NZX50 slumps 3% as investors flee for safe havens

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The S&P/NZX 50 Index dropped almost 3 percent as investors fled the local stock market for safe havens leaving dividends behind, after oil prices collapsed following the OPEC meeting on Friday.

Monday, March 9th 2020, 6:05PM 2 Comments

by BusinessDesk

The benchmark index decreased 334.09 points, or 2.9 percent, to 11,091.81. Within the index, 46 stocks fell, two rose, and two were unchanged. Turnover was $241.8 million.

Stock markets across Asia were pummelled today as investors reacted to the news that Russia and OPEC had failed to agree to oil production cuts, leading to the oil price to drop by as much as 20 percent.

Australia's S&P/ASX 200 Index had its worst opening since the 2008 global financial crisis and was trading down 6.2 percent in afternoon trading. Japan’s TOPIX index fell 5.2 percent, Hong Kong’s Hang Seng was down 3.5 percent and Shanghai’s SSEC decreased 2.4 percent.

The local NZX50 outperformed most of the region, although it still fell aggressively as investors fled to bonds, term deposits and gold - assets that are typically held at heightened times of uncertainty.

Peter McIntyre, an investment adviser at Craigs Investment Partners, said many stocks were being sold off despite having a dividend payment still attached.

“Investors are just wanting to sit on the side-lines and rather than receive the income they’d rather have that cash just sitting in a safe haven,” he said.

Despite the panic seen on global markets, McIntyre said New Zealand had held up to the oil price shock comparatively well.

“We haven’t got many resource stocks or oil related stocks on our exchange, but we are also a low-beta market. So, we don’t tend to rush as high, or go down as far.”

Pushpay Holdings led the market lower, falling 9.3 percent to $3.61 as investors sought to reduce the risk in their portfolios.

“It’s a high growth, high risk stock, and generally those are the first ones who get sold off when we see this type of capitulation,” McIntyre said.

New Zealand energy stocks were also weaker. Genesis Energy, which owns interests in the Kupe oil and gas field, was the hardest hit, down 7.5 percent at $2.90, despite holding a dividend pay-out this month.

Meridian Energy, the country's biggest generator, fell 6 percent to $4.40, Mercury NZ was down 3.2 percent at $4.645 and Contact Energy fell 4.8 percent to $6.50.

Fuel-retailer Z Energy declined 0.3 percent to $4.06, likely buoyed by the assumption that lower oil prices would lead to higher levels of fuel consumption, McIntyre said. 

New Zealand’s only oil refinery, which is part-owned by Z Energy, New Zealand Refining Company dropped 6.3 percent to $1.05.

Air New Zealand declined 5.3 percent to $1.95, a four-year low, after it dropped its earnings guidance saying demand for air travel had softened further in the last week, causing it to reduce total capacity into Asia by 26 percent and overall network capacity by approximately 10 percent since the outbreak began.

Auckland International Airport fell 2.4 percent to $7.70.

Precinct Properties New Zealand was one of just two stocks to gain on the day, climbing 1.6 percent to $26.77. Today the stock was announced to be included in a global real estate index, alongside Goodman Property Trust which was added on Friday.

McIntyre said investors tend to rotate through the property stocks, but Precinct was one favoured by investors as it pays dividends through funds from its operations rather than through debt.  

Other property stocks fell as investors rotated their holdings into Precinct.

Argosy Property fell 5.7 percent to $1.315, another stock that has been sold-off despite holding a dividend until tomorrow.

“If you want to lighten your positions on a day like this you are going to have to accept a lower price and we are seeing some selling pressure on Argosy today."

Property for Industry fell 4.4 percent to $2.41, Stride Property declined 3.2 percent to $2.15, Goodman Property Trust decreased 1 percent to $2.405 and Kiwi Property Group held at $1.465.

Fisher & Paykel Healthcare posted the day's biggest gain, climbing 4.2 percent to $26.77. The company derives half its income in US dollars, which means when the kiwi dollar is weaker its export receipts are larger. The New Zealand dollar dropped about a US cent from Friday's close in New York.

Tags: Market Close

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