Global markets were mixed overnight and at the time of writing the US market was lower while European markets ended the session in positive territory. Once again, concerns around whether President Donald Trump will proceed with imposing tariffs continue to dominate headlines.
As we touched on yesterday, there were reports that top economic adviser Gary Cohn will leave his White House job if Trump decides to go forward with tariffs on imported steel and aluminium. Cohn has now announced he is stepping down from the role, which have ignited concerns around a trade war (particularly with Europe and China), while also raising questions around who will be his successor. Whatever the eventual outcomes, there is a level of uncertainty and risks which have unsettled markets.
Stock in Focus: Metlifecare (MET:NZ)
Metlifecare shares have drifted lower after NZ’s second-largest listed retirement village operator posted a result which disappointed investors. MET reported a -66% drop in first-half profit as the property market slowed and it missed out on sales gains after it bought back units to temporarily rehouse residents as it fixed leaky buildings in their villages.
Excluding the unrealised valuation gains and other non-cash items, underlying pre-tax profit slipped -6.2% to $36.2 million, and the company said that while it expects to deliver a stronger second-half performance, underlying operating cash flow and profit for the 2018 financial year are expected to be "in line" with last year, before rising again in 2019. The result has seen its shares drift lower, although we would note that MET’s share price did run up heading into the result.
MET has been our top pick in the NZ retirement sector for some time now, and while we think it may be a bumpy ride in the near term (primarily given property market risks), over the medium term we remain positive on MET given the tailwind of an ageing population.
We currently have a BUY rating in MET.
Members should look out for a full update on MET to be released in next week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market gave back gains yesterday (ASX 200 index -1.01%) as shares dropped for the fifth time in six sessions as simmering trade war worries resurfaced with the surprise resignation of White House economic adviser Gary Cohn. Banks were taking the brunt of the selling in Australia, with Bank of America Merrill Lynch analysts also weighing in on the sector. Gold miners gained, however, after the gold price, which tends to benefit when markets are seeking a safe haven.
The New Zealand market sold off yesterday (NZX 50 index -0.52%) as Metro Performance Glass sank to a record low on speculation it may drop out of the NZX 50 Index. Fisher & Paykel Healthcare, Fletcher Building and a2 Milk were among decliners while Kathmandu and Z Energy rose. March quarter re-weightings for the NZX 50 may be announced as soon as this week and some investors are re-positioning beforehand (if a company falls out of the market index then a number of funds will no longer need to hold the stock).
3 Things Markets Will be Watching this Week
1. Local AU/NZ company earnings season moves into its latter stages.
2. Global politics as details around trade tariffs to be implemented by the Trump Administration are announced.
3. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
Have a Great Day,
Team