RBA Stays on Hold | Scales Update

7 November 2019

​​Global markets continued to ​trend higher overnight, although US markets were mixed as the recent rally ran out of steam.

​Closer to home, yesterday the Reserve Bank of Australia left the official cash rate unchanged at 0.75​%​, which was widely expected by the market​.​​ ​​In saying that, the statement ​did not signal any significant change in the bank's position. Although it did affirm some expectations that the next cut is further away than many may have been expecting. Th​e biggest driver of equity markets ​this year h​as been​ lower​ interest rates and​ supportive central banks globally, and we continue to watch developments closely.​

Stock in Focus: Scales Corp (SCL:NZX)

SCL shares broke into new all-time highs recently after delivering a well-received result for the first half of the 2019 financial year, as newly acquired businesses perform well. 

Scales reported underlying net profit after tax was $30.1m, up +2.3% from last year, and underlying operating earnings (EBITDA) was $47.3m up marginally (+$0.2m) from last year. A strong start from the new businesses was offset by one-off inventory write-offs, and the core horticulture businesses strong performance in Asia and local markets offset by slower start in the European market. While agribusinesses do come with associated risks – such as impacts from weather, currency moves, and commodity prices, we believe Scales still offers an attractive risk reward opportunity to gain exposure to global agricultural trends. We remain confident in SCL’s ability to growth their earnings both organically and via strategic acquisitions given the additional funds it has to reinvest – as it actively searches to make a value add agri acquisition.​

We currently have a BUY rating on SCL.

Australia & New Zealand Market Movers

​​The Australian market ​added to gains yesterday​ (+0.​15​%)​ ​​with Energy stocks leading gains. The b​ig four banks ​had a volatile session, with Westpac ending the day down -2.5% after it exited its trading halt and returned to normal trading post a $2.5bn capital raise. The capital raise creates flexibility for changes in capital rules and for potential litigation or regulatory action against Westpac.  

The New Zealand market​ continued to trend higher on Tuesday ​(+0.3​7​%)​, as Fletcher Building led the market higher as the stock continued its recovery this month, while Fisher & Paykel hit a new all-time high. Retirement village operators rose for a second day after Barfoot & Thompson figures indicated the Auckland property market continued to recover. A2 Milk weighed on the market, with it set to report an update mid-month.


3 Things Markets Will be Watching this Week

  1. ​US earnings season for the 3rd quarter ​continues this week.
  2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
  3. A string of China data points are set to be released at the start of the week.


Have a Great Day,


​Closer to home, yesterday the Reserve Bank of Australia left the official cash rate unchanged at 0.75​%​.

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