Yovich & Co. Weekly Update - 11 June 2012

Jun 11, 2012 | Commentary

This Week’s Themes

  • Markets were volatile last week with poor economic data in the U.S. early in the week triggering a sell off. There was a bounce towards the end of the week as markets price in further government stimulation and QE3 from the Federal Reserve.
  • The Reserve Bank of Australia cut rates for a second month in a row. This months cut of 0.25% was widely expected, although there was increasing  expectation that last months move of 0.50% could be repeated due to growing global economic uncertainty. With the official rate at 3.5%, the RBA still has plenty of room to move if economic conditions do not improve.
  • Spanish Banks have requested a bailout worth 100 billion Euros, this has been seen as a positive and helps stabilise the smaller banks that are struggling with bad debts from the bursting of the property bubble.
  • NZX50 Rebalance - The NZ Exchange has rebalanced the NZX50 index in preparation for a new calculation methodology. Rakon and Steel and Tube have been replaced by Zero and Diligent, which are trading close to all time highs after being included.

Company News

Nuplex Industries (NPX.nz) issued a market update, giving guidance for earnings of $131 million. Despite being at the lower end of previous updates, the market has reacted well with confirmation that the company is still relatively on target. The following quote outlines the strength and diversity of the business. “Our (Nuplex’s) geographic and product segment diversity has helped reduce the impact of the volatility and weakness of global markets on our earnings”.

Telstra (TLS.nz) It has been revealed that Telstra is in talks with Vodafone to sell its New Zealand operations. Some commentators are predicting that the intention for the sale is to open up a possible bid by Telstra to buy Telecom. There is a lot of water to go under this bridge but the Telco sector is certainly a space to watch.

Fonterra is one step closer to having the Trading Among Farmers (TAF) initiative accepted at the vote on June 25th. A clause has been amended that may have prohibited a successful ballot. The Fonterra Shareholders Fund will enable units to be publicly traded and give non farmers a chance to invest into the co-operative. These shares will not carry voting rights and might be limited to 20% of the total shares in the company.

Other News

  • Eyes will be on Alan Bollard’s Monetary Policy Statement and OCR announcement on Wednesday, June 13th. Expectations are that the rate will be kept at 2.5%, although it is thought that depending on the outcomes in Europe the next move will be down.

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Jarrod Goodall

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