Global markets were mostly positive on Friday, as US stocks eked out a record (S&P 500 index +0.1%), although rising Treasury yields continued to weigh on technology stocks. Gains were led by the Consumer Discretionary (+1.6%) and Real Estate (+1.5%) sectors as the rotation into value shares resumed while the Communication Services (-0.9%) and Tech (-0.7%) sectors lagged.
There were several positive vaccine developments over the weekend with Novavax announcing its vaccine is 96% effective against the original variant and 86% effective against the UK variant, for a combined 90% rate of effectiveness while Pfizer confirmed its vaccine blocked 94% of asymptomatic infections in an Israeli study and 97% of symptomatic cases.
The US passed the 100m vaccine dose milestone on Friday, with US health expert Fauci speculating that life in the US should begin to return to normal in the late Northern Hemisphere summer / early autumn. Markets are braced for a surge in growth as restrictions are removed. The $1.9 trillion Biden fiscal stimulus will add to that growth momentum. Direct payments of up to $1,400 for most Americans were starting to be dished out on the weekend.
Kiwi Property Group (KPG:NZX)
Kiwi Property Group (KPG) shares jumped on Friday as it raised its earnings guidance by as much as 14% as its retailing tenants are performing better than it expected. The company said leasing outcomes and turnover rent have exceeded forecast while rental abatements and doubtful debt allowances are less than anticipated.
Leasing outcomes and turnover rent exceeded forecasts while vacancies were lower than expected. KPG are also seeing rental growth in key centres, with rental reversions in certain centres/sectors still expected. KPG's update provides the market with increased confidence around its ability to get back towards pre-Covid levels and there is potential for a >6 cents per share dividend in the 2022 financial year (5% cash yield).
We are pleased with the result as we have has a positive view on it as an indirect retail play given KPG's quality asset base, especially with plans to further divest its lower tier retail property. KPG remains our top sector pick given its attractive valuation both relative to peers and in absolute terms, still trading marginally below its NTA with the sector trading at a significant premium.
KPG is due to report its annual results on May 24.
Australia & New Zealand Market Movers
The Australian market was higher on Friday (ASX 200 Index +0.8%) as a broad-based rally has helped the ASX post its strongest session in more than a week, and best week in five.
ANZ’s CEO in the press pouring cold water on the buy now, pay later hype. He said: “I think the idea that buy now, pay later is somehow stealing business from cards is wildly exaggerated”. In terms of higher dividends from the banks sector going forward, he noted the sector is “extremely well capitalised” and some of that money will eventually find its way back to shareholders: “We’ve stuffed money away for a rainy day, and it just didn’t rain."
Australia and Singapore plan for travel bubble and quarantine hub by July. The Morrison government is working on an ambitious plan that would establish Singapore as a quarantine gateway, holiday destination and potential vaccination hub for returning Australians, international students and business travellers
The New Zealand market ended the week on a high note (NZX 50 index 1.3%) as Auckland International Airport led the charge, jumping 6.3%, with Air New Zealand also achieving a significant gain, up 4.1%.
3 Things Markets will be Watching this Week
- Highlight this week include the latest US Federal Reserve rate decision and Fed Chair Jerome Powell’s news conference along with rate calls from the Bank of England and Bank of Japan. The announcements will be watched closely given the recent move in interest rate markets.
- In Australia, the latest minutes from the recent RBA meeting are due along with employment and retail sales data.
- In NZ, 4th quarter economic growth (GDP) data is scheduled for release later in the week while Briscoe Group, Fonterra and The Warehouse Group will all report earnings.
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