Investors rejig portfolios; Gentrack soars

New Zealand shares rose as institutional investors increased their exposure to equities at the end of the March quarter, and as central bank support raises the prospect of a rally following the coronavirus crash. Gentrack soared after it affirmed earnings guidance.

Tuesday, March 31st 2020, 6:29PM

by BusinessDesk

The S&P/NZX50 advanced 135.56 points, or 1.4 percent, to 9,796.75. Within the index, 40 stocks rose, eight fell and two were unchanged. Turnover was $256 million.

Fund managers have had to buy equities to maintain their investment portfolio allocations as stocks slumped in value faster than other asset classes.

“There is a rebalancing into equities happening from an asset allocation perspective at the end of quarter, so that is probably what is driving price action more than anything,” said Brad Gordon, an investment adviser at Hobson Wealth.

“A lot of fund managers have gone into excess cash and need to balance that out. There is some speculation it could be up to $800 billion equity flows.”

Gordon said reweighting is not driven by market sentiment, although global investors have found confidence in central banks’ efforts to shore up the financial system and are beginning to see attractive prices stocks that have been aggressively sold.

“Markets are oversold short term and have bounced on fiscal support and stimulus,” he said.

The local benchmark has gained 15.3 percent since its recent low on March 23, although still down 14.8 percent this quarter. Mark Lister of Craig’s Investment Partners said this is the index’s biggest quarterly decline in its 20-year history, surpassing the 14.1 percent fall in the three months to the end of December 2008.

Utility software firm Gentrack led the market higher today, surging 40 percent to $1.40 as it came off a record low 76 cents earlier this month. The company today affirmed earnings guidance for the March period and lifted the trading ban for company directors and executives that's typically in place until a company formally reports.

Greg Smith, head of research at Fat Prophets said investors may be relieved about any announcement better than a downgrade.

“A lot of companies are pulling guidance in the current environment, so anyone that can maintain it will be well received,” he said.

Australia & New Zealand Banking Group climbed 10.4 percent to $18.00 and Westpac Banking Corp increased 8.1 percent to $17.20. Gordon said this was due in part to central banks shoring up capital markets.

“The longer this shutdown goes on, the more bad debt there will be for banks. But at the moment I think central banks are giving a bounce in confidence,” he said.

Refining NZ rose 13 percent to 78 cents. The virus shutdown has pushed oil prices to an 18-year low which has created attractive margins for the refiner, although fuel demand remains muted.

Fuel-retailer Z Energy, which owns a stake in the refinery, gained 5.5 percent to $2.89.

Genesis Energy rose 4.4 percent to $2.515, Meridian Energy advanced 0.3 percent to $4.04, Contact Energy increased 2.1 percent to $5.76. Mercury NZ fell 0.5 percent to $4.22.

Gordon said an announcement earlier today that the aluminium smelter at Tiwai Point was closing one pot line could be a hint the smelter saw a long-term future operating in the country.

Exporters continued to benefit from a weak kiwi dollar, hovering around 60 US cents. Synlait Milk rose 7.8 percent to $6.20, Skellerup Holdings increased 7.9 percent to $1.78 and Scales Corporation advanced 4.2 percent to $4.45.

Fisher & Paykel Healthcare rose 0.1 percent to $30.38, having reached a record $32.22 in earlier trading.

Some retailers rallied after the Ministry of Business, Innovation and Employment yesterday included heaters, computers and whiteware as essential goods.

Warehouse Group shares climbed 5.3 percent to $2 after the retailer said it will offer a limited range of products and services online and through call centres. Smiths City was up 10 percent at 11 cents and Briscoe Group rose 2.9 percent to $2.84.

Trading in Kathmandu Holdings was halted until the retailer makes a material announcement. The shares had increased 9.8 percent to $1.12 before the halt.

NZX Limited rose 1.8 percent to $1.11. The securities exchange operator held its annual general meeting today where it announced it will separate its regulatory functions from its commercial operations.

Air New Zealand fell 5.6 percent to 85 cents. Chief executive Greg Foran said previous revenue of $5.8 billion would dry up to be around $500 million annually as the company becomes a domestic airline with limited international services.

Auckland International Airport fell 4.8 percent to $4.99 and Tourism Holdings rose 0.9 percent to $1.09.

Tags: Market Close