Market share gains as China’s relaxation of baby rules boost Synlait
The stock market edged up on investor optimism that China’s new three-child policy could boost the outlook for milk processor Synlait.
The benchmark S & P / NZX 50 rose 0.5%, or 66.286 points, to 12,496.27 on Friday. Trading has been moderate as many investors may have already left early for the Queens Birthday long weekend.
On Monday, the Chinese government relaxed its rules, allowing couples to have three children, up to two, as it seeks to counter the impact of an aging population.
This boosted sentiment around Synlait, which has not been in favor of investors lately after lowering its earnings outlook. Sales channels to China were disrupted during the pandemic and there were also concerns that falling birth rates could reduce Chinese demand for infant formula.
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Synlait jumped 6.8% to $ 3.48, taking its gain this week to 15%.
Marketing company The a2 Milk Company turned negative late in the day, slipping 0.5% to $ 6.07. This reduced his gain this week to 3.2%.
“We have seen a slight rebound in milk stocks,” said Brad Gordon, investment advisor for Hobson Wealth Partners. “Investor sentiment is improving around China’s history with China’s announcement of the third child earlier in the week.”
Fletcher Building gained 2.5% to $ 7.85 after confirming that its share buyback in the market would begin next Thursday.
The construction company plans to spend up to $ 300 million on the program which can last up to a year. Such schemes are used by cash-rich companies to return money to investors and drive up the share price.
“This has been very well received by the market,” Gordon said.
Hallenstein Glasson fell 0.8% to $ 7.31 after confirming that 13 of its Glassons clothing stores in Melbourne, Australia would remain closed from May 28 to June 11 after the Victoria state government shut down extended the current lockdown to fight a Covid-19 outbreak.
Managing Director Stuart Duncan said in previous lockdowns a shift to online sales protected the company from any significant impact on sales.
Gordon said the market had fallen into a vacuum after the latest results for companies with a March 31 break-even date were released last week, along with a few annual general meetings.
Company information would rise again when companies with June 30 breakeven dates start reporting results, he said.
Until then, investors were likely to focus on macroeconomic trends such as inflation and interest rates, he said.
Asian stocks mostly slid on Friday, dragged down by lower tech stocks on Wall Street.
Benchmarks fell in Japan, South Korea and China, but rose in Australia.
Traders are awaiting the U.S. government’s latest monthly employment report on Friday, after pushing for unemployment data on Thursday.
The jobs report could provide more clarity on the economic recovery and the potential for higher inflation. Economists predict it will show employers added 650,000 jobs in May.
But as an improved labor market suggests the economy is gaining momentum after the pandemic, investors are watching closely for signs of inflation.
The concern is that the global recovery could be hampered if governments and central banks were to withdraw stimulus measures to combat rising prices.
– With PA