Global markets were in positive territory overnight as markets continue to grind higher, with shares on Wall Street making new record highs. Billionaire investor Warren Buffett has joined the debate over the prospect of tax reform in the US, and overnight said he expects tax changes to succeed as Republicans are keen to end the year with a legislative win.
Closer to home, the Reserve Bank of Australia kept rates on hold at 1.50% as we expected and offered no hints any rate increases were on the horizon. The announcement saw the Aussie dollar fall. As we have touched on recently, we continue to expect both the Reserve Banks of Australia, and NZ to keep interest rates steady in the near term.
Stock in Focus: Healthscope (HSO.AX)
While the broader ASX was lower yesterday, private hospital operator Healthscope saw its share price rebound 5%, as it appears investors may be starting to see value at current prices.
Healthscope has announced that it has completed the sale of its standalone medical centres, following on from the original announcement in August. The company has sold its medical centres for $55m, which was only about half of the asset book value. The medical centres had contributed approximately 2% of group operating earnings and following a strategic review, management felt that it was better to dispose them and focus on the core hospital & international pathology operations.
We have maintained a positive view on Healthscope by focussing on a medium-term view and given our ageing population investment thematic (creating demand pressure for private hospitals).
We are currently BUY rated on Healthscope as a medium-term holding.
Australia & New Zealand Market Movers
The Australian share market was lower on Tuesday (ASX 200 index -0.49%) led by QBE, as the general insurer announced an increase to its individual risk and catastrophe claims allowance. After the devastating events in the US and Mexico, the company estimates a $600 million impact on its 2017 earnings. There was also profit taking across the energy sector following a dip in the oil price.
The New Zealand market was more or less flat yesterday (NZX 50 index +0.06%) with Metro Glass rebounding from recent selling while A2 Milk Co and Synlait gave up some gains. The NZ markets does appear to be directionless, as election uncertainty lingers. There has been a decent amount of institutional movement in Metro Glass shares over the last couple of weeks, including from an overseas fund, resulting in a large amount of selling in a relatively short space of time.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
2. While markets have largely brushed off the geopolitical situation with North Korea, risks certainly remain.
3. Important monthly US employment figures are released at the end of the week.
Have a Great Day,
Team
