From all of us at Yovich & Co we wish you a Merry Christmas and a prosperous New Year. The office will be closed from 12.00pm Friday 23rd December and will reopen 4th January.
The table below shows the year-to-date change in markets from the start of 2022 to 16th December.
At the beginning of the year (Market Update 10th January), Yovich & Co picked our 10 preferred high yielding and growth stocks from a list of 26 Herald Broker Picks as published on 28th December 2021. The table below shows those 10 companies and how they have performed year to date to 16th December:
Of the top 50 companies that make up the NZ50 index, only 11 companies were in positive territory year to date.
The US Federal Reserve increased the Fed Funds Rate by 50bps to an upper limit of 4.50% last week, which was expected by the market. The share market did move downwards however based on hawkish comments by the Fed, reinforcing that ongoing hikes will be appropriate, with a forecast for the Fed Funds Rate to reach 5.1% next year. Chairman Jerome Powell said it was important to keep up the fight against inflation so that the expectation of higher prices does not become entrenched. While some economic commentators are forecasting a mild recession in the US in 2023, Jerome Powell said he feels the country can maintain modest growth.
Supply chain issues are slowly being resolved, and the price of oil has come down markedly from its peak, which should assist with inflation, however economic forecasts have proved insufficient this year, with significant updates from the RBNZ for example occurring within the space of a couple of months. On the positive side in NZ, the economy grew by 2.0% in the September quarter, beating expectations for 0.9% growth.
Volatility has been a theme of share markets throughout 2022, and this looks set to continue at least into the first half of 2023. The VIX Index (CBOE Market Volatility) is a measure of share market volatility expectations. The VIX has increased by 31% during 2022, albeit well down from the highs reached earlier in the year.
Fonterra and Nestle have agreed the sale of their Dairy Partners Americas (DPA) Brazil JV to French dairy company Lactalis for approximately NZD$210m. The deal is expected to be completed by mid-2023, subject to regulatory authority approvals. Fonterra’s CEO says the sale is aligned with the Co-op’s strategy of prioritising its NZ milk pool.
Current Share Price: $3.28, Consensus Target Price: $3.54
Contact Energy has joined the Dow Jones Sustainability Asia Pacific Index, being the only new inclusion from NZ this year, and has achieved the second highest ranking of any NZ company. DJSI is a global benchmark for corporate sustainability based on environmental, social, and governance (ESG) performance. The index tracks the performance of the top 20% of the 600 largest companies in the Asia-Pacific developed region.
Current Share Price: $7.90, Consensus Target Price: $8.74
Meridian Energy will begin construction of the BESS in the first quarter of 2023, being NZ’s first large-scale grid battery storage system. A North Island battery was originally part of the company’s response package to Rio Tinto’s termination of its electricity contract for the Tiwai Point Aluminium Smelter. As Meridian has developed the opportunity, the BESS business case proved to be an economic investment irrespective of Rio Tinto’s future in NZ.
Current Share Price: $5.095, Consensus Target Price: $5.42
TVNZ will become the home of the majority of Spark Sport content from 1st July 2023. Agreement has been reached with NZ Cricket, meaning TVNZ will show matches run by NZ Cricket for three years from the start of the 2023/24 season. Spark noted escalating content rights costs and a broader range of investment opportunities across its business as the key drivers of the decision. Spark’s FY23 EBITDAI guidance remains unchanged.
Current Share Price: $5.34, Consensus Target Price: $5.18
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