Global markets were slightly higher overnight as investor await the outcome of the latest US Federal Reserve meeting set for tomorrow morning.
Investors appear generally cautious ahead of the conclusion of the Fed policy meeting at which the US central bank is widely expected to announce another interest rate hike. As we have discussed previously, the pace and track of interest rates is likely to be a key factor in determining share market returns this year. A jump in oil prices also lifted energy stocks overnight, though another drop in Facebook's shares curbed the gains for the broader US market.
Stock in Focus: Heartland Bank (HBL:NZ)
Heartland Bank (HBL) shares have pulled back this year, most recently after the Bank released a 2018 half year result which disappointed the market.
HBL boosted first-half profit 7% to $31.1m as an expanding loan book underpinned all lines of business and strong reverse mortgage growth in Australia increased its appetite to do more business across the Tasman. HBL has a focus on niche products where customers are under-served by the other banks, such as personal, rural, and motor loans. While these business lines are higher margin, they are also riskier. This was highlighted in HBL’s recent result as it boosted impairment charges by 51% to $10.4 million in the period.
While HBL is no doubt achieving solid growth rates, before the price fall HBL was trading at a significant valuation premium to banking peers in our view (such as the Big 4 Australian banks – ANZ, WBC, CBA and NAB) although this has now narrowed somewhat.
We initiate coverage on HBL with a HOLD recommendation.
Members should look out for our full detailed initiation report on HBL to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was lower yesterday (ASX 200 index-+0.39%) as shares fell for the first time in three sessions, as some heavy losses in the mining sector outweighed a better day for the banks in a week where traders are bracing for a rate hike from the US Federal Reserve. In stock news, TPG Telecom couldn't hold on to early earnings-inspired gains and ended the day down -4%. Rio Tinto has sold its Hail Creek and Valeria coal assets in Queensland to Glencore for $US1.7 billion ($2.2 billion), in a deal that increases the Swiss miner's dominance of Australian coal. The deal was announced after trading hours and means Rio has now announced asset sales worth more than $US9 billion since 2013.
The New Zealand market was a touch lower on Tuesday (NZX 50 index -0.05%) with Synlait Milk, A2 Milk and Fonterra Shareholders Fund units falling ahead of an overnight GlobalDairyTrade auction. In stock news, retailer Kathmandu entered a trading halt after it announced it increased first-half profit 23% in line with its forecast, as it discounted less products and lifted margins. It also announced plans to buy its US footwear supplier Oboz Footwear, and plans to raise $50m in a share placement at a 10% discount. The shares are halted from trading until today due to the share placement.
3 Things Markets Will be Watching this Week
1. Global politics remain in focus as details around trade tariffs to be implemented by the Trump Administration are announced.
2. The US Federal Reserve makes an interest rate decision Thursday morning (AU/NZ time).
3. The Reserve Bank of New Zealand also Reserve makes an interest rate decision Thursday morning..
Have a Great Day,
Team