Global markets were mixed overnight as Wall Street struggled for direction with gains by technology companies blunted by losses in the healthcare sector. Trading is likely to remain subdued ahead of the G20 meeting later this week.
Once again, the key event for the week ahead is the G20 leaders meeting in Japan set for Friday & Saturday, with all eyes on talks between presidents Donald Trump and Xi Jinping. Investors remain hopeful upcoming trade talks between Washington and Beijing will progress.
Stock in Focus: Wesfarmers (WES:ASX)
Wesfarmers’ repositioning of their portfolio with a number of disposals and de-merger of Coles has been well received by the market. However, the share price recently fell on the back of a weak trading upgrade for its Kmart and Target businesses.
The Kmart group announced a difficult trading update as market conditions for the 2019 financial year remained very competitive with increased price investment and higher levels of promotional activity from competition. These pricing levels along with cautious consumer sentiment are placing pressure on many industry participants – including Kmart which in the past performed well in a competitive environment given their product offering. However, it now appears to have hit a turning point with Kmart’s earnings for 2019 expected to fall -10% to -18% from last year given challenging industry dynamics.
Earlier, Wesfarmers also announced acquisition of Catch group to supplement its retail offering as well as the acquisition of lithium miner Kidman Resources (as an exposure to growing uptake in electric vehicles) after an unsuccessful attempt to acquire Lynas.
We currently have a HOLD recommendation on Wesfarmers.
Members should look out for a full update on Wesfarmers to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market started the week off in positive territory (ASX 200 index +0.22%) as Technology stocks were among the market's best performers, as investors continued to search for growth.
In stock news, retirement village company Aveo Group shares fell after warning investors its reported results for 2018-19 would be adversely affected by the subdued Australian residential property market. The company said it expected underlying profit for the fiscal year would "be in the order of $50 million". Kogan.com shares also closed lower after announcing it would enter the retail energy market after signing a multi-year agreement with Powershop Australia. The new offering will be named Kogan Energy and is expected to be launched before the end of the year.
The New Zealand market powered to new highs yesterday (NZX 50 index +0.59%) as blue-chip stocks including Fisher & Paykel Healthcare, Auckland International Airport and Mainfreight remained in demand. The NZX50 continues to outperform as it has been buoyed by its heavy weighting towards utilities, infrastructure firms, and property investment companies, with investors paying a premium for reliable dividend income at a time when interest rates remain low around the world.
In stock news, Tourism Holdings said it will raise $80 million to strengthen its balance sheet. Of that, $30 million was through a placement to Chinese investment firm Citic, which will get a seat at the board, while the rest will be via a discounted rights offer.
3 Things Markets Will be Watching this Week
- The G20 Meeting takes place on Friday & Saturday.
- The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.
- There is an OPEC meeting on Tuesday.
Have a Great Day,