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The Markets

Nu-covid sends shares tumbling

New Zealand shares plunged in one of the sharpest declines this year as news of a new covid variant spooked investors around the world.

Friday, November 26th 2021, 6:53PM

by BusinessDesk

The S&P/NZX 50 Index fell 165 points, or 1.3%, to 12,628.89. Turnover was $203 million.

Researchers in South Africa have discovered a variant of covid – expected to be called the Nu strain – that some are concerned may be both more infectious than the current strain and resistant to vaccines.

The newly found variant is reported to have five times as many mutations in its receptor-binding domain which could make it more transmissible.

It also has more than 30 new mutations to the spike protein, which existing vaccines have used to replicate to teach the immune system how to produce antibodies.

If the new spike looks radically different, existing vaccines may not protect against it.

The British government was concerned enough by the news that it temporarily banned travel from six southern African nations.

NZ’s benchmark index was less affected than others in the region, Australia’s S&P/ASX 200 and Hong Kong’s Hang Seng were both down 2% late in the session.

Travel stocks were the worst hit in many markets, but the local bourse saw broad losses as investors took risk out of almost all sectors. 

Air New Zealand dropped 2.5% to $1.575 and Auckland International Airport declined 2% to $7.76, but others fell harder.

Stride Property Group led the market lower, falling almost 5% to $2.10 after completing a capital raise to reduce debt.

The investment vehicle raised $110m in an underwritten share placement at $2 per share, with strong demand resulting in the company accepting an extra $10m.

Jarden analyst Arie Dekker lowered his 12-month target price from $2.26 to $2.16 but primarily due to higher interest rates reducing valuations across the board.

Dekker said the next step for Stride was to move “as much of the office asset portfolio off balance sheet as the market will take” having postponed its Fabric spinoff.

He said the company could list Fabric without raising capital, but this was less desirable than the original plans for a public offer.

Fisher & Paykel Healthcare dropped back 3.5% to $32.60 as analysts tweaked their forecasts following the recent result which was stronger than consensus.

Craigs Investment Partners lowered its target price by 4.2% to $32.85, Jarden raised its 3% to $34, and Morningstar left its fair value unchanged at $24. Fair value is based on how much the analyst believes the stock is worth, while a target price estimates how much other investors are willing to pay for the stock, according to Morningstar.

Most analysts agree that covid-related sales will decline over the next 18 months but have differing views on how many customers will continue using F&P Healthcare products to treat other illnesses.

“We saw the result as still very much driven by covid and providing little insight on the real question: how the business will perform post-pandemic,” said Craigs’ Stephen Ridgewell.

Utility software firm Gentrack got a cautious nod of approval from Jarden analyst Wassim Kisirwani, after modestly beating its guidance earlier this week.

“In our view, the stock is inexpensive, but we see a lack of near-term catalysts and await evidence of traction with the transformation programme, revenue stabilisation and a clearer pathway to earnings growth,” he said in a note.

The stock slipped half a percent to $1.89 today but is up 5% since its result.

Hallenstein Glasson Holdings shook the negative mood and climbed 5.7% to $7.36 today, having announced a final dividend of 24 cents per share.

The dividend payout had been deferred until all the company’s stores in Auckland, New South Wales, and Victoria had left lockdown and begun trading again.

The NZ dollar fell once again, to 68.43 US cents, this time dropping as investors sought safe-haven assets amid fears of the new variant.

Tags: Market Close

« F&P Healthcare props up NZX50Omicron ordeal knocks NZ index 200 points »

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AIA 5.95 4.85 5.35 5.65
ANZ 5.94 ▲5.95 ▲6.40 ▲6.59
ANZ Blueprint to Build - - - -
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Avanti Finance 5.95 - - -
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BNZ - Mortgage One 5.94 - - -
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BNZ - Std, FlyBuys 5.94 ▲5.95 ▲6.29 ▲6.59
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First Credit Union Special 5.85 4.95 5.45 -
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HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.25 4.39 5.09 5.45
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Kiwibank 5.50 ▲6.19 ▲6.69 ▲6.79
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Median 5.85 5.05 5.69 5.99

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