NZD in Freefall | More Positives for Kiwi Property Group

2 April 2021

Global markets edged higher overnight (S&P 500 index +0.5%) as investors weighed the outlook for vaccinations, economic growth and inflation. The US small cap Russell 2000 index jumped +2.3% after CNBC reported that President Joe Biden will announce a new goal of administering 200 million Covid-19 vaccine doses in his first 100 days in office. Financials & materials outperformed while technology names lagged.

At the same time, investors remain cautious about COVID resurgence in Europe and the slower vaccine roll-out across the region, which has seen weakness in the Euro.

Closer to home, NZ Dollar weakness continues (with the NZD currently trading at 69.5 cents versus the USD) as RBNZ rate hike bets get eased post the Government housing policy that was announced Tuesday. Interestingly, BNZ economists highlight they believe the Government is 'dead set' on curtailing soaring house prices and will do what it takes – 'it will almost certainly win in the end'. Government policy designed to slow property market speculation has sent the NZ currency to its lowest level since November.


Kiwi Property Group (KPG:NZX)

KPG shares were higher yesterday as its string of positive news flow continues. KPG has noted it has draft revaluations of ~$100m (+3.1%) for the 6 months to March, with its Office and Mixed-Use assets driving the uplift and Retail assets slightly softer. This aligns with the thrust of its recent earnings guidance upgrade as conditions improve post COVID. This news comes soon after KPG lifted its earnings guidance by as much as 14% as its retailing tenants are performing better than it expected.

In terms of the numbers, KPG’s portfolio valuation is now NZ$3.3bn – with solid gains in office (+NZ$52m) and mixed use (+NZ$38m) values partially offset by retail (-NZ$8m). Low interest rates have driven demand for property assets with secure cash flows underpinned by long lease terms to high quality tenants.

KPG’s NTA (net tangible asset) value is now $1.35 per share, so the stock is still trading at a -8% discount to NTA (versus the broader sector which is at a +7% premium). KPG remains our top sector pick given its attractive valuation both relative to peers and in absolute terms. KPG is due to report its annual results on May 24.


Australia & New Zealand Market Movers

The Australian market was in positive territory on Thursday (ASX 200 index +0.2%) as healthcare companies and banks helped the market to its third gain in four sessions, offsetting losses for AMP, Afterpay and exchange operator ASX.
Energy led the sectors higher as concerns a ship aground in Egypt’s Suez Canal, a busy shipping route, could tie up crude supply helped oil prices. Information technology fared worst following plenty of selling on the US Nasdaq.

AMP fell -3.6% before trading in its shares was halted late in the afternoon. The Australian Financial Review’s Rear Window column reported that AMP chief executive Francesco De Ferrari would resign from the company.

Stock in ASX fell -1% as competition is set to heat up in the exchanges sector, after Cboe Global Markets, the third-largest exchange operator in the US, acquired Chi-X Asia Pacific, which includes exchanges in Australia and Japan.

Suncorp shares dropped -0.9% after the insurer said it had received some 5400 flood-related claims across NSW, Queensland and Victoria. Claims numbers are expected to rise in coming days, Suncorp said.

The New Zealand market made gains yesterday (NZX 50 index +0.2%) as Construction firm Fletcher Building led the market higher. New builds are exempt from the stricter tax rules for property, which may encourage more construction activity.

Stock market operator NZX jumped 2.5% as 2 large companies are considering listing on the exchange: telecommunications firm 2degrees has said an initial public offer is on the cards, while Westpac Bank is toying with the idea of divesting its NZ subsidiary.

The Warehouse Group was up +3.6% as it said it will resume paying a dividend after reporting a record first-half result but has lowered how much it will pay out to shareholders.

3 Things Markets will be Watching this Week

  1. COVID related new-flow and vaccines remains a key driver for markets
  2. Highlights this week include 4th quarter economic growth (GDP) being released in the US.
  3. Locally, it will be a big week for the retail sector in NZ with Kathmandu, Hallenstein Glasson and Warehouse Group all reporting earnings.


NZ Dollar weakness continues (with the NZD currently trading at 69.5 cents versus the USD) as RBNZ rate hike bets get eased post the Government housing policy that was announced Tuesday.

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