Australia (ASX) & New Zealand (NZX) Market Movers – 16th May – Stock in Focus Telstra (ASX:TLS, NZX: TLS)

Australia and New Zealand Market Movers is provided by: Australasian Trading Management.

The Australian share market sold off on Tuesday (ASX 200 index -0.61%) after closing just half a point off a 10-year high in the previous session. Market index heavyweights Telstra and NAB weighed on the index return. While NAB (National Australia Bank) went ex-dividend, a broker report also suggested it reported the weakest underlying revenue of the big 4 Aussie banks. In other stock news, Link Administration jumped despite the company outlining a worst-case scenario revenue impact on the back of last week’s federal budget. Afterpay Touch shares soared +7% on news that the company would expand into the US market this week through fashion retailer Urban Outfitters.

The New Zealand market was marginally lower yesterday (NZX 50 index -0.05%) dipping form a record high with Air New Zealand and Mercury falling while Synlait Milk and Fletcher Building gained. Index weight changes for the MSCI world index (a widely followed global market index) drove market moves yesterday. Mercury dropped on news it will leave the MSCI index, while A2 Milk was supported on the back of news it officially entered the index. At the same time there was a relief rally for Fletcher Building shares that were rumoured to be leaving the index but stayed in it.

Stock in Focus: Telstra (TLS:AX)

Telstra shares continued to freefall yesterday (down -5%) to a 7-year low, after it warned its shareholders on Monday that earnings would be at the lower end of the company’s $10.1 billion to $10.6 billion 2018 guidance, on the back of lower revenue from fixed and mobile customers.

Several market commentators are now highlighting the company needs to take drastic action in order to minimise the next dividend cut and that Telstra’s current strategy is not working.

We have been cautious on the outlook on Telstra for some time now and warn investors not to get caught in the “dividend trap”. Within the telecommunications space competition is very tough, particularly with the expansion of TPG telecom. While Telstra appears to be offering an attractive dividend yield, we expect that competitive pressure will be overwhelming for the incumbent telco giant.

Global markets sold off overnight as the US market snapped an 8-day winning streak after bond yields rose on the back of strong retail sales data which stoked inflation concerns. US Treasury bond yields have reached a 7-year high, driving US dollar strength as both the Kiwi and Aussie continue to fall versus the US dollar – which is at its highest levels this year.

Investors also appear nervous around looming trade talks between the United States and China. High-level trade talks between the world’s two largest economies are due to resume this week.

3 Things Markets Will be Watching this Week
1.                 Corporate earnings season rounds up in the US this week.
2.                 Australian unemployment data is published on Thursday.
3.                 Minutes from the last Reserve Bank of Australia meeting are released on Tuesday as well as a speech from the assistant RBA governor.

Australia and New Zealand Market Movers is provided by Australasian Trading Management. ATM is an independent research house covering stock analysis across major markets including the ASX, NZX and US markets. We make our research easy to understand and concise, taking complex issues and simplifying them so that you can make informed and accurate decisions. We have no conflicts of interest and our only goal is to generate positive returns for our members. We run transparent model portfolios to track performance and invest where we see the most value, in companies of all sizes across all industries, and often in smaller companies.

Categories: Australian Stocks, New Zealand Stocks

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