Please note that tomorrow will be our last daily update for the year, and we will resume in mid-Jan 2018. We wish everyone a Merry Christmas and a prosperous New Year.
Global markets gave up early gains overnight, as shares on Wall Street turned sharply lower following the latest announcement by the US Federal Reserve.
Investors looking for a year-end rally on the back of a “softer tone” from the Fed were disappointed, as it lifted rates as expected, and policymakers signalled they see two potential rate hikes next year. While that is a paring of their projections, it is still more optimistic about the outlook for US growth than investors and that, at least initially, looks to have seen stock markets sell-off. We will continue to monitor moves by the Fed, as the scope of interest rate hikes remains a crucial factor in terms of driving markets.
Stock in Focus: Kiwi Property Group (KPG:NZX)
We have initiated research coverage on Kiwi Property Group (KPG), the largest listed property vehicle on the NZ market.
KPG owns and manages a $3 billion property portfolio, focusing predominately in Auckland (69% of their portfolio) with a mix between office 28% and retail 68%. Landmark buildings it owns are Sylvia Park, New Zealand’s largest mall, as well as prime office assets such as the Vero building and ASB North Wharf – KPG has a solid portfolio of well-known assets with a diverse tenant base
We initiate coverage on KPG as a ‘defensive’ BUY, due to its stable dividend and valuation (trading below its net tangible assets). We believe it is an industry with moderate upside for the dominate operator and KPG would be our preferred option for investors seeking exposure to the NZ commercial property market. While there are risks facing retail assets, KPG has high quality tenants and assets with malls such as Silvia Park being seen as a shopper “destination”, which should allow them to outperform retail peers, in our view.
Australia & New Zealand Market Movers
The Australian share market was once again lower yesterday (ASX 200 index -0.16%). Global traders have fled growth assets like copper and oil for the safety of gold, punishing Australian energy stocks while lifting fuel-dependent airlines and gold miners. The oil price continues to free-fall on fears of slowing global growth combined with a glut of supply, which has seen US Crude Oil fall back below $50 a barrel. In stock news, GrainCorp says it is providing suitor Long-Term Asset Partners due diligence to put forward a more certain proposal than the $2.38 billion all-cash takeover deal it currently has on the table.
The New Zealand market was higher on Wednesday (NZX 50 index +0.85%) with the big move coming from Sky Network Television which extended its rebound. Heartland Group shares were higher after it dropped to a two-year low on Tuesday as investors weighed up the impact of the Reserve Bank's proposals to impose stricter capital requirements on banks. Heartland said it would need to boost its high-quality capital by about $15 million a year during the five-year transition, an announcement that looks to be well-received by the market.
3 Things Markets Will be Watching this Week
- Tensions between the US & China following the arrest of Huawei’s chief financial officer will likely dominate headlines.
- The US Federal Reserve makes its final interest rate decision for the year Thursday morning (AU/NZ time).
- NZ economic growth (GDP) figures and Australian employment data is also published Thursday.
Have a Great Day,