Early market rise undone by fears over US-China tensions

New Zealand shares reversed an earlier gain as Asian markets were sold off amid growing fears of a confrontation between the United States and China.

Thursday, May 28th 2020, 6:15PM

by BusinessDesk

The S&P/NZX 50 Index fell 192.50 points, or 1.7 percent, to 10,856.69. Within the index, 34 stocks fell, 13 rose, and three remained unchanged. Turnover was $206.9 million.

Investor unease regarding geopolitical tension caused Asian markets to fall, cutting short an early rise on the local benchmark. The NZX50 was trading up 0.3 percent until midday when markets across Asia started to open weaker.

“Asian markets more broadly are being sold off today and New Zealand has followed that momentum throughout the day,” said Grant Davies, an investment adviser at Hamilton Hindin Greene.

The standoff between the US and China over Hong Kong pushed the Hang Seng index down 1.8 percent in afternoon trading, while indices on the Chinese mainland were down around 0.4 percent. The gloomier sentiment also weighed on Australia’s S&P/ASX 200 index, which pared its gain from a 2.5 percent increase to a more modest 1.3 percent in late trading.

Sky Network Television led the New Zealand market lower, dropping 15.6 percent to 14.6 cents with an unusually large volume of 17.2 million shares changing hands. The pay-TV operator is in the process of raising $37.8 million at 12 cents per share from retail investors as part of a $157 million capital raising.

“I imagine there are a few investors selling so they can take up their rights at 12 cents,” Davies said.

“There could be a few underwriters getting a bit nervous if this negative momentum continues.”

Seafood company Sanford fell 7.9 percent to $6.80 after it reported icy conditions off the coast of Antarctica had caused an 8 percent drop in wild catch sales volumes. This contributed to a $5 million hit to half-year earnings and prompted the board to lower the dividend to 5 cents per share from 9 cents a year earlier.

Goodman Property Trust fell 4.4 percent to $2.20 after its annual result failed to meet the expectations of investors who had priced the stock for perfection, Davies said.

“They have been a solid performer throughout the whole pandemic lockdown, defying gravity to an extent, so while the result was pretty good there is still a little bit of selling,” Davies said.

The company still forecasts earnings in line with the prior year but the payout to investors will be reduced due to a lower distribution policy and more shares on the register.

Fisher & Paykel Healthcare declined 4.4 percent to $29.45, falling in tandem with its Australian rival ResMed.

Davies said the stocks that were being sold off today were generally companies that had held up well throughout the pandemic and lockdown.

Chorus fell 4.3 percent to $7.20, Infratil slipped 2.6 percent to $4.82, Contact Energy decreased 2.5 percent to $6.25 and Spark New Zealand was down 1.3 percent at $4.43.

Synlait Milk dropped 1.8 percent to $7.12 after it lowered its forecast milk pay-out for the season due to weaker dairy prices and covid-19 outbreak threatening demand. Dairy prices have fallen around 14 percent since the first Global Dairy Trade auction this year.

A2 Milk fell 1.8 percent to $18.60, while Fonterra Shareholder Fund units increased 0.6 percent to $3.63.

Restaurant Brands slipped 0.8 percent to $12.90. The group today told investors the national shutdown had cost the group $15 million in lost earnings and would result in a profit downgrade in the current financial year.

Tourism Holdings posted the day’s biggest gain, rising 11.6 percent to $1.73 on the likelihood of the trans-Tasman bubble being open by July.

Outside the NZX50, honey producer Comvita announced a $50 million capital raise at $2.50 per share, a 34.4 percent discount from $3.81 traded at market close yesterday. The company is benefiting from a surge in demand for natural health products.

Probiotic company Blis Technologies is also riding the health wave, booking a net profit of $1.6 million, a 320 percent rise from the prior year. Its share price rose 2.3 percent to 8.8 cents.

Tags: Market Close