Jarden Brief: Why China is keeping a close eye on Biden

NZ Herald

28 Oct, 2020 07:14 PM6 mins to read

US presidential contender Joe Biden is pitching a different approach for foreign policy relations. Photo / AP

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand

With just nine stocks in the green today it was NZX50's number one constituent, Fisher & Paykel Healthcare (FPH), that led the index to close up 0.1 per cent.

FPH itself rose 3.9 per cent to $35.96, with a strong market response likely due to news out of the US in which the Centres for Medicare & Medicaid Services announced the removal of 13 product categories from the durable medical equipment competitive bidding programme, Round 2021. CPAP devices and supplies & oxygen equipment are included in the categories to be removed, which would result in better price outcomes for FPH.

Fonterra and Chorus were the next best performers rising 3.4 and 2.0 per cent respectively, while the worst performer on the day was Tourism Holdings, down 5.8 per cent. Vista Group and Ryman were the next biggest decliners, falling 3.7 and 3.6 per cent respectively.

Eroad's quarterly operational update reaffirmed first half 2021 guidance of $43.5m - $44.5m, and ebitda of $12.0m - $14.2m. Total contracted units grew by 2.8 per cent across the quarter, with growth across all three geographies (NZ, Australia and North America). Eroad traded up 0.2 per cent yesterday.

International

US Markets:

At time of writing, the SPX500 was down 2.9 per cent, the Dow Jones Industrial was down 3.1 per cent and the Nasdaq was down 3.1 per cent as concerns about European second waves of infection, resumed riots in Philadelphia and the upcoming election have spooked the market.

Utilities was the relative best performing sector (-1.6 per cent) on a day where all sectors were in the red. Technology and Healthcare were the worst performing sectors on the day, respectively down 3.6 and 2.5 per cent.

Automobile manufacturer General Electric was a bright spot, up 9.2 per cent despite most other stocks declining. The performance was driven by a surprise announcement of a third quarter profit, as well as optimistic projections of US$2.5 billion free cash flow for the current financial year.

The worst performer on the day was Medical device manufacturer, Dexcom, despite a recent third quarter profit announcement that exceeded analyst expectations – potentially indicating the stock was overbought in anticipation of a more positive announcement.

Asian markets:

At time of writing, the Shanghai Index was up 0.5 per cent and the Shenzhen Index up 0.7 per cent. The Nikkei 225 was down 0.3 per cent.

As a Biden presidency becomes increasingly likely according to poll data, the candidate's policies towards engagement with China become more interesting. While Biden has previously denounced Xi Jinping as a "thug", his strategy will be to place greater emphasis on alliances and human rights, perhaps in place of tariffs and arms sales. A return to the Obama administration's Indo-Pacific strategy to draw India into a counterbalancing alliance of democracies is likely. Investors should consider what sort of catalyst such a change could create for China exposed securities.

Commodities:

At time of writing, Gold was down 1.3 per cent, trading at US$1882.9 per ounce. WTI Crude was down 5.9 per cent, trading at US$37.0 per barrel. The ten-year treasury yield was down to 0.77 per cent.

Australia:

The ASX 200 seemed to hit pause on Tuesday's sell-off, edging 0.1 per cent higher after a strong afternoon trading session. Information Tech was the best performing sector posting gains of 3.0 per cent, with BNPL darling, Afterpay, rising 7.3 per cent on close to 2 million trading volume.

Afterpay rose significantly on a positive first-quarter update, with first-quarter underlying sales increasing 115 per cent to $4.1 billion with over 11.2 million active customers. Following a few days of large declines in which the stock price fell to a low of A$95 on
Tuesday, investors took up the opportunity to pick up the BNPL giant at a slightly discounted price.

In contrast to yesterday, mid-cap and small-cap indices heavily outperformed their larger counterparts, rising 1.3 and 1.1 per cent respectively. Energy continued to be the worst-performing sector, down 1.4 per cent, potentially on the back of oil prices falling 3.8 per cent overnight.

Following on from the AGM yesterday, Blackmore was the best performing stock today up 13.1 per cent. Despite a small reaction during Tuesday's trading session, investors seemed to digest the news overnight and purchasing demand pushed the share price higher. The company did not provide full guidance during the AGM, but did anticipate full-year profit growth for the financial year 2021.

Coming Up Today:

Australian economic data out later today includes export and import prices for the third quarter, while New Zealand companies Skellerup, Freightways and South Port are all set to host their AGMs.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views 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. This Morning 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 broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimer