Global markets were lower on Friday, as Wall Street’s three major stock indexes all lost ground after a week of recovery from the October sell-off. Oil prices fell further and more evidence of a slowing Chinese economy was reported. Oil prices have now seen the longest stretch of daily declines since 1984, on rising global supply and evidence of a slowing world economy.
For the week ahead, it is quite light in terms of key events, after a jam-packed week last week. Trade relations between China and the US will likely remain a focus ahead of the G20 talks later this month. US politics will be interesting to watch after the mid-terms. A growing view is that the Democrats winning control of the US House of Representatives will provide a check and balance on the Trump administration.
Stock in Focus: SkyCity (SKC:NZ / SKC:AX)
As we mentioned on Friday, SkyCity Entertainment has said it had agreed to sell its Darwin casino for A$188 million to US-based Delaware North as part of a plan to free up capital and focus on its more profitable Auckland and Adelaide operations.
The sale price is about A$8 million above the book value of the asset, excluding neighbouring waterfront land at Little Mindil, which the company plans to sell separately. SkyCity has not yet determined what it will do with the proceeds. We like the fact that SkyCity has disposed of what has been a very poor investment, and can focus on its stronger assets and the $330m upgrade and expansion of the Adelaide casino.
We continue to believe SKC shares are attractively priced in a relatively expensive market, paying a 5.3% dividend yield. We also see a tourism tailwind supporting growth – tourism is booming as the cost of travel becomes cheaper and cheaper relative to incomes, and as a growing Asian middle class travels to Australia & NZ.
We are currently have a BUY rating on SkyCity.
Australia & New Zealand Market Movers
The Australian share market was a touch lower on Friday (ASX 200 index -0.11%) but still managed to close higher for the week as the US midterm result returned some certainty to global markets. In stock news, BHP Billiton said it has cleared all wreckage from a runaway train derailment in the Pilbara and is set to resume rail haulage early next week. The Australian dollar has fallen from multi-week highs against its US counterpart after the Federal Reserve underlined the diverging monetary policies between the antipodean nation and the United States on Friday.
The New Zealand market closed higher on Friday (NZX 50 index +0.40%) as benign comments from the US and local central banks supported a more positive outlook through to the end of the year. In stock moves, Fuel retailer Z Energy was higher as its shares clawed-back from last week’s three-year low. Julia Raue was the latest director to report share purchases last week. Fast food operator Restaurant Brands rose as the company today said talks on the sale of 75% of the business to Finaccess Capital are going well. Warehouse Group also rose as the firm said first-quarter sales rose 3.6% and margins improved at its stationery and general merchandise chains. It noted the market remains very competitive in general merchandise, apparel and in the appliance and technology sector Noel Leeming operates in.
3 Things Markets Will be Watching this Week
1. Trade relations between China and the US ahead of the G20 talks later this month.
2. The latest US inflation data will be published on Thursday morning AU/NZ time.
3. Aussie employment data is also released on Thursday.
Have a Great Day