Global markets were mixed overnight with the US markets ending the day a touch lower, after a strong start to the trading day. We would question whether this rally is sustainable, especially as US companies are set to report quarterly profit results next week – which may bring the focus back to the impact of covid-19 shutdowns on company earnings.
We expect markets to remain volatile. A rebound in oil prices recently had helped, however oil slumped in late trade as short term demand is still questioned despite the possibility of Saudis and Russian cutting production.
Next DC Limited (NXT.ASX)
Data centre Next DC shares initially surged to new all-time highs on Friday after announcing a significant $672m capital raise.
Unlike other companies which have recently raised capital to strengthen their balance sheet ahead of economic uncertainty, NXT have been relatively unphased by the covid-19 pandemic – benefiting from increased demand for its cloud based services as workers are urged to work from home.
The capital will provide greater balance sheet flexibility allowing them to expand their growth initiatives as well as construction of a third data centre in Sydney, as they believe demand will continue in the long-term for its premium data centre services.
We are currently BUY rated 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 market (ASX 200 -0.7%) started yesterday strongly but then eased up, ending the day a touch lower.
A number of companies have also announced fresh capital injections from investors to shore up balance sheets as they prepare for economic uncertainty, with Oil Search the latest looking to raise US$700m.
In other news, small and medium sized business hurt by economic downturn will be exempt from paying part of their rent and given two-years to catch up on any deferred payments – with tenants offered the option to break the lease early if landlords did not negotiate in good faith.
The NZ market was a touch higher yesterday (NZX 50 +0.5%), after being sold off on Monday as investors took part in the institutional placement for Auckland International Airport which gathered strong interest. Auckland International Airport shares jumped +6.9% after exiting its trading halt and resume trade as a much more robust business in terms of its balance sheet.
Tilt renewable has announced it will return A$260m to shareholders in the form of a share-buy back, with majority stakeholder Infratil expected to receive $173m for its 65% stake which will position the company well.
3 Things Markets Will be Watching this Week
- Coronavirus related news-flow remains key in terms of market moves.
- Measures by central banks & governments globally in response to coronavirus.
- Capital raising announcements by companies are growing as companies ask for cash from investors in this uncertain period.
Have a Great Day,