INSIGHTS BLOG

WEEK IN REVIEW: 15 - 18 APRIL

Research Team, 18 April 2019

The local NZX 50 closed at a new record this week, with retirement village operators rebounding after the government said it would not proceed with a proposal for a capital gains tax. Meanwhile, the NZ dollar fell sharply after disappointing inflation for the March quarter increased the prospect of a rate cut at the Reserve Bank's next meeting. The Consumer Price Index (CPI) rose just 0.1% in the first quarter, pushing the annual rate of inflation from 1.9% in the fourth quarter of 2018, to 1.5% now.

Within the index, The a2 Milk Company hit record highs

Closing at $16.00 on Wednesday and validating its title of the best performer in the index, with shares up 43.5% this year. Vista Group also closed at a record $5.09, with shares of the cinema software company up 35.7% year-to-date.

At the other end of the spectrum, Restaurant Brands tumbled more than 8.8%

In the wake of its full year result where it said it won’t pay a final dividend. Tourism Holdings plunged more than 20% on the open after it downgraded net profit after tax for the 2019 financial year. The company now expects net profit after tax of between $25m to $28m for the year ended 30 June 2019, down from previous guidance of $32m. The company said the primary reason for the revised guidance is that the vehicle sales market in the USA has continued to deteriorate and their expectations for the financial year are now substantially below previous forecasts. Tourism Holdings said the New Zealand and Australian markets remain on track with a ‘solid outlook.’ The company will undertake an operational and capital review of the USA operations, and intends to update the market before the end of May.

The retirement village sector continued to rebound after Prime Minister Jacinda Ardern scrapped plans for a capital gains tax

Suggesting the coalition government had not been able to reach a consensus. The sector had been under pressure in previous weeks after Summerset reported a 4.2% decline in first quarter sales on the back of a softening housing market, in particular in Auckland and Christchurch.

Mercury revised its fiscal year 2019 operating earnings guidance from $515m to $495m

The company said the change was due to an expected reduction in full year forecast hydro generation caused by dry weather in the Taupo area. The company said the reduction was expected to take place mostly in the fourth quarter of 2019. Meanwhile, competitor Genesis also advised its operating earnings for the 2019 financial year will be at the lower end of its guidance range of $360m to $375m.

The latest Global Dairy Trade auction saw the headline index rise 0.5%, advancing for the 10th consecutive auction

This brings average pricing up 28% since its November 2018 low point. However, the price of whole milk powder kept the gain muted, falling by 0.7%. Anhydrous milk fat (+4.2%) and butter (+3.5%) saw the biggest gains while lactose (-3.4%) and rennet casein (-2.4%) fell the most.

Elsewhere, there was a flurry of data points out of China this week

The Chinese sharemarket hit its highest level in nearly 13 months after data showed housing prices in 70 major Chinese cities increased an average of 10.6% year-on-year in March, signalling an economic rebound. Chinese GDP grew an annual 6.4% in the first quarter of 2019, unchanged from the fourth quarter and beating forecasts of 6.3%. Meanwhile, retail sales climbed 8.7% on the year in March, beating expectations for an increase of 8.4% and up from 8.2% in February.