Global markets sold off overnight as hopes of progress in high-level trade talks were dashed by a report Washington was moving ahead with efforts to limit capital flows to China and the inclusion of some top Chinese start-ups to a blacklist. The US is also looking at placing visa restrictions on some Chinese officials, who it believes responsible for the detention or abuse of Muslim minorities in Xinjiang province. The chances of a trade deal behind reached this week are falling by the minute.
Earlier in the day, Federal Reserve chairman Jerome Powell signalled a continuing willingness to cut interest rates to offset global risks to the US economy.
Stock in Focus: Summerset (SUM:NZX / SNZ:ASX)
Summerset shares were higher yesterday after reporting an 11.5% increase in third-quarter unit sales, with strong growth in resales and stable new sales, which is pleasing given we recently upgraded our rating on SUM back to a BUY.
Summerset said it sold 165 occupation rights in the three months to Sep. 30, versus 148 in the same period a year earlier. Of those, 77 were new sales while resales numbered 88. In the same period a year earlier, 82 were new sales while 66 were resales. Summerset chief executive Julian Cook said total sales were aligned with expectations for the third quarter and resales were performing very well. Last month, the retirement village owner and operator said it was moving ahead with its expansion plans across the Tasman and had purchased its first land in Australia.
We now believe the Aussie & NZ property markets will stabilise post interest rate cuts and regulatory changes. Given a more positive property market view, and that Summerset is trading at closer to its NTA (Net Tangible Asset) and at a much lower premium than it has in the past, we believe it is more attractively priced.
We currently have a BUY rating on SUM.
Australia & New Zealand Market Movers
The Australian market was up for another day in a row on Tuesday (ASX 200 Index +0.45%) in quiet trade with NSW closed for a holiday. The banking sector came under heavy selling pressure last week as a quarter-point interest rate cut from the Reserve Bank of Australia focused investors on the prospects for margin compression. But the sector has retaken some ground this week. ANZ said annual earnings will be hit by a A$559 million cost to remediate over-charging and mis-selling products to its customers.
The New Zealand market was higher yesterday (NZX 50 Index +0.37%) joining a rally across Asia as investors were more optimistic about the upcoming trade negotiations between the US and China. Outside the benchmark index, New Zealand Oil & Gas jumped 16% after the energy explorer's suitor and major shareholder OG Oil & Gas lifted a takeover offer by 12 cents to 74 cents.
3 Things Markets Will be Watching this Week
- Trade War related news-flow will remain a feature with negotiations between the US & China set to restart.
- Minutes from the last US central bank meeting will be released, as well as a speech by chairman Jerome Powell.
- Australian business conditions & confidence figures are released on Tuesday.
Have a Great Day,