A2 Milk hits four year low

New Zealand shares fell as A2 Milk dropped to its lowest price in almost four years as more institutional investors cut their losses.

Tuesday, April 27th 2021, 6:24PM

by BusinessDesk

The S&P/NZX 50 Index fell 30.12 points, or 0.2%, to 12,620.52. Within the index, 24 stocks fell, 23 rose, and three were unchanged. Turnover was $168.7 million.

The infant formula exporter A2 Milk Company led the index lower as it fell another 5.6% to $7.46 today. The stock was last below $7.50 in April 2017.

Today’s fall might have been prompted by a significant shareholder notice which showed Mitsubishi UFJ Financial Group – a large Japanese financial services company – had reduced its stake in the company to 7.5% from more than 8.5%.

Last week, both Pendal Group and Morgan Stanley ceased to have a significant shareholding. UBS Group, however, has increased its stake on behalf of customers and remains one of the few brokerage firms with a positive outlook on the dairy company. 

Other brokers are predicting a fourth earnings downgrade and think the stock has further to fall – it is already down more than 35% this year.

“The pendulum has swung against them with a few downgrades, and at the moment that momentum is showing no signs of weakening,” said Grant Davies, an investment advisor at Hamilton Hindin Greene.

Davies said an analyst note this morning had suggested the stock could be removed from an MSCI index at its current valuation, which would likely prompt further selling.

Meridian Energy was the other laggard on the index, dropping 3.5% to $5.49 as the stock continues to suffer after being made a less important part of a clean energy index.

“In the background, there has been a dry summer down in the southern lakes, which is not likely to help Meridian,” said Davies.

On the other side of the index, stock market operator NZX got a boost, up 2.4% at $2.10, after reporting revenue was up 13.4% in the first quarter of 2021 compared to the same period last year.

Revenue jumped from $18.5m to $21m in total, driven by funds under management income climbing 13% to $4.1m, and revenue from wealth technologies doubling to $1.1m.

Westpac Banking Corp fell 0.4% to $26.88 after it said yet more "notable items" of A$282 million (NZ$304m) will reduce its first-half cash earnings and statutory net profit.

The items include a further A$220m of customer refunds and associated costs and litigation provisions, and a A$115m write-down of capitalised software and other intangibles.

The kiwi dollar was trading at 72.27 US cents at 5pm in Wellington, up from 71.74 cents on Friday.

The trade-weighted index was at 75.09 at 5pm, from 74.80 yesterday. The kiwi was trading at 92.69 Australian cents from 92.83, 78.24 yen from 77.42 yen, 59.85 euro cents from 59.66 cents, 52.02 British pence from 51.77 pence, and 4.6828 Chinese yuan from 4.6606 yuan.

Tags: Market Close

« NZ shares rise; A2 Milk slumpsSmall stocks lead NZ shares higher »

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