Global markets were mostly lower overnight (S&P 500 index -0.8%) as investors weighed optimism over economic growth with concern that rising virus cases and a lockdown in Germany signals the global reopening will be delayed.
Closer to home, the New Zealand Government introduced a new set of housing policies aimed to improve home ownership and target rental residential investors which include:
- Interest on investment properties will no longer be deductible for tax purposes on existing dwellings (investors will be allowed to deduct interest on new builds acquired as an investment Government prompting landlords to buy and or develop new properties)
- The bright line for tax on capital gains has been extended to 10 years (except for the family home)
- Price and income caps for First Home loans and grants have been lifted
- NZ$3.8bn of infrastructure funding for housing developments has been set aside.
The implications so far should taper investor demand, and release over-geared properties into the market, while allowing developers to continue business as usual. There could be a potential shock to NZ's GDP on the back of lower spending by existing landlords and means the Reserve Bank does not have the pressure on it to raise interest rates to battle the housing boom. This has seen the NZ dollar fall sharply overnight.
Adventure retailer Kathmandu (KMD) shares were up +8.9% yesterday after releasing a better than expected result for the first half of the 2021 financial year. Dispite operating challenges around the world (due to covid) their Ripcurl business delivered a strong result offsetting a performance from Kathmandu affected by lock downs across their retail stores and lower foot traffics in CBD and Malls coupled with and no travel to Northern Hemisphere impacting demand for insulated products over the NZ/AUS Summer.
Group earnings rose +15.5% form the previous year largely driven by the full 6 month contribution from Rip Curl and with improved trading conditions and a profitability (since the start of covid-19) Kathmandu announced they would pay a 2 cent per share dividend.
We have a HOLD rating on KMD and will release a full update in our weekly report.
Australia & New Zealand Market Movers
The Australian market (ASX 200 index -0.1%) was basically flat yesterday, with strong gains in the mining sector offset by weak bank, energy and travel shares on the one-year anniversary of its covid-19 rock bottom.
Telstra rose another +2.5% after a positive brokerage reports were released following news of a restructure.
The New Zealand market closed higher on Tuesday (NZX 50 index +0.5%).
Puspay led the market higher yesterday up +10% after founding members Peter and Christopher Huljich sold their holding to US-based investment firm Sixth Street Partners for $320m, at $1.85 per share. The price was 4% higher than Pushpay’s 30-day volume-weighted average price, at $1.78, and was a 2% premium to trading on Monday. Following the transaction, Sixth Street owns 17.8% of PPH. This removes a huge over-hang on the share as many investors were expecting this large stake to be sold on the market.
Scales Corporation climbed 1.3% to $4.61 after the agriculture firm said it was looking at buying Villa Maria Estates winery, with a $97.6m war chest at the end of 2020 Scales may need to raise capital to fund its bid for the winemaker, which is rumoured to be north of A$200m.
Oceania Healthcare was put in a trading halt at $1.39 after it announced it will raise up to $100m, at $1.30 per share, to fund the purchase of an existing village and more land to construct a new one.
3 Things Markets will be Watching this Week
- COVID related new-flow and vaccines remains a key driver for markets
- Highlights this week include 4th quarter economic growth (GDP) being released in the US.
- Locally, it will be a big week for the retail sector in NZ with Kathmandu, Hallenstein Glasson and Warehouse Group all reporting earnings.