Global markets were little changed on Friday, as shares on Wall Street were mixed after reports US President Donald Trump has called for fresh tariffs on Chinese products.
Trump instructed aides to proceed with tariffs on about $200 billion more of Chinese products, at a lower rate of 10 percent. The news contrasts to more positive news-flow on trade at the end of last week when US Treasury Secretary Steven Mnuchin extended an olive branch to his counterparts in China, inviting them to ministerial level trade talks. Bloomberg reported that Trump wasn't concerned about putting the tariffs in place ahead of trade talks with Asia's biggest economy and that Chinese officials may decline the invitation.
As we touched on last week, so far, the Chinese market is hurting far more than the US, and we believe China has more to lose from an all-out trade war. The tensions between the US and China are keenly felt in Australia and New Zealand, which both count China as their biggest trading partner. Trade tensions have been ongoing risk for some time now, and we continue to watch developments.
Stock on Focus: Auckland Airport (AIA:NZ / AIA:AX)
Shares in Auckland Airport (AIA) have trended higher of late, once again approaching the $7 per share mark.
In terms of recent news flow, AIA increased its underlying profit by +6% to 263m for the 2018 financial year, once the sale of the airport's stake in North Queensland Airports worth A$370m was stripped out.
Looking forward, the airport is anticipating moderate underlying profit growth in 2019, between $265m and $275m, and expects to spend between $450m and $550m on capital expenditure in the year ahead, as part of its $2 billion aeronautical infrastructure development programme. We see AIA as a clear beneficiary of our tourism boom investment theme. However, we still see AIA’s valuation at the upper-end, combined with the risk of further capital to be raised to fund its expansion plans.
We are currently have a HOLD recommendation on AIA.
Members should look out for a full update on AIA to be released in Wednesday’s weekly report.
Australia & New Zealand Market Movers
The Australian share market rebounded on Friday (ASX 200 index +0.60%) as stocks in Asia rallied on trade related optimism. In stock news, Chevron has outlined a plan to develop two North West offshore gas fields by sharing a pipeline with Woodside Petroleum and processing at Burrup Peninsula facilities.
The New Zealand market was in positive territory on Friday (NZX 50 index +0.24) as the NZX joined a rally in equity markets as the prospect of improving trade relations between the US and China lifted investor confidence. In stock moves, Pushpay led the market higher after getting a broker upgrade. Shares in NZME were also higher after new substantial shareholder Renaissance Asset Management said the stock was undervalued, particularly its digital classifieds businesses.
3 Things Markets Will be Watching this Week
1. Trade is expected to be a keen focus this week as Trump directed advisers to proceed with plans to impose tariffs on $US200 billion of Chinese goods even as the US opened the door to further talks with China.
2. Minutes from the last RBA meeting are published on Tuesday.
3. NZ economic growth (GDP) data is released on Thursday.
Have a Great Day,
Team