INSIGHTS

MARKET SUMMARY: 18 TO 22 JUNE

Research Team, 22 June 2018

It was a mixed week for global markets after President Donald Trump threatened to impose a 10% tariff on $200bn of Chinese imports, a tit-for-tat move as the two nations move closer towards a potential trade war. Trump recently ordered tariffs on US$50 billion in Chinese goods in retaliation for intellectual property theft. The tariffs were met by China which frustrated the President. The statement caused markets to tumble on Tuesday however they managed to find strength later on in the week.

The trade confrontation puts the world’s two largest economies against each other and could disrupt global supply chains for the tech and auto industries, sectors heavily reliant on outsourced components. Trump’s threats sent global markets downhill and weakened both the US dollar and Chinese yuan. The Dow Jones tumbled, erasing all of its gains for the year.

Closer to home, the New Zealand dollar rose to a six-week high against the Australian dollar on expectations that the Australian economy will be hit harder if China’s growth slows.

Meanwhile, New Zealand’s gross domestic product rose 0.5% in the March quarter, following a 0.6% increase in the December quarter, with growth in service industries more than offsetting a fall in construction activity. Agriculture was up 0.4% in the March quarter, following a 2.8% fall last quarter. A rebound in milk production contributed to the rise, thanks to improved weather conditions. Annual GDP growth for the year ending March was 2.7% and the size of the economy in current prices was $286 billion.

Global dairy prices continued to fall this week after the Global Dairy Trade auction index fell 1.2% from its previous auction two weeks ago. Key product group, whole milk powder, slipped 1.0% while skim milk powder declined by 1.1%. The only two groups to see an increase in price was lactose which rose by 8.2% and butter gaining 0.8%.

In corporate news, Fletcher Building confirmed its strategy to improve its financial and operating performance. The company is restructuring to cut costs of $30 million a year, as well as instigating an executive shakeup. Its strategy is to focus on a simpler and leaner operating model.

Pushpay completed a bookbuild for Eliot Crowther’s NZ$100 million sell down after the co-founder sold his 9.03% stake in the company. The company reiterated its revenue guidance of US$20.5-22.0m for the quarter ending June.

Manuka honey producer Comvita bought a 20% stake in Uruguay’s Apiter for US$6.25 million to secure propolis supplies. In April the company downgraded its earnings forecast from $17.1 million to $8-11 million after poor weather hampered honey production. At the same time, it announced it was in talks with an unnamed third party for a potential takeover. However the deal fell through after the two parties couldn’t agree on a price.

Gentrack entered into an agreement to acquire Evolve Parent Ltd and Evolve Analytics Ltd, a market leading provider of energy data analysis software in the UK, for an enterprise value of £23m (NZ$44.2m). Evolve specialises in the identification and correction of settlement billing errors as well as the accuracy of standing data.

Synlait confirmed its manufacturing site in Pokeno will be commissioned for the 2019/2020 season. Initially, Synlait’s Pokeno site will produce infant-grade ingredients while regulatory registration is obtained for infant formula base powder production.