Global markets continued to rally overnight and on Wednesday, as US stocks rose for a fourth straight session on China’s efforts to contain the economic fallout from the coronavirus outbreak, while investors assessed a mixed batch of corporate earnings. Investors are also speculating central banks stand ready to mitigate any hit to the global economy from the coronavirus.
Stock in Focus: Tourism Holdings (THL:NZX)
Shares in The New Zealand market was led higher by Tourism Holdings, which rose 7% after initially falling nearly 11% when it warned annual net profit will probably fall due to the coronavirus impact on Chinese tourism, the Australian bushfires and the previously advised problems in its US business.
THL is now guiding for 2020 profit $24m versus prior market consensus of $28.6m. While it is difficult to rule out further downside from the impact of Coronavirus, the key drivers of weaker than expected guidance are largely one-off in nature (bush fires, Coronavirus) and trading remains robust across the rest of the business.
The market was also clearly expecting the news and we are inclined to focus on the medium term outlook (which we believe remains solid) despite near-term challenges.
Members should look out for a full update on THL to be released in our weekly report.
We currently have a BUY rating on THL.
Australia & New Zealand Market Movers
The Australian market rallied yesterday (ASX 200 Index +1.05%) boosted by a solid performance in the banking sector as well as some strong earnings-related gains. CSL also lifted the market ahead of its earnings results next week. Nick Scali shares surged 10% as it said it is still hoping for better sales in the March quarter following a rebound in customer orders and foot traffic in the December quarter.
The New Zealand market was higher on Wednesday (+0.80%) as a strong lead from Wall St and stimulus from the People’s Bank of China buoyed Asian markets. Travel related stocks such as Auckland Airport and SkyCity hit by coronavirus fears regained some lost ground. In stock news, Infratil said it will start investing in European renewable energy projects and already has a portfolio of Irish wind farms lined up.
3 Things Markets Will be Watching this Week
- US earnings season continues this week.
- Coronavirus Headlines.
- The Reserve Bank of Australia makes a decision on Tuesday.
Have a Great Day,
