Yovich & Co. Weekly Update - 2 February 2015

Feb 2, 2015 | Commentary

Changes in Market

 

 This Week’s Themes

  • The New Year “Bull Run” has continued with the NZX50 Gross Index making its seventh straight weekly gain. 

  • The Reserve Bank of New Zealand made their first Monetary Policy Statement last week. The statement was most notable for their movement away from a tightening bias and comments that interest rates were “on hold for some time” and that the next move will be either up or down depending on economic data.

  • The Finance Sector drove gains in the Aussie market as investors ignored further losses in the Energy and Mining sectors. The All Ordinaries has now turned around a sluggish start to the year in the last two weeks to trade at close to a post GFC high.

  • In breaking news, yesterday the RBA surprised the markets by cutting interest rates in Australia.

  • Apple’s record revenue announcement wasn’t enough to stop the sell-off in U.S. markets since Christmas. Energy stocks continued to fall with fourth Quarter results being announced this week and expectations are low after the continued weakness in the Oil Price.

  • With interest rate expectations in New Zealand softening, the Kiwi fell to a four year low against the US Dollar.

Investment News

Australian Bank Review – Post the Financial System Inquiry Final Report:

The Australian Banks have been out of favour with investors as they consider the outcome from the “Financial System Inquiry Final Report” that was released late last year, and what the recommendations mean for the profitability of the Banks. From a very high level, the outcome of the review will require Banks to have stricter capital structures and to reduce exposures to riskier type lending.  Expectations are that the major banks will have to raise equity to increase the amount of loss absorbing capital that they have to reduce the impact on the financial system during times of economic crises like we experienced during the Global Financial Crises. 

As a result of the recommendations outlined in the report, First NZ Capital has updated their target prices on all of the listed banks. Below is a summary of their recommendations:

 NZ First Capital

 

 

 

 

With the New Zealand Dollar hovering around the 95 cent Aussie mark, it is still trading at the top of the 30 year range and providing a good opportunity to invest in good quality, high yielding Australian shares. The assumptions that FNZC are making regarding the costs associated with the stricter requirements still show that there is upside to the share prices of ANZ, BEN, BOQ and NAB. 

Our preferred Australian bank remains ANZ listed in New Zealand as investors do get some imputation credits on the dividends, unlike most other Australian Shares.

 

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Jarrod Goodall



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Weekly Update Investment Shares Bonds Market Commentary ANZ.nz ANZ.asx WBC.nz WBC.asx CBA.asx NAB.asx BEN.asx BOQ asx



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