Global markets were mostly in positive territory overnight as tech stocks rallied on Wall Street with quarterly results in focus.
About 30% of S&P 500 companies are set to report second-quarter results this week, and Amazon and Alphabet are among the companies poised to report results. While Netflix last week missed with its quarterly results, both Microsoft and International Business Machines reported better-than-expected earnings.
Stock in Focus: Auckland Airport (AIA:NZX / AIA:ASX)
Shares in Auckland International Airport (AIA) shares continue to surge up to all-time highs, as it gains attraction from investors seeking a reliable dividend in a volatile and low interest rate environment.
No major company specific news has been released recently to warrant the recent surge, although for the financial year to date total passenger numbers for the first 11 months (to 31 May 2019) was 19m, up +2.9% from the same corresponding period last year – which has been largely in line with expectations that tourism boom peak has passed, with growth now expected to slow down to more moderate rates.
We see AIA as a key beneficiary of the growing tourism industry albeit at a more moderate rate over the medium-term. However, we still see AIA as very expensive especially given the recent run, trading on a valuation of 41x earnings and a dividend yield of 2.4% which is now far from attractive. Accordingly, we believe there are better value investments with better medium-term potential to focus on.
We currently have a HOLD recommendation on AIA.
Members should look out for a full update on AIA to be released in our weekly report.
Australia & New Zealand Market Movers
The Australian share market was a touch lower on Monday (ASX 200 index -0.14%) as market expectations for a 50 basis point cut diminished after the Fed played down its likelihood. The jump in bond yields on the back of the less dovish Fed comments weighed on real estate investment trusts and infrastructure stocks such as Goodman Group and Transurban. Energy stocks traded higher as the price of oil rose as tensions in the Strait of Hormuz increased over the weekend after Iran seized a British tanker. The situation in the region could put at risk one-third of the world's seaborne crude.
The New Zealand market started the week on a positive note (NZX 50 index +0.67%) as NZ shares rose for a fourth day to a fresh record high. Sky TV shares led gains as it rebounded, with the pay-TV operator under pressure in recent months as investors question whether it will be able to respond to the growing threat from online streaming services and other providers. Outside the benchmark index, Plexure Group jumped 11% after it said it's signed US fast-food chain White Castle as a new customer, without providing any details on predicted revenue gains. The mobile app vendor has soared 289 percent so far this year, and is the best performing stock on the S&P/NZX All Index.
3 Things Markets Will be Watching this Week
- US Corporate earnings season continues this week with tech names Amazon, Alphabet, and Facebook among those to report.
- The latest US economic growth (GDP) figures are published at the end of the week.
- Reserve Bank of Australia governor Lowe makes a speech on Thursday.
Have a Great Day,