NZ shares fall as Melbourne lockdown spooks investors

New Zealand shares followed Australia lower as investors weighed up the economic impact of a covid-19 lockdown being re-imposed in the state of Victoria, where new cases of the coronavirus have spiked in the last week.

Wednesday, July 8th 2020, 6:11PM

by BusinessDesk

The S&P/NZX 50 Index declined 36.46 points, or 0.3 percent, to 11,707.27. Within the index, 28 stocks fell, 15 rose, and seven were unchanged. Turnover was $129 million.

Hopes of a swift Australian recovery from the covid-19 pandemic and its resulting economic loss evaporated last night as the Victorian state government put the country's second-biggest city into its second lockdown.

Melbourne residents are confined to their homes unless undertaking essential business for six weeks in an effort to contain a fresh coronavirus outbreak.

Australian federal government treasurer Josh Frydenberg said the country could take a A$1 billion economic hit each week as a result of the lockdown.

Australia’s S&P/ASX 200 Index opened weaker at midday in New Zealand, dragging down the Kiwi benchmark, which had been in positive territory in early trading. The ASX 200 was down 1.4 percent at 5pm in Wellington.

“The deepening covid-19 issues in Victoria are having some flow on effect locally,” said Sam Trethewey, a portfolio manager at Milford Asset Management.

The recognition that new outbreaks of covid-19 could lead to future lockdowns was prompting a “rotation into safety” as investors sold stocks exposed to the Australian market in favour of local utilities.

“Selling is concentrated in stocks like Kathmandu and Fletcher Building that are more exposed to these economies,” he said. “On the flip side, you’ve got a lot of defensive companies, like Spark and the gen-tailers, holding up very well today.”

Vista Group International led the local market lower, falling 4.8 percent to $1.40. The cinema software provider’s customers include the Hoyt’s brand which operates 12 theatres in the state of Victoria.

Kathmandu Holdings dropped 4 percent to $1.19. The outdoor equipment retailer also counts Australia as a key market. Last year, the group acquired surf-wear brand Rip Curl, which was founded in Victoria.

SkyCity Entertainment Group — which operates a casino in Adelaide, South Australia — fell 3.5 percent to $2.51. The group today completed a $50 million capital raising via share purchase plan at $2.38 per share. The underwritten offer attracted a 91 percent take-up rate, with the $4.4 million balance allocated to existing shareholders who acted as sub-underwriters.

Air New Zealand slipped 3.9 percent to $1.365, Fletcher Building declined 2.8 percent to $3.46 and Restaurant Brands New Zealand fell 2.8 percent to $11.81.

The dual-listed lenders were weaker. Westpac Banking Corp fell 4 percent to $18.89 and Australia & New Zealand Banking Group declined 3.6 percent to $19.53.

Energy utility stocks were mostly stronger as investors exited companies exposed to Australia in favour of firms offering reliable dividends.

Genesis Energy rose 2.9 percent to $3.15, Meridian Energy advanced 2.1 percent to $5.26, Mercury NZ increased 1.3 percent at $4.85 and Vector increased 1.1 percent to $3.75.

Telecommunications provider Spark New Zealand rose 1 percent to $4.675.

Skellerup Holdings reported the day's biggest gain, rising 4.1 percent to $2.30. The stock has gained 8.5 percent this week as investors prepare for a relatively upbeat result when the rubber goods maker reports in August.

Metlifecare increased 0.2 percent at $5.80. The company is considering a takeover offer of $6 from Swedish buy-out firm EQT, which had tried to walk away from an earlier offer of $7. While the new bid is a premium to Metlifecare's trading price, it's a discount to the company's net tangible asset value of $7 per share.

“The debate is heating up as to whether $6 is a fair takeover price,” Trethewey said. “Over a medium-term view you could see a lot more value realised from these assets.”

Outside the benchmark, health and wellness company Me Today shares were put on a trading halt at 12.9 cents after the company said it would raise up to $4.5 million by selling new shares at 9.5 cents each.

Tags: Market Close