he US Market was closed for a public holiday yesterday, although futures markets were trading about 1% higher.
European markets (Stoxx 600 index +1.0%) were up following last week’s sharp sell-off, as investors took the view that last week’s sell-off was overdone.
Fletcher Building (FBU:NZX / FBU:ASX)
Fletcher’s are holding their investor day is tomorrow, which will be closely watched by many. Fletcher building shares have been hit hard as recession fears and slumping house prices weigh down on sentiment towards the construction company.
Management are also currently facing scrutiny around its near-monopoly of Gib plasterboard, with massive supply shortages adding to supply constraints in the sector and inflation. While we believe a shallow recession is most likely, we believe Fletcher is still well-positioned to perform well, albeit with softening demand over the near-term.
Fletcher appears attractively priced given it is down -35% from the start of the year, trading at just ~9x on a price to earnings ratio and forecast to pay a ~7% dividend over the near term, assuming some softness in earnings over the medium-term. We are Buy rated on Fletcher and think now is a time to begin averaging into a position.
Australia & New Zealand Market Movers
The Australian market was down yesterday (ASX200 index -0.6%), extending its losses for the year.
A slump in commodity prices across the board saw energy and material stocks slump, given a higher probability of the world economy entering into a recession. Trading was mixed as some sectors reported gains.
Shopping centre giant Vicinity Centres jumped +6.3% after upgrading its earnings guidance for 2022 on strong sales data and rental growth.
The New Zealand market (NZX 50 Index) was flat on light volume. The defensive nature of the majority the market heavyweights saw limited downside moves.
Pushpay slid another -2.6% as they are yet to provide a disclosure of any formal takeover offer from its takeover suitors.
3 Things Markets will be Watching this Week
- Geopolitical risks remain elevated given the Russia/Ukraine conflict.
- Inflation (CPI) data out of the UK and Canada, and PMI manufacturing data from numerous regions.
- Locally, the RBA release minutes from their latest meeting, and Fletcher Building will be holding their investor day.