Global markets continued to move lower on Friday (S&P 500 Index -0.8%) as investors rotate out of the technology sector with significant volatility and markets paring losses into the close. While US stocks bounced back they still closed at a 2-week low as losses for Amazon.com, Microsoft and Facebook pushed the Nasdaq down more than 5% at one point. Financials (+0.8%) and Industrials (+0.2%) sectors outperformed.
In terms of economic data, the US economy added 1.37m net new jobs in August, close to market expectations, but the big surprise was a large fall in the unemployment rate, from 10.2% to 8.4%. Following better than expected employment data, Federal Reserve Chairman Jerome Powell said while US unemployment data for August was positive, the economy’s recovery has a long road ahead and low interest rates will be required for an extended period of time – "It will be measured in years”.
Interestingly, US executives sold $6.7bn of stock in their own companies in August – the highest levels since Nov 2015. Separately, insider sales in the second quarter for companies in the Nasdaq 100 stock index reached $10.4bn, +171% versus the prior period.
Tourism Holdings (THL:NZX)
THL is taking advantage of buoyant domestic motorhome demand by aggressively increasing its sales, saying that its three strongest ever months for vehicle sales in New Zealand were July 2020, August 2020, and June 2020. The 2021 financial year has started strongly with good margins being generated. Consequently, the company has lifted its sales target by 1,000 vehicles to 1,500–1,800 in total and announced "The Great New Zealand Motorhome Sale”.
THL is doing a remarkably good job of managing through the crisis (surprisingly without the need for a capital raise) and should come out the other side a better focussed business.
We think the performance has been reflected in the share price recovery and maintain our High-Risk BUY due to THL’s current valuation and ability to avoid further cash burn, but with the high risk caveat as the real turnaround will start once international tourism returns.
Australia & New Zealand Market Movers
The Australian market got hit hard on Friday (ASX 200 Index -3.1%) the biggest one-day fall in three months as investors dumped high-flying technology stocks, effectively wiping out all the market index gains from the past month. All major sectors were in the red in the absence of major stock specific news flow.
On the lockdown front, 5 million Melburnians will be forced to remain under stay-at-home restrictions until at least the end of October under a roadmap out of lockdown unveiled by Victoria’s Premier. Separately, the Australian government has locked in 84.8m COVID-19 vaccines at a cost of $1.7bn if and when they become available, as confidence grows medical approval and production could be achieved as early as January.
The New Zealand market tumbled on Friday (NZX 50 Index -1.9%) experiencing its biggest fall in almost two months after Wall Street saw a sharp correction. Growth stocks with US exposure led the market lower such as cinema software developer Vista Group, Fisher & Paykel Healthcare, and Pushpay.
Property for Industry dodged the sell off, after it reinstated pre-covid guidance for dividends to be between 7.65 cents and 7.7 cents this year. Chief executive Simon Woodhams said adjusted funds from operations were "materially in line" with the previous first half with a fall in rental income being offset by savings on interest and tax.
On the lockdown front, NZ to remain at Alert Level 2, while Auckland remains at Alert Level 2.5. This decision will be re-evaluated next Monday, 14 Sept as to whether the levels should be changed at 11.59pm on Wed 16 Sept.
3 Things Markets Will be Watching this Week
- COVID-19 related news-flow remains key, with second wave and lockdown headlines, while US Congress debate what an extension of stimulus will look like.
- Key data this week includes US CPI, Eurozone Q2 GDP, the latest ECB interest rate review and exports/import data from China.
- In NZ, Sky TV, Briscoe Group, and Restaurant Brands will report earnings and Investore Property will host its AGM.
