Australia and New Zealand Market Movers is provided by: Australasian Trading Management.
The Australian share market retraced on Friday (ASX 200 index +-0.11%) ending a stellar week on a lower note, as caution crept into the market after traders pushed the index to a level not seen for ten years earlier in the week. While most sectors were lower, the Banks were a bright spot on Friday with ANZ leading the charge. In other news, according to the Australian Bureau of Statistics almost 85,000 people formally departed Australia in the final three months of 2017 — almost 9,000 more than in the same period in 2016
The New Zealand market was virtually flat on Friday (NZX 50 index +0.01%) led by New Zealand Refining and Synlait Milk while Port of Tauranga and A2 Milk shares fell. In stock news, NZ Refining gave an update on its refinery shutdown, saying all of the critical maintenance and replacement work on the refinery shutdown has been completed, but there has been a delay with the restart of the hydrocracker unit as a result of two minor leaks. Outside the benchmark index, Michael Hill International dropped as it plans to close the remaining six stores of its Emma & Roe chain as well as the sub-brand’s online business at a total cost of no more than $3.1 million, a move allowing the Brisbane-based jewellery maker and retailer to focus on its core namesake brand.
Global markets were mostly higher on Friday with the UK market leading gains as OPEC’s mixed messages on crude production sent oil prices soaring and gave energy stocks a bump. At the same time losses in the technology space kept the Nasdaq index in check.
For the week ahead, the main event to watch for Australasian investors will be the Reserve Bank of New Zealand (RBNZ) interest rate decision on Thursday morning. Recent slower than expected quarterly economic growth (GDP) of 0.5% for the quarter was below the RBNZ’s prediction of 0.7%. The GDP result shows a slowdown in New Zealand’s economy and provides further evidence that the end of the migration and housing booms are taking their toll on the economy.
Thursday’s announcement will be interesting to watch, and a dovish stamen by the RBNZ may put further pressure on the NZ dollar which is trading around 69 cents versus the US dollar. Both the NZ and Australian currency’s have been under pressure and we believe this trend will continue over the medium term given our forecast for US dollar strength.
Stock in Focus: ANZ Bank (ANZ:AX / ANZ:NZ)
Shares in ANZ jumped almost +3% on Friday as it said it would increase its current on-market share buyback programme by a further A$1.5 billion to a total of A$3 billion which was pleasing to see. We have reiterated on several occasions that ANZ is our preferred exposure in the banking sector given it has the strongest balance sheet, and the sell-down of non-core assets increases the probability of return of capital to shareholders (through dividends or share buy-backs), in our view.
The news follows through with ANZ’s plan of increasing its buy-back programme once it finalised reinsurance arrangements with Zurich Insurance Group, receiving about A$1 billion as proceeds.
The banking sector has been heavily hit by the Royal commission commencing their inquiry into the Australian Banking sector and our view is that the sector is now likely oversold. Positive news flow could see a surge of buying at these relatively low levels with many investors waiting for an opportunity to “buy at the bottom”, and ANZ remains our preferred pick of the big 4 Aussie Banks.
3 Things Markets Will be Watching this Week
1. Investors will continue to watch for retaliatory trade tariff measures between the US and China.
2. The Reserve Bank of New Zealand makes an interest rate decision on Thursday morning.
3. US economic growth (GDP) and inflation data is published at the end of the week
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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