Workers installing an automated material-handling system track inside a "clean room" at an Intel chip-manufacturing plant. Photo / Philip Cheung, The New York Times
Keeping you up to date with the latest market moves, in association with Investment firm Jarden.
International
US
The Federal Reserve has released its highly anticipated interest rate hike of 25bps and a statement about the state of the US economy, in a bid to reduce inflation.
It says spending and production are growing slowly, but employment is doing well and inflation remains elevated.
It said the health of the United States banking system is strong, but recent events may make it harder for people and businesses to obtain credit, which could affect the economy.
The Fed will keep an eye on the economy and may make more changes in the future.
The US Government has put in place strict regulations for chipmakers who receive federal funding and operate in China.
The CHIPS and Science Act worth US$50 billion limits grant recipients to expanding their output by no more than 5 per cent for advanced chips and 10 per cent for older technology.
Additionally, these rules include a US$100,000 spending limit for advanced capacity investments in China.
Grant recipients may still upgrade their technology to produce advanced semiconductors as long as they receive export control licences.
These restrictions are part of US efforts to impede Beijing’s ambitions while ensuring a stable supply of components that underpin revolutionary technologies.
Although the incentives for industry leaders like Samsung Electronics Co., Intel Corp. and Taiwan Semiconductor Manufacturing Co. are expected to be affected, the restrictions could hamper longer-term efforts to chase growth in the world’s second-largest economy, making it difficult for Beijing to build cutting-edge capabilities at home.
Rest of World
The US$17 billion loss of Credit Suisse bonds has raised concerns about further issuance in the market for risky bank debt.
Some major banks in Japan, Singapore and Hong Kong are halting new additional tier 1 (AT1) bond deals until market conditions stabilise.
This follows the decision to write down the value of Credit Suisse’s AT1 bond to zero as part of the bank’s takeover by Swiss rival UBS, while shareholders received US$3.25 billion.
AT1 bonds are a class of debt that take losses when institutions run into trouble but are generally believed to rank ahead of equity on the balance sheet. Regulators in the eurozone, UK and Hong Kong have stressed that they will not follow Swiss authorities in upsetting the usual hierarchy of bank creditors. Prices in the US$260 billion AT1 market have tumbled this week.
Tencent Holdings, the world’s largest video game company and operator of the WeChat messaging platform, has reported a 1.0 per cent decline in annual revenue for the first time ever due to China’s economic slowdown caused by the pandemic and a regulatory crackdown.
The revenue for 2022 was ¥554.55 billion (US$81 billion), lower than analysts’ expectation of ¥555.15 billion according to Refinitiv.
The domestic gaming revenue fell by 6.0 per cent, while international gaming revenue rose by 5.0 per cent. Revenue from online ads rose 15.0 per cent, while revenue from fintech and business services slid by 1.0 per cent.
Tencent’s profit attributable to equity holders fell by 16.0 per cent to ¥188.24 billion. Despite the regulatory challenges, the company is positioned to benefit from a post-Covid rebound in China.
Chinese multinational automobile company Geely Automobile Holdings reported a net income for 2022 of US$764 million, up 9.0 per cent from the previous year, and an increase in revenue of 46.0 per cent.
Despite rising costs of batteries and chips, the company set a sales target of 1.65 million units for 2023, with a focus on new-energy vehicles and autonomous driving.
Geely’s exports rose 72.0 per cent in 2022 to just over 198,000, while sales in China only rose 2.0 per cent.
The company has been playing catch up in the EV market but is leveraging resources from billionaire owner Li Shufu’s automotive empire, including a new high-end EV line called Zeekr, which filed for a U.S. initial public offering back in December 2020 which Li has noted is “still in the progress”. The stock closed up 2.7 per cent on the day.
China’s largest property developer, Evergrande Group, announced a plan to restructure its US$22.7 billion offshore debt, which may be a template for other troubled companies in China’s property sector.
The restructuring gives creditors options to swap their debt into new bonds and equity-linked instruments backed by Evergrande and its two Hong Kong-listed companies.
Evergrande hopes the restructuring will help to resume its business operations and facilitate debt repayment. Court and arbitration cases involving debt of US$52.83 billion are ongoing in mainland China, but Evergrande expects them not to affect the offshore restructuring materially.
The developer expects to agree restructuring support agreements with bondholders by 31 March 2023 and the restructuring to take effect on 1 October 2023.
Commodities
Despite a higher-than-expected increase in crude inventories, oil prices rose by 1.2 per cent to reach a one-week high on Wednesday.
This was largely due to the weakening of the US dollar, which hit a six-week low ahead of the US Federal Reserve’s decision on interest rates.
This increase in oil prices was also influenced by the potential impact of interest rates on the demand for fuel.
Australia
CoreLogic has released data on the weekly flow of new property listings for week 11 (March 11-19) of 2023 in Australia.
Typically, this time of year sees a surge in new listings, but 2023 is different, as the number of new listings is significantly lower than the previous five-year average.
The trend is likely supporting housing values, with some cities showing no decline in values due to a lack of new stock. The new listings trend varies from region to region, with Hobart, Darwin, and the ACT bucking the trend of lower listings through the first 11 weeks of the year.
The key factor to watch for the performance of this year’s housing market is the flow of new listings, as a rebound could trigger renewed downward pressure on housing values unless it’s matched by a commensurate uplift in buying activity.
New Zealand
The NZX 50 Index increased by 0.43%, drivers being broad based but notably healthcare companies increasing the most, with Ebos Group and Fisher & Paykel Healthcare gaining 2.8 and 2.4 per cent respectively.
The NZX All Health Care Index gained 1.8 per cent as a result, while on the other hand, the NZX All Information Technology and All Materials indices both experienced losses of 1.0 and 0.8 per cent respectively.
Outdoor clothing retailer KMD Brands has reported a record first-half revenue of $547.9 million, up 34.5 per cent from last year’s figures.
This growth was driven by strong sales across all three brands – Kathmandu, Rip Curl, and Oboz – and was boosted by lockdown restrictions and the return of travel.
Although Oboz faced significant supply challenges last year, its revenue rebounded with an increase of more than 124 per cent.
KMD Brands recorded a statutory ebitda of $90.8 million, up from $56.1 million year on year.
Despite its plans to enter the US market being delayed due to the ongoing destocking by retailers in that market, KMD Brands is cautiously optimistic and will focus on the Canadian and European markets Kathmandu recently entered.
The company aims to increase its number of stores in the Australian market, with a focus on suburban populations and regional cities.
Coming up today
Today’s news includes company announcements and earnings reports from various Australian companies such as Wesfarmers Chemicals, Energy & Fertilisers, diversified investment company Washington H. Soul Pattinson and building products company Brickworks for the first half of the fiscal year ended January 2023.
Additionally, in New Zealand, ANZ’s Truckometer for February and The Warehouse Group’s earnings for the first half of the fiscal year ended January 2023 are also being released.
For more information on the latest market moves, get in touch with Jarden.
The Jarden Brief is provided for general information purposes only. It reflects views and research available at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. The Jarden Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm. A financial advice disclosure statement is available free of charge at https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.
Full disclaimer available at: https://www.jarden.co.nz/wealth-sales-and-research-disclaimer
All market pricing and announcements are sourced from Refinitiv, NZX and ASX.
Value of deals in 2024 was less than half the value of those the previous year.