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Last Article Uploaded: Friday, December 3rd, 9:22PM

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The Markets

Pacific Edge up 6%; while index dips

Shares in Pacific Edge surged after it raised $80 million in an oversubscribed placement but the NZX's benchmark equity index fell as its biggest stock, Fisher & Paykel Healthcare, took a 3.1% tumble.

Friday, September 24th 2021, 6:51PM

by BusinessDesk

The S&P/NZX 50 Index ultimately fell 46 points, or 0.4%, to 12,259.55 despite a majority of stocks climbing in value. Turnover was $180 million.

Global market sentiment was positive overnight with equities making broad gains, commodity prices climbing and the US dollar weakening.

In New Zealand, shares in Pacific Edge jumped 6.1% to $1.56 as investors continued throwing money at the company after it raised $80m in a discounted placement.

The cancer diagnostics firm had only planned to raise $60m but increased the offer after it met with strong demand from investors. The shares finished the day 15% above the offer price of $1.35 per share with investors trading 2.5m shares on-market.

Forsyth Barr analyst Chelsea Leadbetter said in a note the company had presented “limited new information” and the amount of capital raised equates to almost six years of cash at historical burn rates.

Stuart Williams, head of equities at Nikko Asset Management, said the share price increase indicated a “very, very strong response” to the capital raise.

Fonterra Shareholders’ Fund units continued to rally – up 1.3% to $4.05 – after Fonterra reported strong earnings, a strategy reset focused on higher value products, capital returns and signalled it would keep the fund running.

Jarden analysts upgraded their earnings forecast for the dairy cooperative.

“In our view, a simpler FSF and better disclosure should give greater visibility on how well the $1 billion investment in existing business growth translates into earnings uplift in a flat milk supply environment had been considering shutting down but now intends retaining, while capping it at its current size.

A2 Milk climbed for a third consecutive session as some investors started buying back into the stock, which hit a new low at $5.39 on Tuesday.

The infant formula company has fallen more than 50% this year but has climbed more than 8% since Tuesday, with an 1.2% rise bringing it to $5.89 today.

Nikko Asset Management is one firm that has been increasing its exposure to the stock having sold it down earlier in the year.

Portfolio manager Michael Sherrock said in a video presentation that A2 Milk had been the most underweight stock in the portfolio, but they had been buying to bring it closer to a market weight position.

Williams told BusinessDesk the exporter had a long track record of success and he was conscious an upcoming investor day in October could be a catalyst for the stock – positively or negatively.

Not all stocks were moving higher today, with the index’s bigger stocks among those posting declines.

Synlait Milk fell 2.1% to $3.30, Contact Energy declined 1.2% to $8.28, and Spark New Zealand slipped 0.7%.

Nikko AM managers also said they had been cashing in some profit from Spark after it climbed more than 6% in the past six months.

Tags: Market Close

« Fonterra fund leads NZX 50 higherRising bond yields push shares down »

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Last updated: 3 December 2021 8:16am

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