Rebound Overdone? | Macquarie

6 December 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, +0.3%) closed higher on Monday after spending most of the day in the red or flat. Sectors were mixed with Utilites (+0.9%) leading gains. Synlait Milk (+6.9%) led the top 50 higher, while A2 Milk (0.5%) closed lower. 

Eroad (-5.7%) fell, while its soon-to-be replacement in the NZX 50, Vulcan Steel (+2.7%), rose. 

Newly listed Black Pearl Group (-31.5%) sank for a second day. 

Australia Market Movers 

The Australian market (ASX 200 Index, +0.3%) rose on Monday as Iron Ore (1.4%) rallied to $106.50/T after Chinese authorities announced the easing of some Covid-19 testing requirements. BHP (+2.3%) and Rio Tinto (+3.7%) advanced on the news, while Fortescue Metals (+6.9%) was the standout for the sector. Hong Kong (HK 50 +4.5%) and Chinese Blue-chip stocks (SSE 50 +2.4%) also gained on the news. 

Today’s trading will likely be dominated by the Reverse Bank of Australia’s interest rate decision. This decision is due at 4.30 pm NZDT. 

Europe Market Movers  

European markets (Stoxx 600 Index, -0.4%) bucked the trend in Asian stocks and declined on Monday with most sectors in the red, led lower by Food and Beverage (-1.5%). 

US Market Movers 

US markets (S&P 500 Index -1.8%) declined on Monday, while 10Y Treasury Bond Yields (+0.1%) advanced above 3.6%, as investors consider the recent 2 weeks of gains in equity markets as overdone given risks awaiting 2023. 

Tesla (-6.4%) fell after denying a Bloomberg report that it will cut production at its Shanghai plant by 20% in response to weakening demand.  

Stock in Focus: Macquarie (MQG.ASX) 

Macquarie Group have recovered strongly since bottoming out to fresh 12-month lows in October, and have continued to trade higher after reporting an interim half-year net profit of $2.3 billion, which is a -13% decline on its previous half-year period, but +13% percent higher than the half-year profit it reported this time last year – benefits of its diversified source of earnings helping a lot within a challenging environment. Looking forward, Macquarie Chief Shemara Wikramanayake said the company would maintain “a conservative approach” but was on the lookout for investment opportunities for its $30 billion in “dry powder”. 

We maintain our positive view on Macquarie in terms of it continuing to grow its profits and being capable of taking advantage of volatile markets, however at the current juncture we believe the valuation is stretched – trading at a forward Price to Earnings multiple of 16x and offering a dividend yield of ~3.8%. We continue to HOLD Macquarie in our Australian portfolio but would prefer to BUY the stock at more attractive valuation multiples. 

What Markets will be Watching this Week (UTC +13) 

Monday 
EA ECB President Christine Lagarde Speech 

Tuesday 
US Factory Orders MoM OCT  

AU RBA Interest Rate Decision 

Wednesday 
NZ Global Dairy Trade Price Index  

AU GDP Growth Rate YoY 

Thursday 
AU RBA Bradley Jones Speech 

Friday 
NZ Electronic Retail Card Spending YoY NOV 

Saturday 
US Producer Price Index MoM NOV 

US markets (S&P 500 Index -1.8%) declined on Monday, while 10Y Treasury Bond Yields (+0.1%) advanced above 3.6%, as investors consider the recent 2 weeks of gains in equity markets as overdone given risks awaiting 2023. 

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