INSIGHTS BLOG

WEEK IN REVIEW: 14 - 18 OCTOBER

Craigs Investment Partners Research Team, 18 October 2019

It was a week of gains for the local sharemarket this week, with positive news from various companies on the NZX. Globally, European shares rose to their highest level in three months on Tuesday, while reporting season in the US got off to a positive start.

Sky TV kicks back. Sky TV announced on Monday that it had reached an agreement for a broadcast deal with the New Zealand, Australian, South African and Argentinian Rugby Unions. The deal will also see New Zealand Rugby become a 5% shareholder in Sky. The broadcast rights include exclusive coverage of all Investec Rugby Championship, Steinlager Series, Investec Super Rugby, Mitre 10 Cup and all New Zealand’s other domestic competitions. Sky was the most traded stock on the NZX on Monday, Tuesday and Wednesday, jumping 20.22% in the three sessions.

Positive updates from leading New Zealand companies led the domestic market higher. Fisher and Paykel Healthcare upgraded its revenue and earnings guidance for FY2020 on Monday, after gaining the rights to sell its new full-face mask in the US. F&P Healthcare said the sale of the new Vitera mask used in the treatment of obstructive sleep apnoea (OSA) was expected to add $10m to its previous guidance provided in August. The company is now forecasting a net profit of between $255m to $265m for the financial year ended 31 March 2020, with an operating revenue of $1.19m. Restaurant Brands also traded strongly following the announcement of positive half year results, with net profit after tax up 14% on the year prior. KFC was the key driver of the upgrade, with a record performance in the quarter.

Fletcher Building announced a new $15m off-site house production plant. Fletcher Building opened New Zealand’s largest purpose designed, offsite home manufacturing facility in Auckland on Wednesday. The high-tech site can produce components for at least 500 new homes a year. This facility will reduce onsite build times by 60%, or from 22 weeks to around 6-10 weeks. Another positive for the housing market was record highs shown in the Residential Property Data released from REINZ. Median house prices across New Zealand climbed by 6.6% in September to a record high of $597,000, up from $560,000 in September 2018.

Consumer Price Index (CPI) rose more than expected by the market. Data released by Stats NZ on Wednesday showed the CPI rose 0.7% in the September quarter. The annual inflation rate fell to 1.5% from 1.7% in the June quarter. The increase was more than expected by the Reserve Bank of New Zealand, which had forecast annual inflation of 1.3%.

Global Dairy Trade (GDT) headline index up 0.5%. Dairy product prices increased for the third session in a row at the GDT auction on Wednesday morning. Rennet casein had the biggest increase, up 3.6%, while skim milk powder prices climbed 2.4% and anhydrous milk fat gained 0.8%. Prices for key product group, whole milk powder, were unchanged. Butter declined 0.4% and cheddar fell 2.2%.

US earnings season kicked off on a positive note. Johnson & Johnson shares rose 1.8% after third quarter earnings and revenue beat expectations, amid thousands of consumer health-related lawsuits. The growth in earnings and revenue was attributed to a lift in sales of its cancer and prescription drugs. Meanwhile, shares in JP Morgan climbed on Tuesday, after reporting positive quarterly earnings, including record revenue.

European markets swung amid Brexit talks. European shares closed at a three-month high on Tuesday, after Brexit negotiations sparked optimism in the markets. This was the fourth daily gain in the EU market. The British pound soared to a four-month high against the US dollar. However, Brexit talks hung in the balance on Wednesday, as investors paused for guidance.