INSIGHTS

MARKET SUMMARY: 12 TO 16 NOVEMBER

Research Team, 16 November 2018

Global sharemarkets have had a volatile week with a number of concerns weighing on investor sentiment. These included lingering concerns surrounding slowing global growth, falling oil prices, a collapse in Apple’s share price and fresh developments tied to Britain's exit from the European Union.

Locally, the NZX 50 index is 6 per cent below its September high, having been 8.6 per cent lower at its weakest closing point. The local bourse is still currently up over 5 per cent for the year to date (as at the time of writing). There was a flutter of corporate news flow this week, with a number of companies reporting earnings or holding annual meetings. Infratil, Mainfreight and Sanford reported results, while Contact Energy and Vector held annual meetings. Port of Tauranga also hosted its Investor day.

The most notable among them was Mainfreight’s interim result. The company reported a 32 per cent rise in net profit to $55.7m, comfortably ahead of market expectations. Mainfreight saw an increase in earnings from all its global segments, though Australia lagged due to increased costs. The core New Zealand segment was a standout, with operating earnings rising 18 per cent. Mainfreight is often seen as an economic gauge, so this result provides a positive read-through for how things are tracking in the New Zealand economy.

In local economic news, the latest housing report from the Real Estate of New Zealand showed sales volumes rose 15.5 per cent from last October - a five-month high. The number of properties sold nationally increased to 6,791 in October 2018, an increase of 911 houses from October 2017 data. Meanwhile, house prices rose just 0.5 per cent nationwide in October from September.

In Australia, there were annual meetings (and associated trading updates) from Computershare, Ramsay Health Care, ResMed, Lend Lease and Link Group. Australian development giant Lendlease has recently surprised investors by writing-down the value of its Australian engineering business by A$350 million. The company has experienced issues primarily relating to the NorthConnex roading project in Sydney. These have been caused by adverse weather, access issues and lower productivity. While a small part of the overall Lendlease business, shares fell by more than 18 per cent on the back of the announcement.

In Australian economic news, data from the Australian Bureau of Statistics showed wages growth was somewhat strong in the third quarter, helped along by a big 3.5 per cent rise in the national minimum wage earlier in the year. Wages rose by a seasonally adjusted 0.6 per cent in the three months through September from the second quarter, and rose by 2.3 per cent from a year earlier.

Further afield, shares in Vodafone jumped after the company reported better than expected sales growth during the first half of its financial year and also provided a reassuring outlook. While management announced that it will freeze its dividend until debt levels are at more appropriate levels, investors had been fearing a potential dividend cut.

Apple has had a rocky week after a number of smartphone component suppliers cut their financial outlooks citing reduced shipments from their ‘largest consumer customers’. While no specific customer was named, Apple is one of the largest customers for smartphone components in the world. These announcements come after Apple’s CEO, Tim Cook, announced the company will stop disclosing unit data for its hardware devices at its recent quarterly result. This has raised concerns around demand for the company’s latest flagship iPhones. Apple has released an unprecedented number of new iPhones as well as a number of other Apple products in time for the Christmas season.

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