UK Rolls Out Vaccine | PGW Jumps, Infratil +19% on Takeover

14 December 2020

Global markets trended higher overnight (S&P 500 index +0.3%)  amid another record day of COVID-19 hospitalisations and signs that talks in the Senate on a COVID-19 aid package continue to falter.

Pfizer climbed after US regulators gave early indications they may grant emergency-use authorization to its vaccine. The first vaccines have also been rolled out in the UK, helping investors look through near term uncertainty.

A key sentiment indicator for US stocks has reached its most bullish level in two decades. The weekly Cboe ratio of volume traded in puts versus calls fell to the lowest since July 2000. This implies extreme positioning to the upside, as investors look beyond short-term uncertainty toward a continuing global recovery in 2021. This suggest investors are positioned for further upside in the market, not downside.

PGG Wrightson (PGW:NZX)

PGW shares jumps +11% yesterday as it increased operating earnings guidance to ~NZ$35m, the second upgrade for the 2021 financial year – albeit cycling a poor underlying 2020 performance, which was also impacted by COVID.
Demand in the retail Rural and Fruitfed supplies businesses has remained strong over the important Spring period. While there is still seven months remaining for 2021, and Wool (structurally challenged) and peak livestock trading are key swing factors in the 2nd half, management believes PGW is well placed. In line with the upgraded earnings, management also lifted interim dividend expectations to “not less than 10cps [8cps at AGM]”, with the normal caveat on trading conditions.

Another positive update from PGW, but we continue to believe the stock is fairly priced and remain HOLD rated given agri related weather risks and the high New Zealand dollar.


Australia & New Zealand Market Movers

The Australian market was in positive territory yesterday (ASX 200 index +0.2%) as the relentless rally in the price of Australia's No. 1 commodity, iron ore, provided no joy for the ASX's resources sector on Tuesday when producers fell, but the benchmark index eked out a small gain. CSL helped lead the market gains, rising 0.9% and leading a broadly firmer health sector.

Link Administration rose 13.7% after US-based SS&C Technologies lodged an indicative proposal of $5.65 per share for the administrator, topping the $5.40-a-share bid by private equity consortium Carlyle Group and Pacific Equity Partners.

Woodside Petroleum dipped after chief executive Peter Coleman said he plans to retire in the second half of 2021 after what will be more than a decade helming the oil and gas producer.

G8 Education fell -6.6% after it said it could owe up to $60 million in unpaid wages to some 27,000 staff stretching as far back as 2014 and that it could book a total expense of up to $80 million as part of its remediation program.

The New Zealand market made gains on Tuesday (NZX 50 index +0.5%) as Pacific Edge led gains (+7%) followed by Mercury and Meridian (+4%) which continue to benefit from relentless green ETF buying.

The big news late yesterday was that Australian-Super has submitted a proposal to acquire all shares of Infratil for a total consideration of NZ$7.43 per share consisting of NZ$5.7 cash and 0.221 TPW shares per IFT share (~NZ$1.64/share). In theory we should not be surprised as IFT’s portfolio of premium, largely green, growth infrastructure assets are representative of the most sought-after asset class on the globe that are achieving eye watering valuations. The Infratil board have rejected the offer as undervaluing its assets.  Infratil shares are up +19% at the time of writing today.

Interestingly, RBNZ expects the reintroduction of high loan to value ratio (LVR) lending limits from March next year will trim about 1-2 percentage points off house price inflation.


3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​COVID related news flow, including vaccines are likely to dominate headlines for another week.
  2. US inflation data is released on Thursday.
  3. US fiscal stimulus package talk also continue to drag on.


A key sentiment indicator for US stocks has reached its most bullish level in two decades.

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