International vaccine news excites market

New Zealand shares followed Wall Street higher as investors were encouraged by positive data from a small covid-19 vaccine trial.

Tuesday, May 19th 2020, 6:43PM

by BusinessDesk

The S&P/NZX 50 Index rose 32.20 points, or 0.3 percent, to 10,790.14. Within the index, 35 stocks rose, eight fell and seven were unchanged. Turnover was $124.8 million.

Data from a study of eight healthy adults suggested a vaccine under development by American biotechnology company, Moderna Inc, is safe and produces antibodies which fend off the virus.

The data is a hopeful sign, but a doctor from Johns Hopkins Center for Health Security warned the limited trial was designed to test the safety, not the efficacy, of the vaccine.

Mark Lister, head of private wealth research at Craigs Investment Partners, said New Zealand shares were “following in the footsteps” of international markets albeit more modestly.

“Any snippet of news that suggests there may be a vaccine of any sort in the offing, markets are latching onto that,” Lister said

Further tailwinds were being provided to equities by the progressive easing of lockdown restrictions, both here and around the world.

“As economies start to open up and restrictions start to lift, it makes for a more optimistic mood as people are excited to get back to something that looks closer to normal,” he said

Investors globally warmed to the news and an additional rescue package agreed in Europe. The FTSE 100 index rose 4.3 percent, the S&P 500 Index rose 3.2 percent, the Dow Jones Industrial Average advanced 3.9 percent and the Nasdaq increased 2.4 percent.

Early this afternoon, Hong Kong’s Hang Seng index was trading 1.8 percent higher, Japan’s Topix was up 1.9 percent and Australia’s S&P/ASX 200 was up 2.1 percent.

New Zealand’s local benchmark saw broad-based support with just eight of the top fifty stocks declining on the day.

Dairy processor Synlait Milk led the market higher, rising 4.9 percent to $7.29 while its main customer, A2 Milk, declined 2.7 percent to $19.42.

Lister said the stocks that had lagged behind the market rally tended to attract more buying on optimistic days, while the “high fliers” were sold off a little.

Synlait Milk is down 18 percent year-to-date, while A2 Milk is up 29.8 percent.

A number of high-yield stocks found support today, as talk of the Reserve Bank further ramping up its quantitative easing programme and potentially implementing negative interest rates pushed investors to look for returns elsewhere.

“All of that plays into the hands of those businesses that are generating and delivering healthy dividends,” Lister said.

The recession-proof energy sector helped buoy the index. Mercury NZ rose 4.2 percent to $4.95, Trustpower increased 3.1 percent to $7.03, Meridian Energy rose 2.1 percent to $4.80, Genesis Energy advanced 1.4 percent and Contact Energy rose 1.3 percent to $6.21.

Property stocks have traditionally been a high-yield safe harbour, although disruptions to commercial rentals during the lockdown have put them under pressure in recent months. Today they clawed back some of those losses.

Argosy Property advanced 3.9 percent to $1.075, Kiwi Property Group rose 2.9 percent to 90 cents and Precinct Properties increased 1.9 percent to $1.59. Stride Property held at $1.49.

Retirement villages, with their fate leveraged to the property market, benefited from improved economic sentiment and saw share price gains today.

Arvida Group rose 2.3 percent to $1.35, Oceania Healthcare increased 1.4 percent to 75 cents, Ryman Healthcare rose 1.3 percent to $12.61 and Metlifecare advanced 1.2 percent to $4.35.

Skycity Entertainment Group fell 3.2 percent to $2.46, the day's largest decline.

Fisher & Paykel Healthcare dropped 1.6 percent to $30. Lister said a bounce in the kiwi dollar was likely weighing on the share price as the manufacturer is sensitive to the exchange rate due to its international sales.

Outside the top 50 stocks, mobile marketing company, Plexure Group rose 3.2 percent to 96 cents after reporting a 50 percent jump in revenue in the 2020 financial year.

And media company NZME fell 2 percent to 24 cents after dropping its bid for urgent clearance from the Commerce Commission to buy major rival Stuff. The High Court today declined to force exclusive negotiations to continue with Stuff owner Nine Entertainment.

Tags: Market Close