Global markets were a bit lower overnight as markets consolidate after rebounding in June. Data showed US consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy increases the chances of the Federal Reserve to cut interest rates this year – which has been supporting share markets.
Stock in Focus: Kiwi Property Group (KPG:NZX)
Shares in NZ’s largest listed property vehicle Kiwi Property Group (KPG) have been on a strong run this year, largely benefiting from falling interest rates which propped up the share price of stable dividend paying stocks and help increase the value of KGP’s property portfolio. KPG is now trading above its net tangible asset per share value.
For the 2019 financial year, KPG reported a net profit after tax of $138.1m, up +15% from last year due to larger gains on revaluations of $47.6m compared with $26.5m in the previous year – benefitting from strong valuation gains on its office and mixed-use properties. Funds from operations, which is KPG’s preferred measure of operating performance that strips out revaluation gains and other fair value movements, fell -3.9% from last year down to $106.9m.
While Sylvia Park has been a strong performer, enjoying a competitive advantage over other nearby malls as a destination hub, it may come under pressure with the significant redevelopment of Westfield 277 in Newmarket (located less than 10km from Sylvia Park and in closer proximity to more affluent households).
We now have a HOLD recommendation on KPG (was BUY).
Australia & New Zealand Market Movers
The Australian share market was a touch lower yesterday (ASX 200 index -0.04%) as losses in the big banks outweighed gains among the major miners. The major banks were weaker after the Australian Prudential Regulation Authority released new capital guidelines for both large banks and smaller banks that will require them to hold more capital against interest-only loans and loans to property investors.
Afterpay Touch shares were higher as it returned from a trading halt following the successful completion of its $317.2 million capital raising. The raising was completed by a fully underwritten institutional placement, priced at $23.00 a share.
The New Zealand market continued to move higher on Wednesday (NZX 50 index +0.65%) led by recoveries in Synlait Milk and Air New Zealand on relatively light volumes. Synlait has been recovering from the recent sell-off on fears that it won't be able to open its largely finished facility in Pokeno. In stock news, Scales Corp was down even as the company affirmed annual earnings guidance at its annual meeting and noted the smaller harvest for its horticulture unit was in line with expectations.
Outside the benchmark index, NZME dropped as it said the decline in the advertising market was slowing and touted its success in attracting paying subscribers to its online news (NZ Herald) service.
3 Things Markets Will be Watching this Week
- Trade War headlines are likely to remain drivers of investor sentiment.
- Closely watched US inflation data will be released on Thursday.
- The latest monthly Chinese economic updates are published on Monday.
Have a Great Day,