NZ shares fall as Asia joins global sell-off

New Zealand shares fell as stock markets across Asia followed Wall Street's lead as investor optimism over the pace of the recovery was brought to a halt by pessimistic economic outlooks and a growing number of new covid-19 cases in some US states.

Friday, June 12th 2020, 6:29PM

by BusinessDesk

The S&P/NZX 50 Index dropped 248.99 points, or 2.2 percent, to 10,905.94. Within the index, 47 stocks fell, one rose, and two were unchanged. Turnover was $202.9 million.

The stare-down between resurgent stock markets and waning economies broke overnight. Wall Street investors were the first to blink after the US Federal Reserve gave dire economic forecasts and as new cases of covid-19 increased in three US states.

The major US benchmark indices dropped more than 5 percent overnight and Asian markets followed. The NZX 50 fell 4.5 percent when local trading opened, but recovered throughout the day. Australia’s ASX 200 Index followed a similar trend and was down 1.5 percent at 5pm in Wellington.

“Markets have effectively released some steam after pretty exuberant times,” said Brad Gordon, an investment adviser at Hobson Wealth.

Gordon said the recent negative headlines were no worse than investors had been seeing since March, with the market reaching an inflexion point rather than investors reacting to bad news.

Markets had been on an upwards tear from March lows. This week, the S&P 500 had rallied 44 percent from the trough, the Nasdaq Composite hit an all-time high and the NZX 50 had advanced more than 30 percent.

Now those gains were being cashed in as investors feel the market had reached a tipping point.

Gordon said the correction was unlikely to last as some investors who had been sitting on the sidelines were buying the recent weakness. US futures were up in local trading, suggesting Wall Street would bounce back tonight.

Sky Network Television led the local market, falling 11.1 percent to 16 cents. The pay-TV operator completed the retail component of a $157 million capital raising at 12 cents a piece.

After trading closed, S&P announced changes to the NZX 50, with Gentrack leaving the benchmark index and Napier Port joining it. Gentrack fell 4.2 percent to $1.60, while Napier Port declined a more modest 0.3 percent to $3.53.

Retail and travel stocks, which had been driving the wave of recovery in recent weeks, bore the brunt of today's decline.

Vista Group International fell 7.8 percent to $1.66, Kathmandu Holdings declined 6.7 percent to $1.11, SkyCity Entertainment Group fell 5.5 percent to $2.75.

Air New Zealand fell 2.4 percent to $1.62, Gordon said the airline’s swiftly rising share price over recent weeks had “defied all common sense.”

Auckland International Airport dropped 4 percent to $6.48 and Tourism Holdings decreased 1.3 percent to $2.31.

Refining NZ fell 4.5 percent to 85 cents and Z Energy declined 3 percent to $2.95. Both stocks have been hit by dramatically reduced demand for fuel due to pandemic lockdowns and ensuing slowed activity.

Westpac Banking Corp dropped 4.1 percent to $18.98, Australia & New Zealand Banking Group declined 3.5 percent to $20.19 and Heartland Group fell 3.7 percent to $1.31.

Ryman Healthcare fell 1.5 percent to $12.85, having fallen 21.3 percent year to date. The country's biggest listed retirement village operator reported a 6.6 percent rise in underlying annual profit today.

Precinct Properties New Zealand fell 2.1 percent to $1.625. It paid a third-quarter dividend of 1.575 cents today and said it's confident of meeting full-year dividend guidance of 6.3 cents.

Trustpower was the solitary gainer on the day, up 0.6 percent at $7.07. Vector was unchanged at $3.65 and Skellerup Holdings closed unchanged at $2.05.

Tags: Market Close