Global markets were mixed on Friday as oil prices fell to their lowest level in more than a year, weighing on European & US stock markets.
One of the major concerns for markets of late has been a potential trade war between the US & China. The G20 leaders will meet in Argentina over Friday and Saturday and key will be whether the “side meeting” between Trump and Chinese premier Xi Jinping leads to any thawing in frosty trade relations. At a minimum, it’s hoped the two sides will agree to keep talking and Trump might announce a postponement of planned tariff increases in January. If this tariff pledge remains in place, it risks a further major negative reaction in an already jittery market.
A Christmas rally Santa is going to need some little helpers at the G20 summit – we are watching with interest.
Stock in Focus: Ryman Healthcare (RYM:NZ)
Ryman shares slipped slightly on Friday after reporting a 14% increase in underlying first-half earnings.
The company reported first-half net profit to $97.1 million, excluding property valuations, and is forecasting a full-year result 10-17% higher than last year.
The results noted a weaker building rate in coming years, with concerns about slowing property markets in Auckland and Melbourne. Chief executive Gordon McLeod downplayed the impact of slowing property markets, pointing to its experience during the GFC downturn. McLeod said prices in the two cities would have to drop 20-30% before there would be any affordability issues for people buying an independent-living townhouse in one of Ryman’s retirement villages.
Ryman currently has a pipeline of 16 new villages, nine in New Zealand and seven in Victoria, and has committed to having five villages open in the wider Melbourne area by 2020. We are positive on the retirement sector generally given the massive tailwind of an ageing population, although we have some reservations around Ryman’s premium valuation.
We currently have a HOLD recommendation on Ryman.
Australia & New Zealand Market Movers
The Australian share market rallied on Friday (ASX 200 index +0.44%). However, two strong trading sessions on Thursday and Friday weren't enough to stop Australian shares closing the week slightly lower. In stock news, shares in Wellard rebounded +27% as it told shareholders it would sell its Beaufort River Meats business to International Meats. The sale of BRM (which is seen as a non-core asset) is expected to complete in February 2019 and generate about $8 million, when realisation of working capital is included. The live export company said a shift away from livestock trading in favour of external shipping charters had brought it closer to profit, with its $9 million in first-quarter earnings nearly outpacing the total previous year.
The New Zealand market was basically flat on Friday (NZX 50 index -0.02%) as NZ shares were mixed. Strong sales buoyed Kathmandu while slowing property markets were seen weighing on Ryman Healthcare. Fletcher Building bounced back from a 14-year low. Kathmandu shares rose 12% as the outdoor equipment chain beat expectations reporting an 8.3% increase in sales from its Kathmandu branded stores and benefiting from a strong performance from its recently acquired US footwear unit, Oboz. Kathmandu has managed to buck the trend, outperforming other retailers, managing its inventory well and maintaining margins to deliver strong sales in the quarter.
3 Things Markets Will be Watching this Week
1. Trade relations between China and the US with the G20 summit talks at the end of the week.
2. US Inflation and GDP data is published late in the week, with Fed Chair Jerome Powell also set to make a speech.
3. The Reserve Bank of NZ releases its financial stability report on Wednesday.
Have a Great Day