NZ shares fall for sixth day as virus fears escalate

New Zealand shares fell for the sixth consecutive day as the worsening virus outbreak continued to weigh on the local stock market, with travel companies including Air New Zealand among the hardest hit.

Monday, March 2nd 2020, 6:47PM

by BusinessDesk

The S&P/NZX 50 Index declined 157.73 points, or 1.4 percent, to 11,103.43. Within the index, 46 stocks fell, three gained, and just one remained unchanged. Turnover was $258.9 million.

Michael McCarthy, chief market strategist at CMC Markets, said coronavirus remained at the heart of investor’s fears.

“Developments in the outbreaks in various countries around the globe will likely be the driver of markets over the course of this week,” he said.

China’s official PMI numbers reporting record low production provided the first hard evidence of the slowdown in the world's second biggest economy, and helped drive today’s weakness, McCarthy said.

Conversely, Asian markets were notably stronger. Hong Kong's Hang Seng was up 0.9 percent, the Shanghai Composite Index rose 2.9 percent and Japan’s Nikkei was up 1.3 percent. On Wall Street on Friday, the S&P 500 index was down 0.8 percent and the Dow Jones Industrial Average declined 1.4 percent.

McCarthy said markets rarely move in a straight line and this did not mean the trend had reversed.

“Given the market was absolutely trounced last week, we would be expecting said bounce back at some stage. That doesn’t mean we have an all-clear by any stretch of the imagination.”

Tomorrow, the Reserve Bank of Australia is expected to announce a cut to interest rates and economists are expecting New Zealand's Reserve Bank to follow suit at its next meeting later this month. However, McCarthy remained reserved about the effectiveness of cutting rates which are already at historic lows.

“Privately I’m sure central banks have doubts about the effectiveness of cutting rates another quarter or half a percent. The signal it sends – that central banks are supporting markets – might be more important than the actual effect,” he said.

Air New Zealand led the local market lower, dropping 7.9 percent to $2.09 on a volume six times its 90-day average. The company recently reported that international passenger numbers had been hit by coronavirus and today offered a thousand domestic airfares at just $9 as part of an effort to boost domestic travel.

Auckland International Airport declined 3.6 percent to $7.59 and Tourism Holdings fell 3.6 percent to $2.4. The government today extended travel restrictions would be extended for another week and added that travellers from northern Italy and South Korea would be required to self-isolate for 14 days.

McCarthy said the high volumes showed there was a lot of conviction behind investors concerns.

Provisional data released by Stats NZ showed exports to China may be 19 percent lower than they would have been without covid-19.

Exporters were hit hard in the sell off, Synlait Milk fell 6.8 percent to $5.60, Scales Corporation fell 5.3 percent to $4.10, Skellerup Holdings fell 3 percent to $1.93 and the Port of Tauranga declined 4 percent to $6.28.

The Ports of Auckland said it won’t pay a first-half dividend to the city partly due to coronavirus outbreak weighing on transport movements. Port of Tauranga trimmed its annual earnings guidance last week, with the logging sector hit the hardest. Auckland differs in that it’s primarily an import hub.

Investors were not just selling down companies with exposure to China. Ryman Healthcare fell 1.3 percent at $15.06, while Mercury NZ was down 3.9 percent at $4.60.

A few stocks found support against the market, Ebos Group – which reported a strong first half result last week – increased 2.8 percent to $23.93, Spark New Zealand gained 2.3 percent to $4.64 and Chorus rose 0.8 percent to $6.73.

CMC’s McCarthy said this looked like some investors bargain hunting during the dip and anticipating the recovery.

“Markets are very fragile and predicting the next 24 hours is a difficult exercise. But according to market theory, five or six down days in a row is a pretty hard sell-off and regardless of the news flow I would expect to see some bounce back from that at some stage this week,” he said.

Tags: Market Close