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Global Equities Roundup: Market Talk

7 Jan 2018 11:14 pm

The latest Market Talks covering Equities. Published exclusively on Dow Jones Newswires throughout the day.

1814 ET [Dow Jones] Coal miner Aspire Mining has been a slow burn for investors but that could be about to change. Patersons thinks Aspire's current A$30 million market capitalization undercooks the value of its 90%-owned Nuurstei coking coal project in Mongolia. "Based on peer comparatives, we see the potential for a more than A$100 million market capitalization given that the project has the potential to generate US$23-28 million per annum in cash flow (post-tax current pricing) within the next 15-18 months over a circa 10-year period," says Patersons, which starts Aspire at speculative buy. It also likes Aspire's Ovoot coking coal deposit, if China's One Belt One Road policy leads to the construction of a railway that can enable the commodity to be shipped out. (david.winning@wsj.com; @dwinningWSJ)

1812 ET [Dow Jones] Morgan Stanley analysts say shares in Sydney Airport are likely to rise relative to the broader industry over the next 30 days, noting that bond yields have stabilized and strong passenger growth across Australia's east coast is continuing. The investment bank has a A$7.37 price target on Sydney Airport shares, compared to Friday's close at A$7.11. One potential catalyst for a share price move could be later this month when the airport releases full 2017 traffic data. (mike.cherney@wsj.com; @Mike_Cherney)

1804 ET [Dow Jones] Sustained weakness in Australia's retail sales data is puzzling High Frequency Economics. That's because GDP growth is close to its potential rate and employment is rising very quickly, which should be buoying sentiment. Still, High Frequency Economics isn't expecting Thursday's data to show a happier consumer, predicting flat nominal retail sales for November compared to October. "We hope we are wrong and the data will surprise everyone to the upside," says chief economist Carl Weinberg. "If so, talk may turn to an interest rate hike in the first quarter, and GDP will be expected to accelerate." (david.winning@wsj.com; @dwinningWSJ)

1754 ET [Dow Jones] Interest in Fortescue Metals's upcoming 2Q production report will remain centered on the miner's ability to close a longer-than-expected discount on the lower-grade iron ore that it exports, says RBC Capital Markets. Also under the microscope is Fortescue's cost performance, given its FY18 guidance of US$11-12/ton. "Although we remain broadly constructive on iron ore, we are wary of the risks from potentially lower price realization," RBC says. "Fortescue is highly exposed to the iron-ore price, and remains leveraged despite the significant debt pay down." It retains a sector perform call on Fortescue. (david.winning@wsj.com; @dwinningWSJ)

1752 ET [Dow Jones] Seek's move to take online job classifieds portal Zhaopin private with the help of Chinese private-equity partners was driven by a desire to accelerate growth over 5-10 years. How will it achieve this? Morgan Stanley highlights 3 options: buy another online jobs player, expand beyond classifieds advertising into other jobs-related businesses, or diversify into a new sector like online car sales or real-estate classifieds. Either way, Morgan Stanley now thinks Zhaopin is worth a lot more than it thought, raising its estimated value to A$2.1 billion from A$1.4 billion. That drives a 9.9% lift in the price target for Seek, which owns 61% of Zhaopin, to A$21.00/share. (david.winning@wsj.com; @dwinningWSJ)

1732 ET [Dow Jones] Australian pipeline operator APA has fallen 12% over the past month, and Morgan Stanley thinks the stock will remain in the grip of the bears for a while yet. Morgan Stanley is tipping APA's shares to fall relative to the utilities and infrastructure sector over the coming month, citing "increasing uncertainty regarding recontracting outcomes for contracted and regulated pipelines until regulatory guidelines and/or decisions are published." It estimates there is a 60% to 70% chance of this scenario happening. (david.winning@wsj.com; @dwinningWSJ)

1712 ET [Dow Jones] Australian retail sales data for November are due on Thursday, and the market focus will be intense. Aussie consumers are being squeezed between high debt, rising costs and little to no incomes growth. There seems little relief on the horizon too. Annual retail sales growth has slowed from 3.7% in June to just 1.8% more recently. The consumer will remain a key focus of the RBA in 2018. Westpac says consumer sentiment has shown improvement in 4Q with employment growth remaining solid. But the Christmas period was lackluster. Westpac expects November retail sales rose 0.3% on month. The market consensus is for a 0.4% rise. (james.glynn@wsj.com ; @JamesGlynnWSJ)

1706 ET [Dow Jones] The world oil price has started 2018 on a strong note with West Texas Intermediate pushing decisively through $US60/barrel. Unrest in Iran is no doubt an additional factor, but it's likely to either fade out or be suppressed, so a disruption to Iranian oil production is unlikely, says AMP Capital. Rather strong demand for oil on the back of stronger global growth and OPEC supply discipline are likely the main drivers. The oil price is likely to be capped by a pickup in shale oil production, but it could go a bit higher yet in the interim, it adds. (james.glynn@wsj.com ; @JamesGlynnWSJ)

1702 ET [Dow JOnes] Geopolitical risks are likely to figure more highly in 2018, says Shane Oliver, chief economist at AMP Capital. Geopolitics was a focus in 2017, but it mostly turned out okay as President Trump focused on business friendly policies, there was no trade war with China and European elections saw support for centrist pro-Euro parties, he adds. Still, 2018 may not be quite so smooth as the risks around U.S. politics rise as the mid-term elections and the Mueller inquiry ramp up the risk of more populist policies from Trump; Italy also heads to the polls on March 4. (james.glynn@wsj.com ; @JamesGlynnWSJ)

1637 ET [Dow Jones] Canaccord says investors perhaps shouldn't bet on costume jewelry retailer Lovisa maintaining such strong sales growth in 2H. That's because a 7.4% uplift in 1H like-for-like sales, reported on Friday, may reflect the success of additional ranges specific to the Christmas season or higher 'gifting' sales. Still, Lovisa looks set to beat its 3-5% like-for-like sales target for the fourth year in a row, and that's notable "given the numerous tailwinds (competitor closures, price increases, very successful ranges in FY17) that have supported sales growth in prior years," the broker says. Canaccord's price target moves up by 43% to A$6.98/share, but the broker drops the stock to hold from buy citing recent share-price strength. Lovisa ended last week at A$7.90. (david.winning@wsj.com; @dwinningWSJ)

1625 ET [Dow Jones] New Zealand's NZ50 is 0.04% lower in early trade on Monday at 8452.36, after global equity markets had a strong finish to the previous week. Retirement home operator Summerset Group is down 1%, after investors took profits; the company announced a record 4Q sales figure this morning. (ben.collins@wsj.com)

1618 ET [Dow Jones] Australia's S&P/ASX 200 looks set to rise 17 points at the open to 6140, extending momentum that saw the benchmark index notch a 10-year closing high on Friday. IG expects positive sentiment on Wall Street, where the S&P 500 closed up 0.7% on Friday on good buying in tech, materials and healthcare, to flow through to Australian equities. That's despite some disappointing U.S. data on Friday, including a miss on non-farm payrolls of 148,000 jobs added versus expectations for around 180,000. (david.winning@wsj.com; @dwinningWSJ)

(END) Dow Jones Newswires

January 07, 2018 18:14 ET (23:14 GMT)

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