Global markets continued to sell-off overnight, but the losses were less severe than the brutal sell-off in the previous session as technology stock outperformance helped limit losses. Gold surged 2.4% as its safe-haven status saw buying from investors.
The NZ Market has moved lower every day this month, and is down -8% from all time highs hit at the end of September. The NZ market is particularly vulnerable to higher rates given its status as a dividend paying market (with dividends becoming relatively less attractive as interest rates rise). In saying that, the NZX50 remains up 3.9% for the year-to-date, outperforming almost every other major index across Asia.
Market darlings such as A2 Milk and Aussie Tech darling Afterpay saw the heaviest selling, in a sharp reversal as high valuation shares recorded some of the biggest losses on the market. The sell-down comes ahead of the US quarterly corporate reporting season which gets underway this week with Citigroup, JP Morgan and Wells Fargo first to report. As we mentioned yesterday, we think it is important medium-term investors do not panic in times of heightened volatility, although we are watching developments closely.
Stock in Focus: Coca-Cola Amatil (CCL:AX)
Shares in CCL have staged a recovery this year, jumping on their 2018 half year result, relieving some of the negatively due to challenges in their core Australian business.
CCL’s total revenue was virtually flat from last year at $2,417m, while underlying net profit after tax fell -6% from last year to $178.8, due to better performance from New Zealand & Fiji, and Alcohol & Coffee offsetting challenges faced in the Australian market. CCL shares also rallied on the possibility they could buy Kirin’s Lion Dairy & Drinks business, as it follows with the direction taken from its US-listed counterpart to expand its non-sparkling offering to grow earnings in Australia.
We believe CCL is still an attractive option for income investors.
We have a HOLD recommendation on CCL.
Australia & New Zealand Market Movers
The Australian share market sold off on Thursday (ASX 200 index -2.74%) following global moves. All that glittered on Australian markets was gold as the ASX ended its second worst day of the year after a "perfect storm" on Wall Street caused heavy stock losses across every other sector, wiping $49.6 billion in market value. In stock news, Fortescue Metals Group has launched a share buyback program of up to $500 million ($US355 million), joining bigger rival Rio Tinto in handing back cash to shareholders.
The New Zealand market plummeted yesterday (NZX 50 index -3.64%) as NZ shares joined Wall Street's rout, falling to a four-month low as investors sold out of growth-orientated stocks against the backdrop of rising US interest rates. A2 Milk led the slide, shedding -11%. The sell-off wasn't contained to growth-focused companies. Rate-sensitive stocks were also weaker with the power generators and retirement stocks also hit hard. In stock news, Chorus reported record fibre connections in the September quarter, which overtook copper ADSL as the company's biggest connection-type.
3 Things Markets Will be Watching this Week
1. Trade related news-flow is likely to continue to feature in headlines.
2. In an event light week, Tuesday’s Aussie Business Confidence survey will be carefully watched for any adverse impacts from US-China trade risk and the housing slowdown.
3. Important US inflation data is published on Friday.
Have a Great Day