INSIGHTS

MARKET SUMMARY: 10 TO 14 SEPTEMBER

Research Team, 14 September 2018

It has been a rollercoaster for markets this week following the tech sell off seen the week prior. Trade tensions between the US and its major trading partners again dominated headlines. While in Europe, investors were tracking the latest Brexit developments.

Despite a tough few weeks, the NZX 50 logged it biggest daily gain in 22 months on Tuesday, jumping 1.96%. The local bourse remains up a very healthy 9.5% year to date, on the back of an exceptionally strong performance during August. However, not all global indices are faring as well. Emerging market shares are down almost 20% from the 2018 peak, including the Shanghai Composite in China which is 19.7% lower than where it was at the start of the year.

In company news, Fonterra reported a net loss of $196m for the year ending July, following last year’s profit of $745m. The company said its total cash payout for the year would be $6.79, comprising a Farmgate Milk Price of $6.69 per kg of milksolids and a 10 cent dividend. The company provided forecast earnings for 2019 of 25-35 cents per share.

Gentailers rose on the back of the first report of the Electricity Price Review. The report provided an overview of New Zealand’s electricity sector and was received with a sense of relief after no major issues were recorded. The report excused electricity companies from the allegations they were making excessive profits and revealed households pay 79% more now than they did in 1990.

The tit-for-tat patent battle between Fisher & Paykel Healthcare and ResMed reared its head again this week. F&P Healthcare filed a complaint with the US International Trade Commission seeking an exclusion order to prevent the importation and sale of ResMed’s AirFit range. Both companies which produce devices and masks to treat obstructive sleep apnea claim their patents have been breached. Earlier this month, F&P Healthcare downgraded its earnings guidance by $5-10m due to the legal costs expected to be incurred contesting the allegations. Over the past two years, the two companies have filed patent infringement notices against each other on various products in the US, UK, New Zealand, Australia and Germany.

The NZX has signed a memorandum of understanding with US tech-heavy bourse operator Nasdaq. The two exchanges have agreed to “explore ways to promote dual listings, depository receipts, exchange traded funds and broader ways to develop market initiatives”. This should benefit both companies and investors.

Trade was again in focus this week after President Donald Trump said he was "ready to go" on slapping an additional US$267 billion worth of tariffs on Chinese goods. So far, the United States and China have hit US$50 billion worth of each others’ goods with tariffs in a dispute over US demands that China make sweeping economic policy changes. There are reports the Trump Administration have invited Chinese officials to restart trade talks but details are yet to be provided and some investors remain skeptical.

China told the World Trade Organisation (WTO) on Tuesday it wanted to impose US$7 billion a year in sanctions on the United States in retaliation for Washington's non-compliance with a ruling in a dispute over US dumping duties.

Over to Europe, investors were also tracking Brexit news. European Commission President Jean-Claude Juncker said in his last State of the Union speech Wednesday that the European Union stands ready to work "day and night" to find an agreement with the UK over Brexit.