Investors cash in gains to chase value elsewhere

New Zealand shares fell as investors cashed in strong-performing stocks, including Fisher & Paykel Healthcare and A2 Milk, to pursue value in beaten up stocks which may be set for recovery.

Thursday, April 9th 2020, 6:08PM

by BusinessDesk

The S&P/NZX 50 Index declined 67.76 points, or 0.7 percent, to 9,963.90. Within the index, 16 stocks fell, 30 rose, and four were unchanged. Turnover was $332.2 million.

Greg Smith, head of research at Fat Prophets, said there was an “Easter value hunt” happening as investors sold high-value stocks to take advantage of low share prices of other companies that could recovery after the covid–19 crisis wanes.

“We are seeing a little bit of rotation out of those higher priced blue-chip names and a little bit creeping into the more beaten up stocks that may well recover a few months down the track,” Smith said.

F&P Healthcare and A2 Milk were both examples of stocks that have been strong performers throughout the crisis and were now being sold off amid a more upbeat mood, said Mark Lister, head of private wealth research at Craigs Investment Partners.

“Those are the two that have been stunning performers through all this volatility so they’re the ones who are ripe for profit taking,” Lister said.

A strong lead from the US overnight and some signs the virus outbreak had turned a corner had left investors in an optimistic mood.

“Some of the stocks that are going up in response to that are stocks that had been heavily sold off,” Lister said.

F&P Healthcare led the market lower, falling 5.7 percent to $27. A2 Milk declined 2.5 percent to $17.48.

Both companies were also affected by a stronger kiwi dollar eroding their export earnings, Lister said. The kiwi rose to 60.14 US cents at 5pm.

Vista Group International, which is also exposed to currency movements, fell 3.8 percent to $1.01.

Spark New Zealand fell 1.1 percent to $4.35. Smith said investors probably rotated out of the stock, which is being seen as defensive due to the telco's business continuing through the disruption.

Telecommunications network provider Chorus declined 2.7 percent to $6.61.

“Data is running high with everyone locked away at home and it will be interesting to see what sort of benefits accrue for the company after lockdown if more people keep working from home.” Smith said

While the big names declined, companies that have been hardest hit in the pandemic were stronger.

SkyCity Entertainment Group jumped 9.1 percent to $2.15, while Air New Zealand advanced 7.8 percent to 90 cents. Tourism Holding rose 4.6 percent to $1.15.

Auckland International Airport increased 5.5 percent to $5.75. The $200 million share purchase plan component of its $1.2 billion capital raising opened today.

Metlifecare rose 7.4 percent to $3.77, bouncing back from yesterday's 17 percent slide after a $1.49 billion takeover deal collapsed.

Tags: Market Close