NZ shares fall as investors wait for economy to reopen

New Zealand shares edged lower as investors paused to take stock as they wait to see how conditions develop under alert level 3. Air New Zealand led the market lower.

Friday, April 24th 2020, 7:02PM

by BusinessDesk

The S&P/NZX 50 Index declined 26.63 points, or 0.3 percent, to 10,419.48. Within the index, 33 stocks fell, nine rose, and eight were unchanged. Turnover was $187.6 million.

Investors took a more cautious approach to trading ahead of the long weekend, holding back to reassess once they get a clearer picture of the conditions under looser pandemic restrictions.

“Locally, there is bit of optimism moving forward into level 3 and possibly back to some sense of normality in a few weeks’ time,” said Greg Smith, head of research at Fat Prophets.

Investors had already priced in the lower alert level earlier in the week and were now looking to when more of the economy opens up.

“There will be parts the economy moving again, but lots of businesses say they won’t be in full swing until level 2,” Smith said.

The benchmark index fell 3.1 percent across the week, although it's up 22 percent from the market’s low-water mark. Smith said the recovery had been driven by fiscal stimulus hyping the market and that trend may begin to slow.

“Once the sugar rush dies off as stimulus slows, we might see markets turn to the downside — but I don’t think it will test the lows,” he said.

Air New Zealand led the market lower, falling 5.9 percent to $1.205. The airline announced today that direct flights between Auckland and the Argentinian capital Buenos Aires will not resume and the launch of the non-stop service to New York will be delayed until after 2021.

Smith said the airline was in a difficult place, facing the same adverse conditions as Auckland International Airport but without the bigger balance sheet to give it runway. This increases the likelihood it will have to turn to the government for another loan, which may dilute shareholders in the future.

Auckland International Airport fell 2.6 percent to $5.64.

Infratil was unchanged at $4.46. Its junior shareholder in Wellington International Airport - Wellington City Council - has agreed to underwrite a $75 million loan facility as part of refinancing efforts for the airport.

“Wellington airport is a bit more insulated, not being a true international airport, so arguably has less headwinds than Auckland,” Smith said.

Tourism Holdings fell 4 percent to $1.20. Chief executive Grant Webster said that with no international tourists, the industry is facing a 70 percent to 80 percent reduction in revenue.

Casino operator SkyCity Entertainment Group declined 4.9 percent to $2.12. Smith said the share price had been “getting ahead of itself” as the business was likely to still be impacted as long as social distancing measures are in place.

“There has been some value hunting for some stocks in the eye of the storm, but there is a bit of reality setting in,” he said.

NZME fell further today, down 2.3 percent to 21 cents. The stock was sold off heavily when the government’s $50 million media support package was deemed to be insufficient to offset adverse conditions. The share price is down 14.3 percent across the week.

Sky Network Television fell 3.3 percent to 29 cents.

Refining New Zealand continued to recover after a week of tumultuous trading amid chaotic oil prices. Shares in the refinery rose 2.2 percent to 92 cents but are down 10.7 percent from last Friday.

Fuel retailer Z Energy fell 1.6 percent to $3.10.

Meridian Energy posted the day's biggest gain, up 2.8 percent at $4.49.

Argosy Property rose 0.9 percent to $1.09, continuing to climb after reporting a 3.6 percent valuation increase to its portfolio yesterday. The share price is up 3.8 percent this week.

Restaurant Brands New Zealand is set to gain from pent-up demand as it reopens its fast food restaurants’ takeaway and delivery services under alert level 3. Its share price fell 0.9 percent to $11.60.

“What we’ve seen in other countries is there can be a massive rush on luxuries like takeaways when things reopen,” Smith said.

Retailer Briscoe Group rose 0.3 percent to $3.09 while Kathmandu Holdings was unchanged at 74 cents.

Tags: Market Close