Craigs Investment Partners Research Team, 29 November 2019

New Zealand investors absorbed more company news this week, as well as the results from the local retail trade survey for the September quarter. Overseas, Wall Street touched record highs as investor sentiment improved following positive headlines around trade relations between the US and China.

NZ retail sales for the September quarter came in above market expectations. Total retail sales volumes rose 1.6% on the prior period, with nine of the 16 regions showing higher sales values in the quarter. Electrical and electronic goods had the largest volume sales increase, up 4.4%.

Fisher & Paykel posted a strong interim result on Wednesday. Fisher & Paykel Healthcare announced its financial results for the half year ended 30 September 2019. This saw the company post net profit after tax was $121.2 million, up 24%, and operating revenue was $570.9 million, 12% above the first half last year. Managing Director and CEO Lewis Gradon said the company had a strong start to the 2020 financial year, mainly driven by the Hospital product group, which delivered operating revenue growth of 19%.

Fletcher Building provides guidance at its annual shareholder meeting. Fletcher Building provided guidance for the year ahead on Thursday, with operating earnings expected to be in the range of $515m-$565m, in-line with market expectations but lower than that posted for FY19. Overall, Fletcher Building sees New Zealand building and construction activity easing from its peak, while in Australia the company expects weak conditions to persist.

The Reserve Bank of Australia (RBA) says quantitive easing is not on the bank’s agenda at this time. Philip Lowe, the Governor of the RBA, gave a speech in Sydney on Tuesday evening and said that the bank may create money to buy government bonds if it runs out of ways to boost the economy. However, Lowe said that the bank expected the combination of previous rate cuts, the government’s recent income tax cuts, a lift in house prices and ongoing government spending on infrastructure would help boost the economy. As a result, he said the chances of quantitative easing in Australia were little.

Westpac Group CEO resigns as scandal shakes the bank. Westpac Bank’s CEO, Brian Hartzer, announced he was stepping down on Tuesday after the bank was alleged to have breached the anti-money laundering laws on 23 million occasions relating to more than $11bn worth of transactions. Payments totalling less than $500,000 that a dozen of the bank’s customers paid to people in the Philippines are the most damaging part of the lawsuit for Westpac, with regulator AUSTRAC saying the payments should have been detected and stopped as they were “consistent with child exploitation typologies”.

In the US, the S&P 500 and the NASDAQ climbed to record highs as trade-related optimism boosted market sentiment. There have been a number of traded related headlines over the last few days with the Chinese government saying in a statement that China and the US “reached consensus on properly resolving relevant issues” and agreed to stay in contact on the remaining points for a phase one trade deal. Experts privy to the talks between the two countries said that officials discussed tariff removal, agricultural purchases and a review mechanism for the implementation of a potential agreement.

‘Merger Monday’ saw more than $60bn of deals announced in the US. In merger and acquisition activity, eBay announced it will sell its ticket exchange website Stubhub for $4.05 billion in cash to Viagogo, a European competitor. Meanwhile, LVMH, the European luxury brand conglomerate, will pay $16 billion for iconic US jewellery-maker Tiffany and Co. Charles Schwab also formally agreed to buy its rival TD Ameritrade, as reported last week.