NZ shares gain; Wall Street rally brings out bargain hunters

New Zealand shares rose for a second day as a strong rally on Wall Street brought out investors on the prowl for bargains.

Wednesday, March 25th 2020, 5:46PM

by BusinessDesk

The S&P/NZX 50 Index advanced 155.23 points, or 1.7 percent to 9,264.38. Within the index, 46 stocks rose, and four fell. Turnover was $261 million.

Equity markets around the world were buoyed by the prospect of a US$2 trillion stimulus package getting through deep divisions among US policymakers. The Dow Jones Industrial Average rose 11 percent overnight, and across Asia, Japan’s Topix was up 4.6 percent in afternoon trading, Hong Kong’s Hang Seng rose 2.1 percent and Korea’s Kospi 200 Index rose 4.1 percent.

New Zealand’s benchmark index started the day strongly, having climbed 7.2 percent yesterday as investors were buoyed by the government’s domestic support package.

At one point, the NZX50 was up more than 6 percent, but that petered out through the day.

“Most investors are still a bit cautious. A number of bargain hunters came out to buy,” following the rally on Wall Street, said Grant Williamson, a director at Hamilton Hindin Greene.

New Zealand’s market entered bear market territory earlier this month as it slumped sharply from its peak in late February. Refinitiv data puts the market's historic price to earnings ratio at 17.05 times, still one of the highest among major Asian indices.

Companies that have been the most beaten up were among today’s strongest performers.

Sky Network Television, which has been trading near all-time lows, jumped 34.2 percent to 25.5 cents. The pay-TV operator today said it’s been deemed an essential service through the lockdown period.

Tourism Holdings, which suspended dividend payments and ditched earnings guidance due to the virus, climbed 20.6 percent to 88 cents.

Retirement village operators have also been sold off as investors question whether the covid-19 outbreak will hit their residents more harshly than the wider population.

Metlifecare, which is under a takeover offer, rose 16.4 percent to $4.83, Summerset Group climbed 15.7 percent to $4.522, Arvida Group was up 13 percent at $1.13, and Ryman Healthcare advanced 11.9 percent to $9.20. Oceania Healthcare gained 10.6 percent at 52 cents.

Air New Zealand was the most traded stock on a volume of 10.2 million shares, compared to its 90-day average of 1.6 million. The stock rose 3 percent to 87 cents. The national carrier was given a $900 million lifeline by the government last week in the form of loans that may convert to equity.

Williamson said it was vital for New Zealand to keep its airline, and that the question for investors was how much they would get diluted when the government converted its debt to equity.

Auckland International Airport jumped 10.3 percent to $5.45.

Among other NZX50 firms that outed themselves as essential services, Contact Energy rose 3.5 percent to $5.26, Scales climbed 11.3 percent to $4.03, and Sanford was up 6.7 percent to $6.05.

Mercury NZ was up 2.4 percent at $4.20 after saying it had suspended non-essential work, including the construction of its Turitea wind farm in Manawatu.

Fletcher Building fell 0.9 percent to $3.37 after it withdrew its earnings guidance, cancelled its dividend and suspended its share buyback programme.

Fisher & Paykel Healthcare posted the day’s biggest decline, down 6.2 percent at $28.15. The breathing respirator maker has been buoyed by a weak currency and increased demand for its products spurred on by the pandemic.

Restaurant Brands New Zealand increased 2.5 percent to $7.30. It said it will close its New Zealand stores during the four-week lockdown that starts tonight.

Outside the benchmark index, Moa Group rose 14 percent to 15.5 cents after saying its brewing services will remain open, although its bars and restaurants will close.

Warehouse Group remained in a trading halt at $2.02. The retailer jumped the gun yesterday when it announced it was deemed an essential service, only to have officials and the prime minister publicly shoot down that claim later in the day.

Tags: Market Close