Waiting for RBNZ | Trimming down EBOS

22 November 2022

New Zealand Market Movers 

The New Zealand market (NZX 50 Index, +0.5%) advanced on Monday, with Financials (+2.6%) far outperforming other sectors. The catalyst for the sectors performance is of course the Reserve Bank of New Zealand delivering another interest rate hike this Wednesday at 2.00pm. Markets are expecting a 75-basis-points hike, taking the Official Cash Rate to 4.25%, although a 50-basis-points hike is entirely possible. 

Heartland Group (+4.0%) led Financials, while Westpac (+0.6%) and ANZ (+0.1%) recorded smaller advances. 

Australia Market Movers 

The Australian market (ASX 200 Index, -0.2%) fell slightly on Monday while the Australian dollar (-1.1%) retreated from a 2-month peak. 

NIB holdings (+1.7%) rose on news that the company is acquiring customers from Medibank, after the latter’s privacy breach and increasing waiting times at public hospitals. As such, for the 3 months to October 31, customer growth stood at 4.7% and underlying operating profit increased by 16.3%. 

Europe Market Movers  

European markets (Stoxx 600 Index, 0.0%) closed flat on Monday. Oil and Gas (-2.6%) stocks led losses and Food and Beverage (+1.3%) led gains. 

US Market Movers 

US markets (S&P 500 Index -0.3%) fell on Monday. Fars that China may reinstate Covid restrictions weighed on Crude Oil (-0.2%) and Energy stocks (-1.4%).  

The big news in the US markets is the replacement of Disney’s (+6.0%) CEO Bob Chapek with Bob Igor, the company’s former Chief Executive, effective immediate. Apparently, many senior executives had expressed a lack of confidence in Chapek, including Christine McCarthy, Disney’s Chief Financial Officer. 

Stock In Focus:   EBOS (EBO.NZX) 

Ebos shares have climbed higher recently following its entery into the MSCI Word Index seeing large amounts of passive buying. EBOS remains our most preferred healthcare stock in NZ, the stock has now broke over $40 a share again and  think it is an opportune time for investors to take ‘some’ profit given its ‘fair valuation’ and heightened volatility in the markets it is unlikely to hold up for so long like it has done so in the past. 

We see the stock as fairly priced at current levels with limited upside over the near to medium term, however due to its defensive nature and stable growth profile we would continue to hold most of our holdings still in the NZ portfolio, but reducing our weight down from 10% down to 9% (selling only 10% of our EBOS holdings and keeping 90%), the funds moving to cash, for better risk adjusted opportunities next year.  
We downgrade EBOS to a Hold, and would be buyers again at slightly lower levels or when market outlook improves.  

What Markets will be Watching this Week (UTC +13) 

Monday 
EA ECB President Lagarde Speech 

Tuesday 
Argosy Property earnings 

AU RBA Govenor Philip Lowe Speech   

Wednesday 
Oceania Healthcare earnings 

Tower earnings 

NZ RBNZ Interest Rate Decision  

Thursday 
Rakon earnings 

Pacific Edge earnings 

US Durable Goods Orders MoM OCT  

US FOMC Meeting Minutes 

Friday 
US Thanksgiving Holiday (US markets closed) 

Saturday

The New Zealand market (NZX 50 Index, +0.5%) advanced on Monday, with Financials (+2.6%) far outperforming other sectors. The catalyst for the sectors performance is of course the Reserve Bank of New Zealand delivering another interest rate hike this Wednesday at 2.00pm. Markets are expecting a 75-basis-points hike, taking the Official Cash Rate to 4.25%, although a 50-basis-points hike is entirely possible. 

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