Global markets were mixed overnight with Wall Street trading in a narrow band as health stocks got a boost after Republicans unveiled a bill to repeal Obamacare and the energy sector recovered as oil prices rose from multi-month lows.
Yesterday saw the Reserve Bank of NZ hold the official cash rate at a record low of 1.75%. The RBNZ said that they will look through a recent pick-up in inflation which is being seen as temporary, while Governor Wheeler tried to talk down the high NZD. Essentially the RBNZ reaffirmed its neutral bias, which surpised some in the market. continue to believe that as with the RBA, interest rates will remain on hold in the near term (and likely through 2017).
Stock in Focus: Tourism Holdings (THL.NZ)
Tourism Holdings shares continued to make gains after the company raised its earnings guidance on Wednesday and said annual profit will likely rise by about 21% as New Zealand continues to register record visitor numbers.
THL had previously expected 2017 profits to be $27m and now expect them to hit $29.5mn, citing recent positive trading results in NZ and the US. We are encouraged by the announcement and our earnings forecasts remain positive – bolstered by robust visitor arrivals growth from key markets and potential upside from THL’s recently acquired El Monte business in the US.
THL has been one of our best performing tourism exposures, and a tourism boom across Australia & NZ remains one of our key investment themes.
We are Currently BUY rated on THL and are encouraged by the latest upgrades.
Members should lookout for our full update on THL to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market recovered yesterday (ASX 200 index +0.71%) but news late in the day of a state-based bank tax trimmed gains across the Banking sector. QBE Insurance managed to claw back some of its losses from a day earlier, while the miners managed to edge higher despite the recent weakness in the oil price.
The New Zealand market rallied yesterday (NZX 50 index +0.49%) led by Xero which was spurred on by a rally in tech stocks on Wall Street, while blue chip stocks including power company Contact Energy also gained. In other news Fonterra said it expects to collect 3% more milk from New Zealand farms this season as higher milk prices encourage farmers to lift production.
3 Things Markets Will be Watching this Week
1. The Reserve Bank of New Zealand makes an interest rate decision on Thursday.
2. Minutes from the last Reserve Bank of Australia meeting are released on Tuesday.
3. How the US Technology sector trades following its recent correction.
Have a Great Day,
Team