US Market Reversal | SkyCity Update

4 September 2020

Global markets plunged overnight (S&P 500 Index -3.5%) as Technology stocks suffered a massive reversal, with the Nasdaq Tech index down almost -5% with star performer Tesla giving back -9% and Apple down -8%. 

While US stocks recorded their worst day since June as investors bailed on technology stocks after their stunning rally, there was no clear catalyst for the sell-off. Our best guess is that the moves were profit taking, and putting things into context the US market has only retraced back to levels it was at a week ago. As such we see no need to panic. 

Meanwhile, US health officials have told states to prepare for a Covid-19 vaccine to be ready by 1 Nov, an aggressive goal that suggests availability just before the presidential election. 

SkyCity Entertainment (SKC:NZX / SKC:ASX)
SkyCity Entertainment Group led the NZ market higher yesterday, up 7% after it said it would pay a final dividend in late 2021 if there are no significant adverse changes to the current covid-19 status.

Despite reporting a normalised profit after tax fall of -60% to $NZ66 million in fiscal 2020 the result was better than analysts had been expecting, with strong increases in its electronic gaming machine business following the re-openings of its Auckland Casino.

This result surprised us, given the strength in domestic gaming underpinning the result. While SkyCity could be an interesting way to play a re-opening economy, on balance of risks we remain HOLD rated for now.  


Australia & New Zealand Market Movers

The Australian market was higher on Thursday (ASX 200 Index +0.8%) as blue chip stocks lifted the market. Real estate investment trusts and infrastructure stocks were also on the rise, with a heavy fall in bond yields through the start of the week supporting bond-proxy assets.
Afterpay rose 1.6%, leading a mixed buy now, pay later sector, with a number of stocks still under pressure following heavy falls at the start of the week after payments giant PayPal unveiled plans to launch a buy now, pay later product in the US.
Buoyant equity markets and a stronger US dollar weighed on safe haven demand, pushing the price of gold lower and driving the local precious metal miners lower.

The New Zealand market (NZX 50 Index +1.3%) rose yesterday in a broad-based rally led by entertainment companies as the pandemic appeared to be coming under control in key markets.
Vista Group International rose another 4% after the United States’ biggest cinema chain AMC announced it would have 70% of its theatres open by the end of the week. The cinema software developer has rallied 43% since it reported better-than-expected earnings last Wednesday and the popularity of blockbuster release Tenet.

3 Things Markets Will be Watching this Week

  1. ​​​​​​​​​​​​​​​COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
  2. With reporting season all but over, focus in the week ahead returns to macro data including monthly employment figures (nonfarm payrolls) and ISM manufacturing data in the US
  3. The RBA also meets on Tuesday.
Global markets plunged overnight (S&P 500 Index -3.5%) as Technology stocks suffered a massive reversal, with the Nasdaq Tech index down almost -5% with star performer Tesla giving back -9% and Apple down -8%.

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