Global markets were slightly lower overnight. With Wall Street at record highs, investors will eye a Federal Reserve meeting, and US President Donald Trump’s first State of the Union address this week. The US earnings season is now also in full-swing, with a number of high-profile corporate profit results dude this week including from Facebook, Microsoft, Amazon, Alphabet and Apple. As we mentioned last week investors are optimistic, making the current earnings season as important as ever in terms of supporting stock prices.
While the US Federal Reserve is not expected to announce a rate hike on Thursday morning AU/NZ time, it is widely expected to raise its target rate during its March meeting. First though, on Tuesday, President Trump is likely to discuss infrastructure plans, expected to be next on his legislative agenda, as well as immigration and trade.
Stock in Focus: Auckland International Airport (AIA:NZ / AIA:AX)
AIA recently announced it will sell its 25% stake in the Cairns and Mackay airports in North Queensland to its fellow investors for A$370 million, almost three times what it paid eight years ago. The shares were higher on the day of the announcement.
Chief executive Adrian Littlewood said in a statement. "The sale will enable Auckland Airport to focus attention on growing its New Zealand travel, trade and tourism businesses and to recycle the proceeds into supporting the significant step up in aeronautical investment at Auckland Airport over the five years that we recently announced".
AIA also announced that passenger numbers were up by 6.3% in November 2017 compared to November 2016. Growth occurred across all regions with a particularly strong performance on Asia and Middle Eastern routes (+16.6%). This was another positive set of traffic numbers, reinforcing the strength of the tourism boom across New Zealand (and Australia) which remains one of our top investment themes. In particular we forecast strong medium-term growth from China, and tourism numbers and traffic stats continue to support that trend. However, what has held us back on becoming more positive on AIA is valuation, particularly given its large capital expenditure program.
Members should look out for a full update to be released on AIA in this week’s weekly report.
Australia & New Zealand Market Movers
The Australian share market climbed solidly on Monday to start the week on an upbeat note (ASX 200 index +0.42%). Banks and healthcare firms were the best performers by sector, with CBA shares advancing after Australia's biggest bank said that it has promoted the head of its retail business, Matt Comyn, to chief executive. Shares in Pharma giant CSL were also higher as the European Medicines Agency's Committee for Medicinal Products for Human Use gave a positive use extension recommendation to CSL for its Hizentra product late Friday.
The New Zealand market was higher on Monday (NZX 50 index +0.19% ) led higher by Fisher & Paykel Healthcare Corp and Kathmandu Holdings in quiet trading due to the Auckland Anniversary Day. In stock news, Synlait Milk fell as the milk processor said it expects to achieve its forecast milk price pay-out to farmers (of $6.50 per kilogram of milk solids for the 2017/18 season) so long as commodity prices continue to firm for the remainder of the season.
3 Things Markets Will be Watching this Week
1. US earnings season gets into full swing – with a particular focus on company comments around the impact of US tax cuts.
2. The US Federal Reserve makes and interest rate decision Thursday morning (AU/NZ time).
3. Australian Inflation data is published Wednesday.
Have a Great Day,
Team