What Investors Need To Know About Media Sector Amid Market Downturn?

  • Oct 15, 2018 AEDT
  • Team Kalkine
What Investors Need To Know About Media Sector Amid Market Downturn?

With the global markets down over the past week, the impact has also been felt on the media and technology sector. The markets have been down globally primarily because of the higher yields. In addition, the Federal Reserve is highly optimistic about the US economy and hence they might remain hawkish moving forward. With strong growth prospects as well as wage growth, the fear of increased inflation always persist. Thus, the apex bank in the US is expected to raise the interest rates in the December meeting indicating that it has taken the path of quantitative tightening. However, higher rates have multiple impacts on different asset classes. The rise in the rates also pushes the value of the US dollar higher against the basket of the other currencies leading to the dollar appreciation.

However, in particular, the value of the currencies of the emerging economies get adversely affected. Coming to the media and technology sector, the deals in these sectors might witness the negative impacts as they have witnessed a hit because of the sell-off. One such deal is the merger between the Fairfax Media (ASX: FXJ) and Nine Entertainment Company (ASX: NEC) and the updates provided by these are, in turn, impacting other media companies in the house. The stock price of Seven West Media (ASX: SWM) has been witnessing continuous downtrend. A possible reason for the fall could be the update provided by the Nine Entertainment. As per the management of Nine Entertainment, metropolitan free-to-air or FTA advertising market is expected to be marginally worse than was anticipated by them but its market share has been witnessing positive momentum. Fairfax Media and Nine Entertainment ended the session at A$0.670 and A$1.815 per share. However, Seven West Media ended lower as it has declined A$0.830 per share on October 15, 2018. This company has a market capitalization amounting to $1.29 billion. 

As a result, media companies like Nine Entertainment, Fairfax Media as well as Domain Holdings Australia Limited (ASX: DHG) witnessed significant downtrend in their share prices on October 15, 2018. Apart from the update related to the broad overview of the FTA market which impacted the prices, the weakening real estate markets was also the primary contributor. The lower confidence which is being witnessed by the housing markets in Australia would fewer homes which might impact the overall development of the economy. Therefore, the Australian economy might experience negative momentum moving forward.

Amidst this, if the new regulations pertaining to the interim report by the Royal Commission hit the market, that would adversely affect the economic growth primarily because these regulations would make the lending strict to lesser capital in the economy which could be deployed for growth prospects. Moreover, the International Monetary Fund or IMF report also suggested that the Australian economy might witness the impacts of trade wars. However, if the trade settlement between the US and China happens next month when they meet, it would provide some relief to the global and emerging economies.

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