Global markets were mixed overnight as European markets were lower and the US market moved between small gains and losses.
Corporate profits remain a focus with Caterpillar positing a solid quarterly result overnight. Once again, in the US the quarterly earnings season is underway, and during earnings season investor attention usually shifts back towards company profitability and away from other issues. Investors are optimistic with the US market at all-time highs, making the current earnings season as important as ever in terms of supporting stock prices. We will be watching developments closely.
Closer to home, NZ inflation data was weaker than expected yesterday. New Zealand's consumer price index rose 0.1% in the fourth quarter, with annual growth was at 1.6%, well below the 1.9% forecast by economists. Unseasonable weakness in clothing prices, household goods, car prices and phone contracts in the quarter depressed the reading, which saw the NZ dollar fall.
Stock in Focus: Healthscope (HSO:AX)
One of our key investment themes is that an ageing population will drive demand for healthcare services. HSO is Australia's second largest private hospital group operating hospitals, medical clinics and clinical labs in Australia, New Zealand and Asia, and is clearly set to benefit from this demographic trend as public healthcare struggles to keep up with overall healthcare demand.
HSO shares have experienced a steady recovery since it announced 2018 full year guidance that was better than the market expected. The market appears to have mixed views towards Healthscope – with some punishing it for weak short-term earnings. In fact, HSO is currently on of the most shorted stocks on the ASX (speculators betting that the stock price will fall). At the same time, other investors appear to appreciate the investment it has made to focus on generating long term earnings growth.
We have maintained a positive view on HSO’s outlook by focussing on the longer-term growth angle given the level of investment made by HSO into developing new private hospitals, especially given the ageing population dynamic.
We currently have a BUY rating on HSO.
Members can read our recently updated full report on HSO.
Australia & New Zealand Market Movers
The Australian share market was a touch lower yesterday (ASX 200 index -0.08%) as investors ended a holiday-shortened week on a downbeat note, while the Australian dollar briefly vaulted back over US81 cents (the highest level since May 2015).
Currency strategists attributed the Australian dollar's strength to a sharp drop in the US dollar after US Treasury Secretary Steven Mnuchin endorsed the US dollar's decline as a benefit to the American economy and US Commerce Secretary Wilbur Ross said the US would fight harder to protect its exporters. The impact was felt across the markets especially in the commodities markets which rallied (commodities are generally quoted in US dollar terms) which provided a tailwind for the Australian mining sector yesterday.
The New Zealand market added to gains on Thursday (NZX 50 index +0.55%) led higher by Pushpay Holdings and A2 Milk, with Trustpower and Infratil weakening. Trustpower said it is looking at a proposal by cornerstone shareholder Tauranga Energy Consumer Trust which would, in effect, move all the trust's assets into a separate charitable trust and wind it up. The trust owns 26% of Trustpower and distributes the bulk of its income to the power company's Tauranga and Western Bay of Plenty customers, money which would instead be used to fund community projects. The share price was lower on the basis that after people get their big payout in September this year, they may look to switch. Infratil, which is Trustpower's controlling shareholder.
3 Things Markets Will be Watching this Week
1. US earnings season continues – with a particular focus on company comments around the impact of US tax cuts.
2. The US political deadlock which has resulted in a government shutdown.
3. The European Central Bank makes an interest rate decision Friday.
Have a Great Day,
Team