INSIGHTS BLOG

WEEK IN REVIEW: 18 - 22 NOVEMBER

Craigs Investment Partners Research Team, 22 November 2019

The New Zealand market processed company results and announcements this week. Overseas, US markets digested the release of the minutes from October’s Federal Reserve meeting, the US-China trade talks continue to dominate headlines, and the UK’s major party leaders had their first televised head-to-head debate.

The a2 milk company shares surged following an upgrade of its 2020 guidance. a2 Milk announced on Tuesday that it had extended its supply agreement with Synlait Milk, a key part of the company’s global supply strategy. The company also updated its guidance, with a2 Milk expecting higher profit margins in the year ahead than previously expected. The company’s share price rose 10.3% to $14.12 on Tuesday following the upgrade.

Sky TV fell to further record lows this week. The pay TV provider announced that it expects full year operating earnings to fall to a range of $170-$190m in the 2020 financial year, down from $241m announced in August. This was attributed to accounting changes and its ongoing investment into sports and streaming content. The share price closed at a record low price of 83 cents on Tuesday. EBOS Group also hit a five-month low on Tuesday, after the company’s biggest shareholder, Sybos Holdings, sold down a portion of its holdings at a discounted price.

Local results continue to take the market’s attention. Arvida reported its half year results on Tuesday, with underlying net profit after tax rising 31% on the same period last year. The company said it was on track to deliver 200 new units in FY20, in line with guidance. Argosy Property released its half year results on Wednesday, with its profit after tax for the half up from the same period last year. The company also maintained its full year guidance. Ryman Healthcare released its half year result on Thursday, with first half underlying profit up 6.2% on the same period last year. The company released guidance for the full year, with underlying profit expected to increase by 10-17%.

Prices rise for the fifth Global Dairy Trade auction in a row. The Global Dairy Trade auction on Wednesday morning showed the overall price index gaining 1.7%. Key product whole milk powder rose 2.2%, while rennet casein had the auction’s largest rise of 5.6%. Anhydrous milk fat lost 1.5%, the biggest drop within the index.

The leaders of the UK’s two major political parties face off in their first televised debate. UK Prime Minister Boris Johnson and Labour Party leader Jeremy Corbyn had a head-to-head debate on Wednesday, as they prepare for the upcoming general election on 12 December. Johnson was adamant he will “get Brexit done” and that the deal is “oven ready”. Meanwhile, Corbyn said the timeframe was “nonsense”.

High profile US retailers results showed mixed signals on consumer spending. Poor forecasts and slow sales growth from retail giants Home Depot and Kohl’s show challenges ahead of the holiday season for US retailers. Both companies downgraded guidance for a second time this year, sparking worries for the whole sector ahead of the annual Black Friday shopping event. Shares in the companies fell following the release of the results.

US Federal Reserve minutes were a highlight for US investors this week. The Fed released the minutes from the October policy meeting, where it cut interest rates for the third time this year. The majority of Federal Open Market Committee members saw the moves as enough “to support the outlook of moderate growth, a strong labour market, and inflation near the Committee’s symmetric two percent objective”, the summary said. The minutes showed that interest rates are likely to remain where they are if economic conditions do not change significantly and require a substantial reassessment of the economic outlook. Trade was also mentioned as a concern for global economic growth in the minutes.