Australia (ASX) & New Zealand (NZX) Market Movers – 29th June – Stock in Focus: New Zealand Refining

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

The Australian share market was in positive territory on Thursday (ASX 200 index +0.31%) breaking a four-day losing streak, with energy and materials stocks leading the gains. BHP Billiton and Rio Tinto both rose during trade to be among the market leaders despite the price of iron ore falling. The oil price continues to surge with West Texas Intermediate crude oil hitting a more than three-year high which bolstered local energy stocks. Santos shares were among the gainers as the gas producer’s board said it would consider a pay-out at its interim results in August as part of a new “sustainable” dividend policy.

The New Zealand market was a touch higher yesterday (NZX 50 index +0.02%) led higher by honey producer Comvita and Kathmandu, while Fisher and Paykel Healthcare and Trade Me fell. Fisher & Paykel Healthcare shares retraced after receiving large support from offshore buyers over the last couple of months. After the market closed, Z Energy said its customer database for the Z card online was breached due to a security flaw and has advised affected customers and the Privacy Commissioner of the failing.

Global markets were mixed overnight as shares on Wall Street rebounded. At the same time, Chinese shares continued to extend their losses on Thursday. As we pointed out earlier this week this in part reflects intensifying trade tensions between the US and China. At the same time, there are rising concerns by market commentators around the strength of the Chinese economy.

Closer to home, yesterday saw the Reserve Bank of New Zealand (RBNZ) keep the official cash rate unchanged at a record-low 1.75%, citing ongoing weak inflation and tension in global trade.

The decision was largely expected by economists, although a change of tone suggests the RBNZ may now be more willing to cut rates if need be, reaffirming a cautious stance by saying “We are well positioned to manage change in either direction – up or down – as necessary”. Our view has been and remains that the RBNZ will keep rates on hold heading into 2019, although the chances of a move lower are now higher. NZ Business confidence has been heading lower, economic growth has been below expectations, and the housing market looks to be cooling. Overall the chance of an interest rate cut is no longer insignificant, in our view.

Stock in Focus: New Zealand Refining (NZR:NZ)

Shares in NZ Refining (NZR) have pulled back over the last few days as it announced Its hydrocracker unit has been shut down after a newly installed valve failed, lengthening delays from its scheduled refinery maintenance shutdown.

NZR said it will provide an update “once we have established the repair and restart plan”. Clearly this is not positive news, although it is likely to be a one-off issue which the market usually can look past.

As we have discussed in prior reports, we believe the next leg higher in terms of NZR’s profitability will have to come from currency gains. Our view remains that the NZ dollar will move lower versus the US dollar over the medium term, rather than remaining a headwind for NZR’s business

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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Categories: Australian Stocks, New Zealand Stocks

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