Sell-off, Brexit | Spark Outperforms

11 December 2018

Global markets remained under pressure overnight (although Wall Street managed to rally into the close of trade) on mounting worries over global growth, the US-China trade war and uncertainty over Britain’s exit from the European Union.

As we discussed last week, there are concerns that Canada's arrest of Huawei global chief financial officer Meng Wanzhou could derail the temporary truce between the US and China. The flare-up in tensions come just as the two nation's kick of 90 days of negotiations.

Brexit is also back in focus, and investors bailed on European stocks as British Prime Minister Theresa May postponed a key Brexit vote slated for Tuesday. May said she was delaying a planned vote in parliament on her Brexit deal as it was set to be rejected "by a significant margin". This is adding to the high level of political uncertainty around Europe at the moment as the risk of a “No Deal” Brexit grows.


Stock in Focus: Spark (SPK:NZ /  SPK:AX)

Spark shares have held up very well in the recent sell-off, as investors seek safe-haven exposure through defensive sectors companies with a good dividend yield – such as Spark.


In terms of recent news, Spark has been caught up in the Huawei news as the GCSB declined Spark’s proposal to use Huawei 5G equipment as if implemented, would raise significant national security risks. Spark chief executive Simon Moutter has an ambitious goal, to get the company's 5G mobile network up and running by July 2020. Spark has also recently made the first move into sports content production.

Spark continue to grow their mobile and cloud security businesses, offsetting declines in its legacy voice business as Spark transforms from a traditional Telco to a digital services company. Spark remain ambitious, investing heavily in digitalisation and automation so they can better serve and compete with their multi brand strategy. While there are execution risks with their strategy, SPK have been agile and forward thinking, and we remain positive on the business

Australia & New Zealand Market Movers

The Australian share market slumped to a 2-year low on Monday (ASX 200 index -2.27%) weighed down by the major banks as a broad sell-off hit the ASX. Interestingly, a cut in interest rates could not be ruled out, a senior central banker said on Monday, but emphasised that the next move was still likely to be an increase given expectations for a gradual acceleration in inflation. IOOF Holdings shares fell sharplyafter the company announced chief executive Chris Kelaher and chairman George Venardos had stepped down from their respective roles. Renato Mota will be appointed as acting CEO and Allan Griffiths will be appointed acting chairman. The changes come following the announcement on Friday that APRA will take legal action against five of IOOF's executives.


The New Zealand market sold off yesterday (NZX 50 index -1.22%) as rising concerns about global growth due to heightened US-China trade tensions extended into Asian markets. In a light day for stock news, A2 Milk announced the departure of general manager of international development Simon Hennessy and head of emerging markets business development Michael Bracka. Retailers such as Briscoes, Hallensteins and the Warehouse were mixed after Paymark figures showed a muted start to the Christmas spending season.


3 Things Markets Will be Watching this Week

  1. Tensions between the US & China following the arrest of Huawei’s chief financial officer will likely dominate headlines.
  2. The latest US inflation figures are published on Thursday morning (AU/NZ time).
  3. Australian house price data is published on Tuesday. 


Have a Great Day,


Brexit is back in focus, and investors bailed on European stocks as British Prime Minister Theresa May postponed a key Brexit vote slated for Tuesday.

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