USD Gains in Cautious Trade | Fisher & Paykel Healthcare

4 September 2018

Global markets were quiet overnight as the US markets were closed for Labor Day holiday.

Global stock markets retraced overnight, hurt by worries over the escalation of trade disputes between world powers and a deepening sell-off across emerging market currencies. At the same time the US dollar continued to strengthen, as the US currency's status as the chief reserve currency makes it the primary beneficiary of concern over trade conflicts. The US dollar has lifted this year every time the United States has sought a more protectionist trade policy. 

One of our medium-term investment themes has been investing in beneficiaries of a weaker Aussie and Kiwi dollar, which benefits exporters, offshore earners, and tourism stocks. One stock which benefits from a weaker NZ Dollar / stronger US dollar is Fisher & Paykel Healthcare which sells the majority of its product in the US.


Stock on Focus: Fisher & Paykel Healthcare (FPH:NZ / FPH:AX)
Shares in Fisher & Paykel Healthcare pulled back yesterday as it warned the cost of contesting the latest patent allegations from rival ResMed will cut annual earnings by as much as $10 million in a far-ranging dispute across multiple jurisdictions.

The news comes shortly after FPH shares hit an all-time high as it raised its full-year earnings forecast by about $5 million on the back of strong sales growth and the weaker New Zealand dollar.

FPH said it will contest complaints in the US International Trade Commission (ITC) and US District Court for the Southern District of California, and cut forecast profit due to the cost of defending the litigation. The companies have been locked in litigation since 2016 spanning the US, UK, Europe, NZ and Australia. To date FPH appears to have the upper hand in court, and the litigation looks to be an ongoing distraction for the business. 

We are currently have a BUY recommendation on FPH.

Members should look out for a full update on FPH to be released in our weekly report.


Australia & New Zealand Market Movers

The Australian share market was a touch lower on Monday (ASX 200 index -0.14%) as increased trade war fears rattled the materials sector. Reports that US President Donald Trump was preparing to impose tariffs on a further $200 billion worth of Chinese goods hurt commodities on Friday, dragging most mining stocks lower on Monday. Interestingly, Adelaide Bank has raised its variable mortgage rates, citing "challenging" market conditions, following the lead of Westpac.

The New Zealand market started off the week lower (NZX 50 index -0.60%) with losses led by Fisher & Paykel Healthcare and Z Energy while A2 Milk rose amidst new Chinese e-commerce legislation. A2 Milk said it welcomes new e-commerce law in China, as it awaits further information. A2 said the new law creates a broad framework for e-commerce, and it will keep working with its partners to respond to the new law and yet-to-be-released guidance. In other news, Restaurant Brands said it is exiting its Starbucks coffee business after two decades of operation after the US brand failed to take off as anticipated.


3 Things Markets Will be Watching this Week

1.             Locally, investors in Australia and NZ will be watching for the last few company profit announcements as earnings season winds up.  

2.             The Reserve Bank of Australia makes an interest rate decision on Tuesday.

3.             Important monthly US employment figures are released at the end of the week.

Have a Great Day,


Global stock markets retraced overnight, hurt by worries over the escalation of trade disputes between world powers and a deepening sell-off across emerging market currencies

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