Global markets ended the week on a high (S&P 500 +0.9%) as revived hopes for a US$1.8 trillion US stimulus boosted morale and polls continue to point to a Biden election win. A Biden win may not be as bad for markets as initially assumed, not because Biden’s policies would be pro-stocks (with proposed tax hikes), but more because anything other than a contested outcome should be a relief for markets (which don’t like uncertainty).
It is set to be a busy week ahead with the focus on quarterly reporting season in the US and a number of AGM’s in Australia/NZ. During reporting season, investor attention usually shifts back to company specific news flow rather than big picture issues, however given we are heading into important elections in the US they are likely to remain front-of mind.
The property/housing market across Australia has been remarkably resilient (ex-Melbourne) and is even booming with a backdrop of low interest rates. This has seen a number of our recent stock picks related to property rally hard, such as retirement village stocks and direct property stocks such as Kiwi Property Group and Argosy – as confidence has returned.
Argosy Property (ARG:NZX)
On Friday ARG announced NZ$76m acquisition in a prime Mt Wellington, Auckland industrial location, with the site comprising 10.64 ha land and 23,000 sqm of occupied buildings. ARG has purchased on a 4.7% holding return but sees an uplift in rent to market over the next couple of years that would take the yield to greater than 5%. While ARG has capacity, this will provide time to bring in Albany Lifestyle Centre proceeds which ARG reports is close to completing.
At the same time, ARG reported that its COVID-19 abatements came in at NZ$3.5m, well within original provisions, and that expects a positive property portfolio valuation uplift at the 1st half 2021 result.
Members should look out for a full update on ARG in our weekly report.
Australia & New Zealand Market Movers
The Australian market was flat on Friday (ASX 200 Index +0%) but was up +5.4% for the week, its largest weekly gain since April. Australia is looking towards the reopening of its international borders and is in discussion with Japan, South Korea, and Singapore, while New Zealanders will be permitted to visit NSW and NT from Friday October 16.
In stock news, gold miner Newcrest jumped +3.2% after approving a US$175 million expansion of its Cadia project in NSW and a US$61 million plant upgrade at Lihir in Papua New Guinea. AMP’s board is reportedly looking to provide a shareholder update on the potential sale of all-or-part of its wealth group before the year’s end, as investors push for a break-up of the company
The New Zealand market added to gains on Friday (NZX 50 Index +0.4%) as retirement village stocks Oceania Healthcare and Summerset jumped +4.8% and +4.5% respectively.
New Zealand King Salmon (NZK) is rechecking results after half its farms failed to meet environmental standards. The Marlborough District Council has issued two fines and a warning after Cawthron Institute’s inspection of NZK’s farms found five in nine were non-compliant. One farm in Pelorus Sound’s Forsyth Bay was even deemed “significantly non-compliant” due to pollution under its pens, caused by fish waste and uneaten fish food falling to the bed.
3 Things Markets Will be Watching this Week
- US election developments will be followed closely by markets as we move closer to elections both in the US and NZ.
- US quarterly earnings season kicks-off, with key names reporting this week including JPMorgan, BofA, Wells Fargo, Citi, Morgan Stanley, Goldman, Delta Air, United Air and J&J.
- In Australasia, AGM’s are scheduled for CBA, Telstra, Ebos, Sky Television, BHP, Cleanaway, CSL, Aurizon, Perpetual and SkyCity