Global markets were mixed on Friday as Wall Street’s major indexes fell late in the day as US President Donald Trump raised the possibility of additional tariffs on Chinese imports and Apple Inc indicated that some of its products (such as the Apple watch and AirPods) could be subjected to such levies.
While there was no immediate imposition of tariffs on the $US200bn of Chinese goods that the administration has targeted, Trump told reporters he already was looking towards hitting a further $US267bn of Chinese goods. The comments put investors on the defensive before the weekend.
Closer to home, it was a tough week last week for the ASX and NZX, with the Aussie market recording its worst weekly performance since February, while the NZ market gave some of Augusts large gains. Markets are under pressure given the trade dispute between the US & China, and as instability continues to shake emerging markets, with the Aussie market coming off a more than 10 year high and the NZ market off an all-time high. As we mentioned on Friday, once the dust settles we believe there will be buying opportunities particularly on the ASX.
Stock on Focus: Fletcher Building (FBU:NZ / FBU:AX)
Shares in Fletcher Building (FBU) have traded lower after recently announcing their 2018 full year result, which was within guidance with operating earnings excluding B+I (commercial construction) of $710 million, and the B+I loss was unchanged at $660 million – which was pleasing to see.
With the residential property market softening both in Australia and New Zealand, a significant portion of Fletcher’s business has a more muted outlook which seems to have scared the market. However, we believe the recent restructure plans which put a greater emphasis on expanding FBU’s core business and cut down unnecessary overheads, improve its operating efficiencies and reduce its risk profile.
We forecast a multi-year turnaround for medium term investors, with the caveat that there are still considerable execution risks.
We are currently have a BUY (High-Risk) recommendation on FBU.
Members can login to read our full reports on FBU.
Australia & New Zealand Market Movers
The Australian share market retraced again on Friday (ASX 200 index -0.27%). In stock news, Greencross was removed from the ASX200 index, along with Genworth Mortgage Insurance. They will be replaced by agribusiness company Elders and Bingo Industries from September 24. Inclusion in the ASX 200 is important as it improves liquidity in a stock and means it will be followed by more funds, particularly passive funds such as ETFs which are forced to by index constituent shares.
The New Zealand market was slightly lower on Friday (NZX 50 index -0.06%) as investors cashed in some of August's gains after what was a very strong month for the local market. In stock news, Orion Health shares were unchanged after independent adviser KordaMentha recommended shareholders back a proposal to carve up the company and return capital through a share buyback.
3 Things Markets Will be Watching this Week
1. US-China trade tensions & whether Trump proceeds with the threats of a new tariff which would be imposed on virtually every Chinese good entering the US.
2. The Bank of England and European Central Bank make interest rate decisions on Thursday.
3. Australian employment data is published on Thursday.
Have a Great Day,