NZ shares tank following sudden spread of covid-19

New Zealand shares fell as a sudden increase of coronavirus infections outside Chinese borders unwound earlier confidence the outbreak might be contained.

Monday, February 24th 2020, 6:11PM

by BusinessDesk

The S&P/NZX 50 Index dropped 216.22 points, or 1.8 percent, to 11,857.12. Within the index, 42 stocks fell, seven gained, and one was unchanged. Turnover was $140 million.

Michael McCarthy, chief market strategist at CMC Markets, said up until late last week global equity markets had reached consensus that the impact of covid-19 would be quickly dealt with and support from central banks would offset any danger.

However, that changed over the weekend as reports of surging infections in South Korea, Italy and Iran dashed those hopes.

“As we have had reports of the virus spreading all around the globe, it has really got markets rethinking that complacency. What we are see is a very quick adjustment in thinking and that is being reflected in some very heavy selling across the region,” McCarthy said.

“We’ve seen a reversal in global equity market sentiment, which is why we are getting such a belting today across the region too – it's not just New Zealand, everybody is in the red today.”

At New Zealand’s market close, Australia’s S&P/ASX 200 was down 2.1 percent, Hong Kong's Hang Seng was 1.5 percent lower and Shanghai’s SSEC was down 0.3 percent.

The NZX was led lower by Air New Zealand, which dropped 5.5 percent to $2.58 on a volume of 3.5 million shares. The airline today lowered its annual earnings guidance by as much as $75 million due to the outbreak reducing travel demand.

Prime Minister Jacinda Ardern today said the ban on travellers from China would be extended for another eight days.

“If this is going to go on longer than we originally thought then those that are most directly exposed to the key industries are the ones most likely to feel the pressure,” McCarthy said.

Auckland International Airport fell 3.8 percent to $8.32 and Tourism Holdings declined 4.2 percent to $2.72.

Freightways fell 4.9 percent to $8.05 despite today saying its domestic-focused business was not feeling the effect of the virus outbreak. The company reported flat first-half earnings, but chief executive Mark Troughear said better margins and recovering economic activity made him guardedly optimistic about the outlook.

A2 Milk, which exports to China, declined 4.6 percent to $15.63 and Synlait Milk fell 4 percent to $6.56. Fonterra Shareholders’ Fund units increased 0.3 percent to $4.

Gentrack Group declined 3.9 percent to $2.20 after the sudden resignation of its chief executive was announced today, just three days before its annual general meeting. The stock has fallen 55 percent in the last 12 months.

Meridian Energy fell 3 percent to $5.38 on a volume of 957,000 shares. The power company reports first-half earnings on Wednesday, with a key risk around the future of its supply to the Tiwai Point aluminium smelter.

Rio Tinto today reported a $46.2 million underlying loss from its New Zealand aluminium smelter at Tiwai Point. The mining company is trying to renegotiate lower power prices and transmission charges.

Chorus was the only stock on the NZX50 to gain more than 1 percent today, rising 5.6 percent to $6.73. The company signalled plans to pay bigger dividends after an extended period of constrained returns once it finishes building the bulk of the country’s fibre network.

The telecommunications network operator completed the first stage of the ultra-fast broadband network in December, one month ahead of schedule and within the $1.8 billion guidance.

Outside the NZX50, Delegat rose 4.5 percent to $11.05 after announcing a record sales volume of 1.7 million cases. The winemaker said it was on target to lift annual case sales 8 percent to 3.2 million.

Tags: Market Close