Pandemic fears drive NZ shares lower for a second day consecutive day

New Zealand shares sank for a second day as investors remained fearful that the spread of covid-19 could dent global growth.

Wednesday, February 26th 2020, 6:12PM

by BusinessDesk

The S&P/NZX 50 Index dropped 185.37 points, or 1.6 percent, to 11,533.86. Within the index, 45 stocks fell, four rose and one was unchanged. Turnover was $206.3 million, with 17 companies trading on volumes of more than a million shares.

Stock markets around the world extended their decline as the global cases of covid-19 stoked fears that worldwide economic growth will slow. Asian markets followed Wall Street lower, with Australia’s S&P/ASX 200 Index down 2.5 percent in afternoon trading. Hong Kong’s Hang Seng fell 0.5 percent and South Korea’s Kospi 200 declined 1.2 percent.

“Covid-19 is certainly front of mind for investors and will be for a period of time. That’s the question – what is this period of time? A week, two weeks, a month, two months?” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

Investors have started pricing in lower interest rates as a response to the outbreak. In New Zealand, markets have priced in at least one, and possibly two, rate cuts to the 1 percent official cash rate.

Lower interest rates have typically supported the local market due to the number of companies that pay reliable dividends, with the electricity generator-retailers some of the biggest beneficiaries last year.

Meridian Energy, the country’s biggest generator, today reported record first-half earnings on the back of record generation from its South Island dams. However, the stock fell 5.6 percent to $5.09 with 1.5 million shares changing hands.

McIntyre said the result was in line with expectations, but that wasn’t enough insulate it from the uncertain environment.

Adding to the uncertainty is the future of Meridian’s biggest customer, the Tiwai Point smelter. Its owner, Rio Tinto, is mulling whether to close the unprofitable smelter if it can't achieve cheaper energy prices.

Among other power companies, Trustpower fell 4 percent to $6.66, Mercury NZ was down 4.5 percent at $5.12, Contact Energy decreased 2.5 percent to $7.02, and Genesis Energy was down 1.1 percent at $3.13.

Travel and transport stocks remained under pressure over the covid-19 fears. Port of Tauranga declined 5.5 percent to $6.52, Tourism Holdings fell 3.8 percent to $2.55, Air New Zealand was down 2.8 percent at $2.40, and Auckland International Airport decreased 1.5 percent to $8.12.

Growth stocks have also been under pressure.

Sky Network Television, which is overhauling its satellite business to compete with streaming rivals, led the market lower. The stock slid 6.7 percent to 56 cents, a record low, with some 1.5 million shares changing hands.

Vista Group International, which reports tomorrow, fell 4.1 percent to $3.02 and Pushpay Holdings was down 2.9 percent at $4.03.

Metlifecare was unchanged at $6.90. It reported a 5 percent decline in underlying earnings as its development margins came under pressure from rising construction costs. A takeover bid at $7 helped support the stock in today’s sell-off. McIntyre noted that the company’s net tangible asset value was in line with the bid, making it unlikely investors would get a sweetener. It was the most traded stock on a volume of 4.2 million shares.

Summerset Group, which reported a similar contraction in development margins yesterday, fell 0.8 percent to $8.25.

Scales Corp posted the day’s biggest gain, up 2.3 percent at $4.37. The fruit exporter reported a 2 percent increase in underlying annual profit and McIntyre said investors were optimistic about its patient approach to merger and acquisitions and its $105 million war chest.

Of other stocks to gain, Fletcher Building rose 0.9 percent to $5.40, Vector increased 0.6 percent to $3.25 and Fisher & Paykel Healthcare edged up 0.1 percent to $25.50.

Arvida Group fell 5.5 percent, or 10 cents, to $1.73, after shedding rights to a 1.45 cents per share dividend.

Outside the benchmark index, PGG Wrightson was unchanged at $2.27 after reporting a 33 percent increase in operating earnings on the strength of its livestock and horticultural supplies divisions.

Tags: Market Close