback scheme. The result saw its shares jump yesterday.
As with SkyCity on the NZ market, we see Crown as an attractive play on the tourism boom investment theme.
We currently have a BUY rating on Crown.
Members should look out for our full update on Crown to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was higher on Thursday (ASX 200 index +0.47%) on the back of strong performances from the major banks and other financial stocks. Suncorp was among the market leaders after it reported an annual net profit of $1.1 billion and was upbeat about the next financial year, forecasting a cash return on equity of 10% for 2019. The company also said it would sell its life insurance business to TAL Dai-ichi Life for $725 million. Magellan Financial Group shares soared 14.3% after it said it would boost the proportion of profits paid out to shareholders.
The New Zealand market rallied yesterday (NZX 50 index +0.77%) as the dollar sank following the official cash rate update, with Pushpay recovering from recent selling and as Skycity continued to gain. Fonterra Shareholders Fund went into a trading halt as it said 2018 earnings may differ from previous guidance and an update will be released by the end of Friday. The likely assumption is there will be a material downgrade to earnings. Outside the benchmark index, Hallenstein Glasson was unchanged as it saed annual profit rose 58%, outpacing sales growth and after the clothing chain sold its Storm brand.
3 Things Markets Will be Watching this Week
1. US corporate earnings season continues as investors digest quarterly company profit announcements.
2. Locally, investors in Australia and NZ will have a number of profit announcements to focus on as earnings season gets busier.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday, the RBNZ also makes a decision on Thursday.
Have a Great Day,
Team
