Global markets were higher on Friday (S&P 500 index +0.5%) as investors poured a record US$58b into global stock funds last week, $36bn of which went to the US, in the latest sign of the optimism sweeping global financial markets. US and European markets were mostly in the green on Friday while Australasian markets fell. Most major Asian markets were closed for the Lunar New Year
We have had a reminder that COVID news is still relevant locally on both sides of the Tasman, with both Victoria and Auckland entering fresh lockdowns. Auckland has re-entered Level 3 Covid-19 lockdown until midnight Wednesday 17 February following the discovery of three confirmed cases of community transmission. The rest of NZ is in Level 2, with borders around Auckland creating travel restrictions. Melbourne also entered a snap-lockdown on Friday (for five days), with the Holiday Inn cluster reaching 13 confirmed UK-variant cases at that time. How much this affects investor sentiment clearly depends on the length of lock-downs.
James Hardie (JHX:ASX)
JHX shares have been stronger as it released a strong 3rd quarter 2021 result last week.
3rd quarter profit of $123m was higher than market consensus at $106m. Full year 2021 guidance was increased to US$440-$450m (above current consensus at US$431m). All regions reported solid increases, due to strong demand and cost savings. A special dividend of US$0.70 was declared, with the company expecting to resume paying dividends in the 2022 financial year.
Looking ahead, new products could present upside, and housing construction markets are booming. On the flipside, the Aussie dollar is stronger which is a headwind (a significant amount of JHX's business is from the US) and the shares are now pricing in high expectations.
We currently have a HIgh-Risk BUY on JHX and will release a full report in our weekly.
Australia & New Zealand Market Movers
The Australian market was lower on Friday (ASX 200 index -0.6%) as the ASX reversed a strong start to the month’s trading last week over disappointing earnings and a new lockdown in Victoria which weighed on investor sentiment.
Travel stocks were among the market’s worst performers on Friday after the Victoria government announced a snap five-day lockdown. Qantas fell -4%, Flight Centre declined -5.7% and Webjet slid -9.6%.
The New Zealand market fell on Friday (NZX 50 index -1.3%) weighed down by energy stocks.
Confirmation that Meridian Energy (-7.0%) and Contact Energy (-5.1%) will be downweighed in an influential clean energy ETF sent their shares lower.
S&P has confirmed its changes to the Global Clean Energy Index that will result in significant selling in Contact Energy (CEN) and Meridian Energy (MEL). After the close of Friday, 16 April, broker reports suggest expect the two relevant exchange traded funds (ETF) will be forced to sell ~-55m (~7.7% of free float) CEN shares and ~-79m (~6.3%) MEL shares. Whilst the market has already started to prepare for this significant adjustment, the short-term share price risk for CEN and MEL remains to the downside.
In other news, there was a solid trading update from Kathmandu with same store sales from Rip Curl (+21%) more than offsetting travel related category weakness in the Kathmandu brand (-30%).
The number of residential properties coming on to the market hit a five year high in January. Property website Realestate.co.nz received 8048 new residential property listings from throughout the country in January, which was up 10.2% compared to January last year and the highest number of new listings the website has received in the month of January since 2016.
3 Things Markets will be Watching this Week
- Local COVID news-flow – a reminder that COVID news is still relevant on both sides of the Tasman, with both Victoria and Auckland entering fresh lockdowns.
- The week ahead is dominated by corporate earnings. In NZ & Aussie. Contact Energy, Fletcher Building, EBOS, SkyCity and Auckland Airport are all scheduled to report. In Australia, key results include BHP, Treasury Wine, Rio Tinto, Wesfarmers, Fortescue, CSL, Crown, Woodside, and QBE. In addition, NAB hands in its quarterly report on Tues, with Westpac on Wed, and ANZ on Thu.
- In Australia, the latest employment data is due along with retail sales and minutes from last month’s RBA meeting.
Team
