Worst Quarter Since GFC | NZ King Salmon

1 April 2020

Global markets were mixed overnight, with the US markets down about -1%, with news President Donald Trump is reportedly seeking a $2 trillion infrastructure package, and US corona-virus cases continue to explode. Asian markets remained mixed with China reporting better than expected manufacturing data, while the Nikkei fell after Japan announced the countries biggest ever stimulus package of 60 trillion.

The US market, measured by the S&P 500 ends the 1st quarter of 2020 down -20%, making it its worst quarter since the 2008 GFC. The Dow Jones index closed the quarter down -23.2%, its worst since 1987, as the covid-19 pandemic wreaks havoc around the world. 

Investors are at a crossroads, questioning whether extraordinary stimulus by countries and central banks can counter further retrenchment of firms and consumers as the outbreak spreads. While markets look to be calmer and have bounced from recent lows, it is still to early to determine whether we are heading towards a recovery, with volatility still anticipated over the near-term.

 

Stock in Focus: New Zealand King Salmon  (NZK:NZX / NZK:ASX)

NZK shares have rebounded after providing a covid-19 update, as it kept operating earnings (EBITDA) guidance for the 2020 financial year unchanged at between $25m to $28.5m. As a farmer and processor of King salmon, NZ King Salmon operates within the primary industry food producer category which has been included in the Government’s list of essential services which can continue to operate.

NZK said that while too early to make conclusions, harvest levels appear to be better than the last two years, partly thanks to cooler water, returning to long-term average levels. The NZ dollar has also fallen significantly which improves profits on NZK’s exports, although there are risks around demand from the US.

We  have recently upgraded NZK to a High Risk BUY rating, largely on the basis of its more attractive valuation and strong demand for its premium product.
Members can login to read our full reports on NEW Zealand King Salmon.

 

 

   
Australia & New Zealand Market Movers

The Australian market fell on Tuesday (ASX 200 index -2%),  giving back some of its gains from Monday, to cap off its worst quarter (down –24.1%) since 1987.
The mining sector was heavily hit, as base and bulk metal prices fell sending BHP -4% lower and Rio Tinto down -3.4%, while the banking sector remained mixed. G8 Education was one of the best performing stocks up +19.3%, as it would likely benefit from the stimulus package and its cancelled dividend helps ensure sufficient liquidity over the near-term.

Australian retail REITs are in negotiation with peak retail bodies, to determine a process to deal with rental payments through this crisis period, with tenants disclosing financial details to determine rent waivers or deferrals. Myer are in discussions to shorten lease agreements and exits some of its malls, negotiation done as a package deal with major landlords (Scentre Group, AMP and Vicinity).   

The NZ market edged higher yesterday (NZX50 +1.4%), to close the quarter down (-14.8%), with a slight recovery towards the end of March.
Utility software firm Gentrack led the market higher yesterday, surging +40% after affirming its earnings guidance for the March period, as market anticipated  heavy downgrade. The power generators all edged higher, with Genesis up +4.4% as the Tiwai Point aluminium smelter announced it was reducing capacity to manage operations under covid-19 restrictions, hinting that the smelter saw a long-term future.
Air New Zealand fell 5.6% after announcing revenue of $5.8 billion will fall to be around $500 million annually as the company becomes a domestic airline with limited international services.

 

3 Things Markets Will be Watching this Week

  1. ​​​​​​​Coronavirus related news-flow remains key in terms of driving investor sentiment.
  2. Moves from central banks & governments globally in response to coronavirus,
  3. Key economic news events this week include the latest jobless claims data in the US along with nonfarm payrolls.
     

Have a Great Day,
 

Team

The US market, measured by the S&P 500 ends the 1st quarter of 2020 down -20%, making it its worst quarter since the 2008 GFC. The Dow Jones index closed the quarter down -23.2%, its worst since 1987, as the covid-19 pandemic wreaks havoc around the world

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