Wall Street’s sniffles not so catching
NZ correlation with US lessens
The adage “when Wall Street sneezes, everyone catches a cold” is wearing thin. The US stock market’s S&P 500 index fell by 2.2 per cent last Friday after US President Donald Trump threatened to impose US$100 million of additional tariffs on China.
Such a decline in the US market would normally translate into a “down” day for local stocks but, as it turned out, the market rallied by 60 points or 0.7 per cent when trade resumed on Monday.
It appeared investors’ nerves had settled somewhat over the weekend, and markets in the region were optimistic that the US and China could manage to avoid a trade war.
Even so, Salt Funds Management managing director Matt Goodson said the correlation between the US share market and markets such as New Zealand’s and Australia’s had lessened.
While the US economy remains extremely important, it seems investors are starting to see through some of the announcements to come out of the US via Trump’s Twitter feed.
“These markets are starting to see through the Trump noise,” Goodson said.
The volatility in the US — both for between days and within the trading day — has been quite extraordinary.
At one point in 2017 the US market went for 112 straight days without a movement, up or down, of more than 1 per cent on the S&P 500 index.
That compares with 21 days over this February and March when the market moved by 1 per cent or more.
Of that total, 12 were “up” days and nine were “down”. The down days were big, but they did not inspire commensurate falls in other markets.
“There is still a linkage, but the correlation has certainly fallen,” Goodson says.
Scott’s rise
Dunedin-based engineering and robotics company Scott Technology has seen a steady increase in its share price since the world’s biggest meat packer, Brazil’s, JBS, took a controlling stake in early 2016.
Scott this week reported a 19 per cent revenue boost in its first half, driven by strong demand for its automation and robotics technology.
Total revenue for Scott’s half year to February was up 19 per cent to $67.5m, and earnings before interest and tax rose 25 per cent to $6.4 million. Scott’s after-tax profit rose from $2.88m to $3.15m.
Scott, which has specialised in developing robotic technology for the meat processing trade, said strong orders in recent months had pushed forward work for large projects to a record high and that the company expected to be operating at near full capacity.
The stock, which tends to fly under the radar screen, has come a long way since JBS came into the picture. In April 2016, Scott was trading at $1.65 against its last traded price of $3.48.
Meanwhile, JBS has been in the news as Brazil’s political crisis deepens. Last May, J&F Investimentos, JBS’ controlling shareholder, agreed to pay a record-setting 10.3 billion real (US$3.2 billion) fine for its role in political corruption scandals.
Trilogy delists
Trilogy International will delist today following its sale to China’s Citic Capital Partners after the $211 million takeover received the green light from investors in March.
Sisters Sarah Gibbs and Catherine de Groot started Trilogy in the early 2000s out of an Upper Hutt industrial unit. In 2010 they sold it for $20m to listed candle-maker Ecoya, a company under the control of The Business Bakery, the investment vehicle of 42 Below founders Geoff Ross, Steve Sinclair and Grant Baker.
The combined business was later renamed Trilogy International. The Business Bakery, which owned about 31 per cent of Trilogy International, had already backed Citic’s offer of $2.90 per share.
The Business Bakery also owns about 21 per cent of beer company Moa Group. Its other investments include a stake in Turners Automotive Group (formerly Turners Ltd), which was formed through the 2014 merger of New Zealand’s largest vehicle and machinery retailer, Turners Auctions, and leading consumer finance and insurance business Dorchester Pacific.