Will the plug be pulled out of the bathtub?

A friend recently asked me if we are to likely to see a repeat of March when markets plummeted in the wake of COVID-19.

It seems an apt question considering US markets have just completed their worst week since March, the Presidential Elections are days away, USA and Europe have another wave of COVID-19 and are facing further lockdowns and restrictions on people and trade.

Locally, the CEO and Chairman’s addresses for companies listed on the NZX and ASX have highlighted the importance of virus containment for their respective profitability forecasts. The good news on this front is that Australia has just notched up a day without any community transmission and the Federal Government seems determined for all internal borders to be opened by Christmas. New South Wales, Northern Territory and more recently Tasmania are now letting New Zealanders into Australia without having to endure a two-week quarantine period. Mobility of people and trade should provide much needed business confidence.

To support the view that this is unlikely to be a repeat of March is that at the start of the year there were three NZX-listed companies under takeover, Augusta Property, Metlifecare and Abano Healthcare. While the terms of all three takeovers have now been revised lower, with shareholders not receiving what they were initially offered to take into account the negative impacts of COVID-19, the first two transactions have now been completed and Abano is going through the final stages before it likely delists in early December.

On a larger scale, UK-based Coca-Cola European Partners are staging a takeover for ASX-listed Coca-Cola Amatil. Corporate activity remains ongoing and since the start of the year businesses with constrained balance sheets, even those operating in the travel and tourism space, have raised capital to improve their liquidity positions.

Unlike the view in March where some thought we may be facing Armageddon, there is now an overall perception that we shall prevail.

All of this is against a backdrop of historically low interest rates, a booming housing market and a NZ stock market which has seen few new listings over the last two years. Similar to the housing market, this limited supply and strong demand shall more than likely be positive for investors.

If you would like to discuss any of the ideas we have at present, on the market, sectors of interest, concerns and individual securities to watch, please get in touch with our team today.

This article reflects general views and opinions of Maxim Financial Markets Limited at the time of publication. Nothing within the article should be relied upon as a basis for making any investment decision. Please contact us to seek specific investment advice before making any investment decision. A Financial Advisor disclosure statement is available upon request.