NZ shares fall in shadow of Nvidia result

New Zealand shares joined a global selloff as investors were disappointed by Nvidia’s strong result in the US, while more weak earnings at home added to the sombre mood.

Thursday, August 29th 2024, 6:23PM

by BusinessDesk

The S&P/NZX 50 Index dropped 116.99 points, or 0.9%, to 12,353.61. Across the main board, 101 stocks fell, 37 rose, and 41 were unchanged. Turnover was $123.9 million, with 11 companies trading on volumes of more than a million shares.

Stock markets across Asia fell after chipmaker Nvidia’s more than doubling of sales and earnings in the June quarter failed to inspire investors who have driven the share price up more than 150% this year alone.

“It doesn’t feel like they disappointed,” said Rickey Ward, head of investment strategy group at JBWere. “There’s always been a question in markets about their ability to continue growing.”

Tech stocks felt the hit more keenly in Asian markets, while in NZ, components maker Rakon, which talked up its growth opportunities in AI at Wednesday’s annual meeting, fell 6.3% to 75c. Infratil, which expects its CDC Data Centre business to benefit from increased AI adoption, declined 1.7% to $10.82.

The local earnings season continued to weigh on the local market, with more companies highlighting how tough the domestic economy has been.

Heartland Group Holdings led the benchmark index lower, sinking 12% to $1.03 on a volume of 1.3m shares after missing its guidance due to a late increase in provisioning for bad debts. The financial services firm reported a 22% decline in net profit.

Brad Gordon, an investment adviser at Forsyth Barr, said companies linked to the domestic economy such as Heartland were struggling in the current market.

“The market just doesn’t like a messy result at this stage in the cycle,” he said. “It’s a good business though, and well-positioned for when things start to turn.”

Competition in the air

Air NZ declined 0.9% to 55.5c after reporting that pre-tax earnings more than halved as it faced greater competition on international routes and contended with higher costs and disruptions from ongoing engine maintenance issues.

Gordon said the airline was the latest to feel the brunt of reduced international visitors. Australia’s Qantas Airways, which also reported today, said it expected a decline in first-half revenue from its international business.

Tourism Holdings fell 0.5% to $2.06, SkyCity Entertainment Group declined 1.4% to $1.42, Auckland International Airport decreased 1.5% to $7.44 and online travel software developer Serko dropped 4.9% to $3.14.

Comvita slipped 4.2% to $1.13 after reporting a $77m loss, having flagged writedowns and an executive overhaul last week.

A rally in the kiwi dollar to near an eight-month high of US62.90c weighed on exporters such as Fisher & Paykel Healthcare, which declined 2% to $35.20. The local currency was buoyed by a sharp turnaround in business confidence.

Spark NZ recovered from its five-year low, rising 2.2% to $3.68 on a volume of 4.3m. The telecommunications and IT services group missed its earnings guidance last week.

JBWere’s Ward said Spark was the biggest disappointment of the soft earnings season, given its track record of reliability.

“It’s the type of investment where people allocate their money in times of uncertainty, because it’s a safe haven,” he said. “That hasn’t proven to be the case.”

Biggest gainers

Vital Healthcare Property Trust posted the day’s biggest gain on the NZX50, up 2.8% at $1.995 on a volume of 1.6m.

Bremworth posted the biggest gain on the main board, climbing 10.3% to 43c, after signalling a resumption of dividends was on the cards by 2026 as it reported a 57% slide in annual profit to $4.7m as the pace of cyclone-related insurance payments slowed.

Delegat Group gained 8.8% to $5.44 after lifting operating earnings 7%, while Foley Wines advanced 1.3% to 78c as its operating earnings sank 20%.

Restaurant Brands NZ advanced 3.6% to $3.19 after reporting a 20% lift in first-half earnings.

NZME was the most heavily traded company with a volume of 8.9m, as it rose 1% to 97c. Some 8.7m shares – or 4.7% of NZME’s issued shares – changed hands in two trades at 95c a share.

Arvida Group rose 0.6% to $1.65 on a volume of 5.6m, with the company’s board supporting the $1.24 billion, or $1.70 per share, offer from private equity firm Stonepeak after getting initial court approval for the buyout.

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