Trump travel-ban drives NZX50 to nine-month low

New Zealand shares sank to a nine-month low as investors were shocked by US President Donald Trump's ban on all travellers from Europe.

Thursday, March 12th 2020, 7:43PM

by BusinessDesk

The S&P/NZX 50 Index slumped 540.33 points, or 5 percent, to 10,333.27, its lowest close June. Within the index, 47 stocks fell, one rose, and two were unchanged. Turnover was heavier than usual at $301.5 million.

Investors fled the market after Trump imposed travel restrictions on passengers from the European mainland. Access to the United States will be banned for 30 days from Friday in an effort to prevent further cases of covid-19 entering the country, he said. In the US, the virus has already killed at least 37 people and infected 1,281.

Prime Minister Jacinda Ardern today told media this afternoon she expected further border restrictions would be implemented here in New Zealand.

Travel stocks reacted strongly to the news, with Auckland International Airport falling 7.4 percent to $7.16 before being placed on a trading halt while the company assessed the implications of the announcement.

Air New Zealand fell 8.3 percent to $1.76 and Tourism Holdings, who warned the 30-day travel-ban would have an immediate impact in New Zealand, fell 7.1 to $2.34.

Grant Davies, an investment adviser at Hamilton Hindin Greene, said the announcement had “thrown the cat among the pigeons” because a lot of Tourism Holdings operations were campervans rented by European tourists.

Wall Street had already set a weak lead for the local market when the Dow Jones Industrial Average entered bear market territory when it fell more than 20 percent from its peak in late February. The World Health Organisation formally declared the outbreak a pandemic, and investors had already been disappointed with the US response before Trump's announcement.

Vista Group International led the market lower, falling 14.2 percent to $2.41 on six-times its 90-day average trading volume. The company told BusinessDesk it wasn’t expecting the bulk of its cinemas in China to reopen until early April.

“The market is always looking at the forward story and the forward was the growth they were getting in China, which is being pared back significantly,” Davies said.

“I can’t imagine too many people rushing to the cinema in New Zealand or anywhere else in the world.”

Aged-care firms also came under pressure as investors became wary of the retirement village operators because their residents were more vulnerable to the virus outbreak.

Oceania Healthcare decreased 9.9 percent to a three-year low of 91 cents with more than 5 million shares changing hands. Arvida Group fell 9.4 percent to $1.45 and Ryman Healthcare declined 8.8 percent to $12.95.

Freightways declined 8 percent to $6.77 and Mainfreight dropped 7.2 percent to $33. Logistics companies are often seen as a proxy for future economic activity.

A2 Milk fell 6.7 percent to $15.02 with almost 2 million shares traded. The milk marketer announced today it was expanding into Canada through an exclusive licensing agreement with Agrifoods Cooperative.

“They’ve been successful in most of the markets they have entered and the way they have done it in the States is, I’m sure, something they’ll be able to replicate in Canada,” Davies said.

A2 has outperformed the wider market, up 7 percent year-to-date compared to a 5.4 percent decline on the NZX50.

Synlait Milk fell 4.1 percent to $4.89 and Fonterra Shareholders' Fund units held at $3.75.

Davies said milk prices had fallen with other commodities, which may lead to a lower farm gate price and lower production costs for Fonterra.

“That could be one reason why they are holding up pretty well throughout the whole crisis really,” he said.

New Zealand Refining Company was the only stock to gain, up 2.8 percent at $1.09.

Davies said the local market was holding relatively strong amidst the global crisis.

“The New Zealand market is down around 15 percent from its peak on Feb. 21, while the Aussie market is off about 25 percent,” he said.

“The US, with another bad night coming up tonight, is off 19.5 percent. So New Zealand's market, in spite of itself today, is holding up reasonably well.”

Tags: Market Close