Asian markets still worried about Europe

<p>Asian markets traded lower today as investors remain cautious toward the year end. The Shanghai Composite Index lost about 1% while Hong Kong’s Hang Seng […]</p>

Asian markets traded lower today as investors remain cautious toward the year end. The Shanghai Composite Index lost about 1% while Hong Kong’s Hang Seng Index was also down by 0.5% by afternoon trade.

In Australia, the ASX 200 Index shed over 1% after retail stocks were sold off following a profit warning from Kathmandu, a retailer of outdoor apparel.

The problem with outperforming market expectations is the need to continue delivering year after year. In some respects, Kathmandu is a victim of its own success.

Last year’s performance was outstanding and caught the attention of many investors looking for a different type of retail exposure. Unfortunately this year, this performance cannot be replicated but that’s not to say things are problematic at the group.

Comparable sales are still positive, 2.8% in fact for the 20 weeks to the 18th of December. Other retailers like JB Hi-Fi and David Jones are seeing their comparable sales decline.

Kathmandu says earnings in the first half of the year are expected to fall on last year but the second half is more important and there is still the possibility of a gradual recovery.

The market was expecting EBITDA to rise by around $10m this year, one could argue this was way too optimistic in light of the very strong performance last year and current retail environment.

The Australian dollar remains above parity with the US dollar, but only just.

We are also seeing quite a low volume at this stage with most traders and investors getting ready for the Christmas break.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.