SUN was the markets 2nd worst performing stock yesterday tumbling -6.4% following a downgrade by Morgan Stanley to both SUN and IAG Insurance (IAG) -3.1%, their main reasoning being fears around significant claim events due to evolving climate change risks. On Tuesday MM highlighted some short-term risks to the sector if financial markets decided they had become too hawkish and interest rates weren’t going to rise as fast as was previously assumed, but yesterday’s plunge was all about another stock/sector not being able to withstand any bad news or in this case just an analyst believing the market hadn’t accurately factored in weather-related risks moving forward although we would add that premiums will rise rapidly if required to balance the equation.
The next few days will be interesting but further weakness should encounter some yield hungry buyers, with SUN’s next fully franked dividend due in August – over the next 12-months SUN is forecast to pay a 5.55% pa yield.
MM likes SUN around $11
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