Global markets bounced overnight after the Trump administration announced a delay on select Chinese import tariffs, bringing buyers back to the equities market in a broad-based rally.
The US will delay 10% tariffs on some Chinese products, including laptops and cell phones, driving a 4% rally in shares of iPhone maker Apple and supporting retail stocks. Trump said his decision to delay tariffs ahead of the Christmas season was to avoid an impact on holiday shopping. The news would suggest that China is willing to play a longer game, while the US is still looking for a quicker resolution on trade.
Stocks across Asia remained volatile after pro-democracy protests in Hong Kong closed the autonomous region's airport and goaded mainland Chinese officials to dub the demonstrations as the first sign of "terrorism".
Stock in Focus: Summerset (SUM:NZX / SNZ:ASX)
Summerset shares were higher as it reported a well-received first-half result with underlying earnings up 6%, and signalled interest in entering Melbourne, where larger rival Ryman Healthcare has branched out.
Summerset reported net profit after tax of $92.6m (which includes unrealised valuation gains) was down -4% from last year due lower level of retirement unit pricing increase. Underlying profit, which is the retirement villages preferred metric (which excludes unrealised valuation gains in the fair value of investment property) was $47.8m, up +6% from last year due to the growing scale of the business delivering higher deferred management, care and service fees, despite lower sales volume. Better margins from new builds and improved operating performance helped delivered a higher profit than last year.
We are now also more neutral on the property market given factors such as interest rate cuts by RBNZ this year, which removes a near term down-side risk for the retirement village sector.
We are currently reviewing our recommendation on SUM.
Members should look out for a full update on SUM to be released in today’s weekly report.
Australia & New Zealand Market Movers
The Australian market retraced yesterday (ASX 200 index -0.33%) with investors bracing for a number of key results later in the week. In stock news, investment management company Challenger rose after reporting full year normalised net profit before tax of $548 million, in line with its guidance from June that said the figure would be at the lower end of its $545 million to $565 million guidance range.
The New Zealand market was lower on Tuesday (NZX 50 index -0.17%) joining a global decline as investors remain unnerved by heightened geopolitical tensions. Domestic earnings met expectations but failed to stoke local investor confidence. Outside the benchmark index, PGG Wrightson resumed trading after a 10-for-1 share consolidation. The rural services firm reported a record annual profit due to a one-off gain on the $434 million sale of its seeds division to DLF Seeds, of which it returned $234 million to shareholders. However, underlying earnings dropped -29% as farmers kept spending in check as they contended with the Mycoplasma bovis outbreak and amid a general malaise in the rural sector.
3 Things Markets Will be Watching this Week
- Australasian earnings season kicks into full gear this week with a number of companies set to make profit announcements.
- Employment data in Australia will be released on Thursday.
- US inflation data is published Wednesday morning NZ/AU time.
Have a Great Day,