Australia and New Zealand Market Movers is provided by: Australasian Trading Management.
The Australian share market rallied on Thursday (ASX 200 index +0.52%) as financial stocks continue to seesaw, which saw the ASX close in the green despite a tough day for the major miners. Telstra shares have rebounded from 7-year lows hit last week, as optimism appears to be creeping back in following the telco’s merger of its venture business with private equity player HarbourVest Partners. Local gold miners such as Evolution Mining and Newcrest Mining enjoyed a positive day on the market as the price of the precious metal continues to rise from recent lows amid US dollar weakness (given gold is priced in US dollar terms).
The New Zealand market was in positive territory yesterday (NZX 50 index +0.41%) in another session of light trading, led higher by Auckland International Airport, with Heartland Bank and Fletcher Building softening. There was news on insurance company CBL Corp, which remains suspended from trading since February. CBL administrators said an agreement has been reached to sell its UK-based Professional Fee Protection business to US private equity firms Highbridge Principal Strategies and Madison Dearborn Partners – the sale terms were not disclosed and the deal is subject to regulatory approval.
Global markets rallied overnight with broad based gains across most markets on reports that the United States and the European Union may agree to withdraw auto tariffs, creating some optimism around international trade relations among investors.
Trade also hit headlines as China accused the United States on Thursday of “opening fire” on the world with tariffs set to take effect tonight, warning that it will respond the moment that duties on $34 billion in Chinese goods kick in.
Minutes from the latest US Federal Reserve meeting were also published overnight, which discussed whether a recession lurked around the corner and expressed concerns global trade tensions could hit an economy that by most measures looked strong. The minutes overall did not do much to change expectations for 2 more interest rate hikes in the US this year. As we have highlighted previously, the pace of interest rate hikes in the US is an important factor for global markets that we are watching closely (as a sharp rise in interest rates could spark a market sell-off).
Stock in Focus: Auckland Airport (AIA:NZ/ AIA:AX)
Air New Zealand has taken aim at New Zealand’s airports in a select committee hearing yesterday, accusing them of behaving like monopolists and extracting excessive charges.
Air New Zealand said it was supportive of changes to the Commerce Act that would help curb airport owners’ charging and cut air travel costs for passengers. A study commissioned by a group representing Australian and New Zealand Airlines found that the average earnings (EBITDA) margin of Australian and New Zealand airports, an indicator of profitability, was far in excess of international competitors. Auckland Airport have among other things argued their risk profile is higher (so they need to generate a higher return) given they are undertaking a large expansion plan which requires a $1.88bn investment, which includes the build of a second runway.
Given airports such as Auckland Airport have monopoly like power, the threat/risks of regulation are unavoidable. We are generally positive towards Auckland Airport given it is a clear beneficiary of our tourism boom investment theme, although we are somewhat cautious around its valuation.
We currently have a HOLD recommendation on Auckland Airport.
3 Things Markets Will be Watching this Week
1. Ongoing trade disputes, particularly as tariff measures between the US and China continue to sway investor sentiment.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Important monthly US employment figures are 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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