Global markets continued to rally overnight (S&P 500 Index +1.2%). Just as climbing COVID-19 cases looked to rattle investors after equities surged last week, another positive vaccine update, this time from Moderna, sent equities even higher to start this week. Indices in the US, UK, Europe and the major Asian-Pacific markets were all in the green.
Positive news on the Moderna Covid-19 vaccine sent shares tied to an economic reopening higher while stay-at-home tech companies lagged behind.
Moderna announced its experimental vaccine was 94.5% effective in preventing COVID-19 based on interim data from a late-stage trial. A key advantage of Moderna's vaccine is that it does not need ultra-cold storage like Pfizer's, making it easier to distribute. Together with Pfizer's vaccine the US could have two vaccines authorised for emergency use in December with as many as 60m doses of vaccine available this year.
Skycity (SKC:NZX / SKC:ASX)
SkyCity shares dipped -3.5% yesterday after announcing the sudden departure of CEO Graeme Stephens and the resignations of its CFO and CMO. This spooked investors and overshadowed a positive trading update. The speed of the CEO transition against the backdrop of strong trading momentum is surprising but we do not think this is reason to panic.
SKC said there was no change to previous 2021 financial year outlook statements although management noted performance was better than expected at the 2020 result (early Sept). A 4-month trading update (to October) confirming the business is tracking well — with New Zealand revenue at 88% of pre COVID-19 levels (excluding the second Auckland lockdown; 19 days of closure) and Adelaide tracking at 92%.
The domestic businesses continue to perform well (especially Electronic gaming machines) and major projects remain on track and budget. The online business is profitable with 27k active customers as at Oct-2020. We think the real recovery in SKC will come with the return of international travel, making SKC a clear beneficiary of the vaccine news trade.
We currently have a HOLD rating on SKC which is under review.
Australia & New Zealand Market Movers
The Australian markets opened higher yesterday (ASX 200 Index +1.2%) but the ASX only traded for 20 minutes in the morning before the system froze. The stock exchange operator said the cause of the issue had been identified and that normal trading would resume today.
The New Zealand market started the week off on a positive note (NZX 50 Index +0.4%) as investors remained positive that a covid-19 vaccine could soon be available.
Travel stocks most hit by the pandemic led the local share market higher, on the hope the vaccine may provide a path to normalcy for those companies – Tourism Holdings and Air NZ both rose 3%. Air NZ operated at almost 90% of its pre-covid domestic capacity during the October school holiday period, while Auckland International Airport’s domestic passenger numbers were down 68% from last year.
In other stock news, NZME shares were up as it provided detail on its strategy and pleasingly a scorecard on which the company will be measured – highlighting an ongoing transition to digital.
3 Things Markets Will be Watching this Week
- Second wave COVID-19 news is back at the top of headlines with social distancing measures being re-introduced, while vaccine developments are also front-of-mind.
- Highlights this week include the latest employment data in Australia and earnings from Aristocrat, Ryman Healthcare, Orica, Serko and Napier Port Holdings.
- The AGM season continues with Afterpay, a2 Milk, Pointsbet Holdings, REA Group, Precint Properties, Altium, BlueScope Steel, Goodman Group, Mirvac, Resmed, Seek, Lendlease and Kogan.com scheduled to meet with shareholders