Global markets were mixed overnight as the US market ended flat while the UK market was lower heading into their election. Markets seem to have digested former FBI director James Comey's Senate testimony without any major moves, with the next major event of the week being the UK election snap election.
Polls are due to close shortly in the UK, and the result will become apparent over the course of the day. While most polls have shown that the Conservatives are ahead of Labour, there have been mixed signals. It appears as though a conservative victory with Theresa May winning will be the most market friendly, and should strengthen her position in handling Brexit.
The key risk from the election is a hung parliament (given the polls are tight this is a possibility) which would not be market friendly given the uncertainty that creates. While the election outcome may be a market “non-event”, there are likely a number of investors sitting on the side-lines waiting for the result.
Stock in Focus: Auckland Airport (AIA.NZ / AIA.AX)
In terms of stock specific news, AIA announced plans yesterday to invest $1.8 billion in aeronautical infrastructure by 2022 to support the continued growth of New Zealand travel and tourism. According to the company, its new prices for the 2018-2022 financial years will target a return on investment of 6.99%.
AIA also noted that the number of international airlines has grown significantly, with a 61% increase in only the last 22 months. AIA is expecting total passenger numbers to rise from 19.8 million in the current financial year to 22.6 million in 2022. AIA is clearly benefitting from the tailwinds of a tourism boom. Overall the announcement saw a relatively muted share price reaction.
We are currently HOLD rated on AIA shares. While we are firm believers in the tourism boom investment theme, we believe AIA is fairly priced in terms of valuation.
Members should look out for a full update on AIA to be released in our weekly.
Australia & New Zealand Market Movers
The Australian share market snapped a losing streak on Thursday (ASX 200 index +0.17%) as CSL shares lifted the market, and buyers returned to the Big Banks. At the same time a slide in Telstra and the energy sector given a 4% slide in the oil price capped overall market gains. In stock specific news, Woodside Petroleum’s joint venture partner at an offshore Senegal oilfield, FAR, has declined to support a transition for the oil and gas giant to eventually take over as operator of the SNE oil field, which puts the development schedule at risk.
The New Zealand market lost ground again yesterday (NZX 50 index -0.12%) led lower by Sanford and Infratil. There was also some profit taking on Xero, which has had a strong share price run in recent times. Shares in Steel & Tube rebounded after falling sharply a day earlier.
3 Things Markets Will be Watching this Week
1. Whether market continues to trend higher, with the US market continuing to reach new all-time highs.
2. Australian quarterly economic growth (GDP) figures are released on Wednesday.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday
Have a Great Day,
Team