INSIGHTS

MARKET SUMMARY: 27 TO 31 MARCH

Research Team , 31 March 2017

It has been a fairly quiet week for the local market, giving investors a chance to catch their breath after a hectic week last week. However with so much going on overseas, markets were largely focussed on offshore events as the Trump administration faced heavy scrutiny and Brexit officially began.

As we near the end of the first quarter of 2017, it is also a good time to look at the winners and losers. At the time of writing the NZX50 index had risen 3.8% so far this year, with a couple of trading days still to go. The top performer for the index has been a2 Milk, rising 37.6% after a number of positive announcements has pushed the share price significantly higher. Market stalwart Fisher & Paykel Healthcare has risen 13.9% while dual listed Australian banks Westpac and ANZ have risen significantly as global financial stocks have benefitted from rising interest rates globally.

Metro Performance Glass is the weakest performer on the NZX50 for the quarter, having fallen 30.7% to date. The company’ share price is nearing all-time lows after a few disappointing announcements including a significant earnings downgrade when the company announced that it is unlikely to see profits rise in FY17. Tegel Group is the second worst decliner for the quarter, having declined 22.8%, closely followed by Fletcher Building, down 22.0%. Fletcher’s poor performance has been driven largely by a significant downgrade from the company in respect to its full year earnings, which came soon after an already disappointing half year result.

The ASX200 has gained 4.1% for the quarter to date with all sectors gaining except one. Health is by far the top performing sector, gaining 14.2% while the telecom sector is the biggest laggard, falling 8.3%. The S&P500 has risen 5.5% for the quarter, despite experiencing a decline in March as the index rose strongly early in the year buoyed by the Trump trade. Recently, US indexes have experienced their worst week of declines since the Presidential election, with some economists questioning if the Trump trade is over.

The Trump administration faced its first hurdle at the end of last week, as it tried to get its new healthcare bill across the line. One of Donald Trump’s campaign promises that was backed whole heartedly by the Republican Party was to replace the controversial Affordable Care Act, more commonly known as Obamacare. However, it seemed to expose significant differences within the party, with some saying the replacement American Health Care Act didn’t go far enough while others said that it went too far. The bill was yanked from the floor before it was even able to go to a vote as it was deemed as being doomed to fail, exposing concerns that the tax plans and deregulation that President Trump campaigned on would also struggle to gain traction.

The biggest news of the week came overnight Wednesday New Zealand time as UK Prime Minister Theresa May pulled the trigger on Article 50 of the Lisbon Treaty, starting divorce proceedings officially between UK and the European Union. Article 50 gives members the right to leave the European Union, and gives the departing nation two years to negotiate an exit deal. Once set in motion, Article 50 is not able to be stopped unless there is unanimous consent from all member nations. The letter was formally delivered to the President of the European Council Donald Tusk, officially starting Brexit proceedings. Following this, the British pound gained some ground against major trading partners however, this was short lived and these gains were pared back. The FTSE 100 in the UK saw a gain for the day, however it appears that this was driven more by gains in global markets and a steadying oil price and investors seemed to shrug off the news. Expectations are for the UK to be vulnerable during this process, however with no precedent, there are mixed opinions on how both the pound and the market will react.