Global markets rallied overnight, carrying on a rally across Asian markets as China reduced its tariffs on US automobiles from 40 per cent to 15 per cent, lifting global investor sentiment.
Investor confidence recovered as the world's two biggest economies attempt to rebuild strained relationships, as indications that Beijing would ease its “Made in China 2025” industrial policy added to optimism fuelled by President Donald Trump’s upbeat comments on trade. Trump also said he would intervene in the case against a top executive at Huawei Technologies if it would help secure a trade deal.
US inflation data overnight also showed that inflation pressures remain contained, which continues to imply the US Federal Reserve will not be under pressure to aggressively hike interest rates next year.
Stock in Focus: Select Harvests (SHV:AX)
Shares of almond producer Select Harvests (SHV) have performed well over the last few months in what has been a tough market, and its shares were also up +6% yesterday.
As we mentioned in our last update in October, while SHV did have a difficult 2017, with everything possible going against them – in 2018 things have turned around significantly with business fundamentals remaining strong, in our view.
At its recent AGM held at the end of November, SHV also provided a 2019 crop update which showed almond yields look sound, while almond pricing has also recovered to more favourable levels (A$8.00 – A$8.50/kg). While the drought in Australia has impacted many Australian agriculture stocks including SHV, the dry conditions are favourable for growing almonds. The main issue of concern is the doubling in annual water prices, as a result of the water shortage.
We see SHV as an interesting way for investors to gain exposure to global agricultural and health conscious consumer trends.
We currently have a BUY (High-Risk) rating on Select Harvests.
Australia & New Zealand Market Movers
The Australian share market rallied on Wednesday (ASX 200 index +0.42%) buoyed by a surge in banking and energy stocks as trade tensions ease and investors cashed in on cheaper share prices. Altium shares closed sharply higher after a major broker initiated coverage on the printed circuit board design software company with a "buy" recommendation. The broker said it expected the company's market share to grow and its addressable market to expand, and that it was trading at an attractive valuation. In stock news, shares in lithium miner Galaxy Resources rose nearly +6% after the company announced it had intersected a new pegmatite deposit at its Mount Cattlin mine in Western Australia.
The New Zealand market joined a rally across Asian markets yesterday (NZX 50 index +0.78%) on signs that China-US trade relations may be thawing. Growth names rallied on the back of the lift in sentiment, with Pushpay and A2 Milk rising. Trade Me hit a record on news the board will back a $2.56 billion takeover by British private equity firm Apax Partners, which raised its bid to $6.45 a share. The transaction will need shareholder, High Court, and Overseas Investment Office approval. Hallenstein Glasson shares dropped sharply to a 10-month low as the retailer warned shareholders its margins may be squeezed in the second half on rising costs and unfavourable foreign exchange movements.
3 Things Markets Will be Watching this Week
- Tensions between the US & China following the arrest of Huawei’s chief financial officer will likely dominate headlines.
- The latest US inflation figures are published on Thursday morning (AU/NZ time).
- Australian house price data is published on Tuesday.
Have a Great Day,