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Australia (ASX) & New Zealand (NZX) Market Movers – 23rd May – Stock in Focus – Treasury Wine Estates (ASX: TWE)

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

The Australian share market sold off yesterday (ASX 200 index -0.70%) recording its largest daily loss in almost two months as several index heavyweights fell. The major banks remain under pressure as the royal commission into the sector continues.  In stock news, James Hardie bucked the losing trend as it announced a solid profit result for the 4th quarter of the 2018 financial year, which saw its shares jump +4%. Healthscope shares were lower as the board rejected two non-binding takeover offers from Brookfield and a BGH Capital-led consortium, saying that neither proposal appropriately valued the private hospital company. Healthscope also lowered its annual earnings guidance on “softer than planned market conditions”.

The New Zealand market was marginally lower on Tuesday (NZX 50 index -0.02%) as continued selling of A2 Milk weighed on the market index, while honey producer Comvita also faced selling pressure. On the flipside, both Ryman Healthcare and Heartland Bank showed strength which followed on from the release of well received recent profit figures. In other stock news, Steel & Tube Holdings shares have been halted from trading pending a board review of the steel products maker’s financial performance, which the company expects will change earnings guidance.

Global markets were mixed overnight, as Wall Street fell late in the trading session amid conflicting messages from the Trump administration about trade talks with China and doubt about the summit with North Korea.

The price of gold has been on a downward trajectory over the last month and is now back below US$1300 an ounce. The strength in the US dollar has continued to be a main driver of gold prices, putting pressure on the commodity in recent weeks as the gold price is usually denominated in USD terms. Further, the market is considerably calmer than earlier this year when investors fled to safe-have assets such as gold. Going forward we see continued pressure on the price of gold as interest rates in the US rise (which increases the opportunity cost of buying and holding gold – as gold is an asset that does not generate an income).

Stock in Focus: Treasury Wine Estates (TWE:AX)

Shares in market darling Treasury Wine Estates (TWE) have sold off sharply this month on the back of media reports of a supply glut of wine at the warehouses of TWE’s Chinese customers. We have had a positive view on TWE from some time now particularly given its strong market position in China tapping into the “dining boom” driven by growing Asian middle-class consumer spend, and as the Asian pallet develops a taste for its red wine.
Reportedly a few large Chinese wholesalers are struggling to sell some of TWE’s less desirable brands which has resulted in significant discounting as wholesaler’s struggle to sell to two to three years’ worth of stock sitting in warehouses. The problem arises when wholesalers are forced to buy less desirable brands in-order to gain access to the popular Penfold’s brand, which is one of the best-known wine brands on the mainland.TWE stated they are “comfortable with sustainability of its operating model in China, to build a portfolio of brands, and with its disciplined approach to managing inventory levels with its customers”. TWE added that certain industries in Australia were seeing a slow down on clearance of imports into China, although they cautioned against reliance on feedback from selected customers in China.

3 Things Markets Will be Watching this Week

1.   The development of trade talks between the US & China.

2.  US Federal Reserve Chairman Powell makes a speech on Friday, following the release of the latest Fed meeting minutes on Wednesday.

3.  This week also sees a number of profit updates from ASX/NZX company’s which we will be watching closely

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.

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Categories: Australian Stocks, New Zealand Stocks

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