Global markets were lower overnight as US stock declines were led by Apple and Amazon as investors took profits ahead of Trump's expected announcement of new tariffs on $200 billion of Chinese imports.
As we discussed yesterday, the US is reportedly set to go ahead with proposed tariffs, although the reaction by Asian markets suggest the market may have been expecting worse – with fears tariffs may have been as high as 25% (rather than 10% now expected). No more tariffs would still clearly be the best outcome for the markets, but it seems the US administration is sticking to its course of action against China.
Closer to home, Australian Prime Minister Scott Morrison has said there will be a royal commission into the aged care sector sent which listed aged care stocks diving. The unexpected announcement will have investors worried with suggestions the finding could be similar to that of the royal commission into the financial services sector.
Stock on Focus: Metlifecare (MET:NZ)
In NZ there have been no indications yet that a similar inquiry such as in Australia will be carried out. Our favoured NZ retirement sector stock has been Metlifecare, which has moved higher post its recent result.
Metlifecare reported underlying profit of $87.5m (compared with $82.1m last year) on improved revenue in 2018. Its headline profit weakened because of the smaller revaluation gains it made on its property portfolio as the housing market moderated.
We are positive on the retirement sector generally given the massive tailwind of an ageing population, although there are risks such as a slowing housing market and wage increases given a shortage of labour (particularly if immigration restrictions are imposed).
We are currently have a BUY recommendation on Metlifecare.
Members should look out for a full update on Metlifecare to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market started the week on a higher note (ASX 200 index +0.32%) higher despite lingering uncertainty over the future of US trade tariffs against China. The ASX was lifted by gains across the major banks despite heavy losses to aged care stocks in reaction to the pending royal commission. Prime Minister Scott Morrison announced a royal commission into the scandal-hit sector. Mr Morrison announced an inquiry following what he called an "alarming and disturbing" spike in elder abuse and poor standards in the industry.
The New Zealand market was marginally higher on Monday (NZX 50 index +0.01%) in light trading as investors weighed up the impact of index rebalancing at the end of this week. Growth stocks Pushpay Holdings and A2 Milk gained, while Sky Network Television fell. Several Australian stock indices tracked by passive investment funds will rebalance at the end of the week. The new line-ups will take effect from next month, including Sky TV's exit from the S&P/ASX 300 index. Index weightings are important as they impact flows from passive funds (such as ETFs) and benchmark aware fund managers.
3 Things Markets Will be Watching this Week
1. Trade is expected to be a keen focus this week as Trump directed advisers to proceed with plans to impose tariffs on $US200 billion of Chinese goods even as the US opened the door to further talks with China.
2. Minutes from the last RBA meeting are published on Tuesday.
3. NZ economic growth (GDP) data is released on Thursday.
Have a Great Day,
Team
