A New Zealand share hits $50, the Chinese stockmarket’s total value goes over US$10 trillion, but the IMF sees slower world growth for years

Is Mainfreight set to become New Zealand’s first $100 share? It’s a question some investors might be pondering as the company reached the halfway mark yesterday, just seven months after its shares hit a low of $25 in the March Covid-19 induced sell-off.

Mainfreight shares jumped almost 6 percent yesterday after a half-year trading update revealed both improved revenue and profits as a result of growing market share during the Covid crisis.

Managing director Don Braid said estimated revenue for the past 26 weeks was up 7.2 percent to $1.6 billion and estimated profit before tax was up 23.4 percent at $102 million.

In a presentation to investors yesterday, Braid said the group’s outlook was positive, with demand improving in all segments. He said the Australia and New Zealand businesses, which makes up almost half the group’s revenue, were both being rewarded for performing well through the Covid crisis.

Mainfreight shares closed up 5.8 percent at $51.30, a new record high, and are up 20 percent for the year.

IkeGPS lands new US commercial deal

Shares in measurement software developer IkeGPS surged 21 percent to an all-time high of $1.09 yesterday following an announcement of a new commercial relationship with an unnamed major US-based utilities company.

The deal is worth around $750,000 initially and follows a pilot programme for assessing and designing power pole infrastructure with the potential for further expansion, the company said in a statement.

IkeGPS said the agreement was significant as “the first major cross-sell from IKE’s Pole Foreman acquisition that was completed in October 2019.”

It has been targeting the US utility market, specialising in pole network installation and maintenance, and runs a sales office from Colorado.

Metlifecare takeover approval on hold after court hearing delayed

The High Court in Auckland has delayed its hearing on whether the $1.28 billion Metlifecare takeover by Swedish firm EQT can proceed, throwing yet another spanner in the works for a deal that has been problematic from the start.

The Takeovers Panel’s decision to defer a statement on whether it believes the deal should go ahead has further complicated matters.

Shareholders have already approved the $6 per share offer, which replaced an earlier $7 per share offer EQT withdrew, narrowly avoiding a legal stoush between the parties, after EQT claimed the coronavirus crisis represented a material adverse change.

The Overseas Investment Office has already given its approval for the deal to proceed.

However, the arrangement still requires Takeovers Panel and High Court approval.

This week Metlifecare suffered a further setback after a small shareholder launched a private legal action saying the company had failed to publish key assumptions underpinning various valuations and forecasts and much of this information was “stale.”

Yesterday, Justice Graham Lang advised affected parties the hearing will now take place on October 20 saying the court “wishes to take into account the views of the Takeovers Panel regarding the adequacy of the material provided by Metlifecare prior to the meeting of shareholders held on October 2.”

Metlifecare acknowledged the delay in the Takeovers Panel decision could potentially delay the deal which was supposed to have been concluded by the end of this month.

Is Apple being environmentally conscious or just saving costs?

It was the big talking point amongst Apple users yesterday following the release of the new iPhone: not so much what they were getting in terms of new features but the traditional accessories they were missing out on.

Apple will ship its latest model phone without headphones or a charging brick, a move it says is aimed at cutting waste.

More than two billion Apple power adapters are in existence, the company says, adding that many customers already have wired headphones or AirPods.

Removing these items means a smaller, lighter iPhone box, allowing the company to fit up to 70 percent more items on a shipping pallet and reducing shipping emissions.

Apple also says the new iPhone uses 100 percent recycled rare earth elements for all magnets, including in the camera and haptics.

With the shadow of Covid-19 all-pervasive globally right now, questions are already being asked about customers’ willingness to upgrade, given increasing economic uncertainty.

There’s also the question of how much of a motivator 5G will be in convincing users to make the switch to the iPhone 12. Apple is relatively late to the 5G game — competitors like Samsung, Motorola, LG and Google have all had 5G smartphones on the market for months — but 5G networks themselves are still at a nascent stage. A full rollout of 5G networks across the United States is expected to take another five to seven years, according to analysts.

Only 13 percent of smartphones sold in the first half of 2020 had 5G capabilities while just 6 percent of customers would rank 5G as a primary factor in their next smartphone purchase, according to research firm Canalys.

Good news and bad news from the IMF

The IMF’s latest forecasts predict the global economy will shrink by 4.4 percent in 2020, a less severe contraction than it forecast in June as a result of China’s return to growth and the lifting of lockdowns in the US. That’s the good news. The bad news is the organisation downgraded its outlook for 2021. The IMF now sees a 5.2 percent increase in global output next year, down from 5.4 percent in its previous report.

Last month, the Organisation for Economic Cooperation and Development also lowered its forecast for 2021.

“The ascent out of this calamity is likely to be long, uneven, and highly uncertain,” IMF chief economist Gita Gopinath said.

Output in advanced economies, as well as emerging markets — with the exception of China — is projected to remain below 2019 levels next year, she said.

Looking ahead, the IMF offered a bleak look at how the global economy might perform over the medium term, its first such forecast since the outbreak began.

Global growth is expected to slow to roughly 3.5 percent between 2022 and 2025, leaving the output of most economies below levels that were predicted before the pandemic.

Slow growth over such an extended period will have large aftershocks, the IMF cautioned.

One consequence will be worsening inequality and a “severe setback” for improvements to living standards, both in developed economies like the United States and emerging markets such as Mexico and Argentina.

Extreme global poverty is also expected to rise for the first time in more than two decades.

China’s sharemarket hits new record value

The total value of China’s stock market has climbed to a record high of more than US$10 trillion as the country’s accelerating economic recovery propelled it past the previous peak hit during an equities bubble five years ago.

The market capitalisation of all shares listed in Shanghai and Shenzhen hit US$10.1 trillion, according to Bloomberg data compiled yesterday.

That is above the $10.05 trillion pinnacle hit in June 2015 immediately before a historic rout sparked by a crackdown on leveraged trading, which resulted in the Chinese market plunging by almost half.

But analysts say despite this year’s rally, stocks are less frothy now than during the bubble of 2015, when retail traders drove valuations to eye-watering heights. They estimate stock valuations now trade at a significant discount to their levels five years ago, while margin financing was equivalent to about 5 per cent of market capitalisation today compared with nearly 10 percent during 2015’s bubble.

However, the value of China’s stockmarket market is massively eclipsed by that of the US market which has a combined market cap of around $US39 trillion.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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