WEEK IN REVIEW: 11 - 15 NOVEMBER
Craigs Investment Partners Research Team, 15 November 2019
The biggest surprise on the market this week was delivered by the Reserve Bank, which left the official cash rate unchanged. Most market participants were factoring in a 25 basis point cut, the decision to stay put saw the New Zealand dollar rise dramatically. The market was also kept busy with a number of corporate results, most of which delivered on expectations.
The Reserve Bank of New Zealand (RBNZ) leaves the official cash rate (OCR) unchanged. The RBNZ went against market expectations on Wednesday when it held the OCR at 1.0%, as the monetary policy committee decided there had been no major change in the economic outlook since the 50 basis point cut in August. However, a statement released by the RBNZ said it was monitoring economic developments and further monetary stimulus would be added if needed. The committee next meets in February 2020.
New record high for New Zealand median house price. The Real Estate Institute of New Zealand released its monthly property report on Thursday, with data showing that median house prices across New Zealand increased by 8.2% in October, to a new record high of $607,500. This was up from $561,500 last year, and is the first time the domestic median house price has been over $600,000. Median house prices in Auckland increased to $868,000, up 0.8% on the same month last year. The region with the largest increase was Gisborne, up 37.1% from October last year.
Mainfreight released its first half result on Wednesday. The company’s operating earnings were up 9.9% to $119.1m and the net profit after tax rose by 11.3% to $62.2m. The freight company attributed the positive results to improvements in Europe and the US. Despite the increase in growth, the results showed that the New Zealand and Australian arms of the business were experiencing weakness due to slowing economic conditions and increased costs.
The local market had a busy week of interim and full year results. Investore Property delivered its first half result on Wednesday, which was down on the prior period. Profit for the half was down $1m to $9m. Infratil reported its interim result, with its operating earnings up 1.7% on the quarter before, at $289m. Sanford released its annual result on Thursday, with operating earnings at $64.8m, broadly flat on the previous year. Net profit after tax of $41.7m was down on last year’s $42.3m. Goodman Property Trust also released its interim result on Thursday, with the company maintaining full year distribution guidance.
Markets turn to Donald Trump for signs on trade. The US President Donald Trump dangled the prospect of completing an initial trade deal with China “soon”, however, offered no new details on negotiations in a speech on Tuesday. The president said he would raise tariffs “substantially” on Chinese goods if there was no deal. Trump’s threat was a reference to previously announced 15% tariffs on approximately US$156bn worth of Chinese consumer goods. These tariffs are expected to take effect on 15 December. The US Federal Reserve Chairman Jerome Powell also testified to congress this week. Powell said he expects the US economy to continue growing at a solid pace, though it still faces risks from slower growth overseas and trade tensions.
China’s Singles Day meant new records for Alibaba. China’s annual Singles’ Day shopping event held on 11 November led Alibaba into record sales territory. Sales increased 26% on the previous year to a record US$38bn. However, this growth rate for the online retailer was the weakest it has been since the event started in 2009. The company attributed the moderate growth to a slowing e-commerce industry in China.
Disney launched its streaming service Disney+ on Tuesday. Walt Disney’s debut in the streaming media wars on Tuesday was hit with technical glitches that the company attributed to higher than expected demand. Disney announced on Wednesday that Disney+ had over 10 million subscribers only a day after launching. This remains well short of rival Netflix which has 158m subscribers.