Powell’s Pushback | NZ King Salmon’s Slide

26 June 2019

Global markets ​sold off overnight, with US Technology stocks leading losses.  Simmering trade concerns, combined with disappointing economic data, sent buyers to the sidelines, where they remained after Federal Reserve Chair Jerome Powell pushed back on pressure from President Donald Trump to cut rates.

Stock in Focus: NZ King Salmon (NZK:NZX / NZK:ASX)

​​​​​​​​​​​​​​​​​​​​​NZK shares continue slide after releasing their operating earnings guidance for the 2020 financial year will be between $25m to $28.5m, in line with the 2019 forecast. The guidance is underpinned by 2020 harvest volumes being around 8,000MT, improving slightly from the current year’s expected harvest volumes. The above assumes mortality rates remaining higher than historical averages.
NZK also announced an increase in capital expenditure over the next two years to facilitate future growth opportunities and improve fish survival rates, with increased production costs required to mitigate the effects of warmer waters. NZK will also be changing its farming practices to mitigate the environmental impact of its harvesting activities which will also reduce potential harvest levels and increase production costs.
While NZK has a great business and product in high demand which it is able to sell at a premium price, weather events such as this are largely an unavoidable risk for companies such as NZK. The warmer water temperatures are creating a setback to NZK’s production growth and without any regulatory (government) support so far to relocate their farms to more suitable deep-water sites, there is limited opportunity to grow production to meet demand.
We currently have a HOLD recommendation on NZK

Australia & New Zealand Market Movers

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​The Australian share market was a touch lower yesterday (ASX 200 index -0.11%) as investors remained cautious ahead of key trade talks later this week, shifting capital into more defensive assets. Gold miners rose firmly as investors shifted their assets to more defensive stocks and as the price of gold moves higher.
In stock news, Domino's Pizza fell after the company advised it had been served with a class action filed on behalf of Australian franchisee employees who alleged the company misled its franchisees by advising them to pay delivery drivers and in-store workers outside of the Fast Food Industry Award.

The New Zealand market added to gains on Tuesday (NZX 50 index +0.29%) led by A2 Milk as solid trade data allayed some concerns over how new Chinese e-commerce rules will be applied. A2 had been under pressure in recent days on fears that the way Chinese authorities apply new e-commerce rules could hit the firm, given its exposure to China's formula market. Arvida Group was unchanged with its shares halted for a placement. The retirement village operator is raising money to help fund its $180 million purchase of three villages.

3 Things Markets Will be Watching this Week

  1. ​​​​​​The ​G20 Meeting takes place on Friday & Saturday.
  2. The Reserve Bank of New Zealand makes an interest rate decision on Wednesday.​
  3. T​here is an OPEC meeting on Tuesday.

Have a Great Day,


Federal Reserve Chair Jerome Powell pushed back on pressure from President Donald Trump to cut rates.

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