Global markets were mixed once again overnight as US markets slipped for the 1st time in 5 days. Sectors at high valuations which are most sensitive to higher interest rates led the market lower such as Telco’s, Consumer Staple and Technology stocks following yesterday’s announcement from the US Fed. At the same time, Financials made gains.
Closer to home, both the ASX and NZX were lower yesterday, with the focus of investors in NZ being the election set to take place over the weekend. There is clearly uncertainty around the outcome of this weekend's general election with polls giving mixed messages. In saying that, given recent political surprises such as Brexit and Trump, we are hesitant to take a view based on polls in any case. As we have touched on previously, we do not expect the election result to have a long-lasting impact on markets overall. There may be some impact on specific sectors such as the retirement sector (which has been highlighted by several market commentators) if certain policies are seen as likely to be implemented.
Stock in Focus: Fletcher Building (FBU.NZ / FBU.AX)
As we touched on yesterday, Fletcher Building have kicked off their boardroom refresh with the departure of directors John Judge and Kate Spargo. Fletcher have stated they intend for replacements to have construction and contracting experience.
The moves come after Fletcher’s struggling construction division resulted in a several profit warnings and the Ex-CEO Mark Adamson left the company with the loss of share options and other incentives. FBU have stated they are committed to management & leadership change which they appear to be progressing with, and the cost overruns in the construction division are being seen as temporary (with the expectations that with the majority of the contract losses now likely realised, 2018 earnings are likely to recover significantly).
We currently have a BUY rating on Fletcher Building.
Australia & New Zealand Market Movers
The Australian share market sold off yesterday (ASX 200 index -0.94%) to its lowest close in 7-months as investors reacted badly to the Federal Reserve's historic decision to take tentative steps to wind back its massive balance sheet. The selling was broad, and investors were especially harsh on gold miners and bond proxies (such as utilities and airports) following hawkish signals from US Federal Reserve.
Bucking the trend were shares of Murray Goulbourn (MG Unit Trust) which jumped +14% as Australia’s largest milk processor said there were several takeover proposals for the group on the table.
The New Zealand market was lower on Thursday (NZX 50 index -0.60%) with several large caps such as Fletcher Building dropping while Synlait and Restaurant Brands gained on good sales. There is a feeling that many investors are waiting on the side-lines for the election result this weekend.
3 Things Markets Will be Watching this Week
1. The polls in NZ as we head towards the general election on Saturday.
2. The US Federal Reserve is due to make a policy announcement Thursday morning AU/NZ time.
3. Minutes from the latest Reserve Bank of Australia meeting are released on Tuesday.
Have a Great Day,
Team
