Market gives back all recent gains

New Zealand shares snapped a three-day rally, as investors grew concerned about deteriorating US-China relations and the economic cost of a resurgence of covid-19.

Thursday, July 16th 2020, 6:45PM

by BusinessDesk

The S&P/NZX 50 Index declined 105.46 points, or 0.9 percent, to 11,505.06. Within the index, 16 stocks fell, 24 rose, and 10 were unchanged. Turnover was $214.9 million.

The benchmark started the day on a positive note but dropped when the Australian market opened at midday. Australian shares were weaker as surging covid-19 cases forced investors to consider the possibility of a second round of economic damage.

Asian share markets were further discouraged by mounting tensions between the United States and China. Overnight, US Secretary of State Mike Pompeo said the US would impose visa restrictions on Chinese firms that he accused of facilitating human-rights violations.

Grant Williamson, a director at Hamilton Hindin Greene, said it was a surprise to see the market weaker after a strong lead from Wall Street.

The local market started off okay, despite heavyweights A2 Milk and Fisher & Paykel Healthcare being weaker, but came off the boil when Australia opened, Williamson said.

“As it stands at the moment the market has given back everything it made yesterday,” he said.

The benchmark was weighed down by its two largest stocks. A2 Milk dropped 3.8 percent to $20.26 and F&P Healthcare declined 3.5 percent to $35.90.

The two stocks - which together comprise close to a third of the index - dragged the NZX 50 lower despite a majority of stocks trading higher.

Williamson said F&P Healthcare had been trading at very high prices with investors periodically choosing to take some profit and knocking the stock a few percent lower.

A2 Milk was likely weaker due to the US and Australia’s jittery relationship with China.

“Tensions seem to be mounting there and A2 is a very big supplier of baby formula into the Chinese market,” Williamson said.

Pushpay Holdings led the market lower, falling 3.9 percent to $8.20. The stock is also trading near its record high and investors may have taken some profit.

Williamson said trading was “a mixed bag” with no clear patterns emerging in the sectors.

Among stocks considered vulnerable to virus outbreaks, Tourism Holdings fell 2.8 percent to $1.75, SkyCity Entertainment Group dropped 1.2 percent to $2.49, while Air New Zealand rose 2.7 percent to $1.34.

Vista Group International jumped 7.2 percent to $1.34, posting the day’s biggest gain. The stock may still be benefiting from excitement around a potential covid vaccine, Williamson said.

Energy stocks were largely stronger as investors took advantage of the recent selloff in the wake of Rio Tinto's announcement that it planned to close the Tiwai Point aluminium smelter next year.

Vector gained 2.7 percent at $3.78, Genesis Energy rose 1.4 percent to $2.98, Meridian Energy was up 1.3 percent $4.60 and Contact Energy increased 0.5 percent to $5.75. Trustpower fell 0.3 percent to $6.91.

Retirement stocks were mixed. Summerset Group Holdings dropped 0.5 percent to $7.31, Metlifecare held at $5.90 and Oceania Healthcare rose 2 percent to $1.02.

Outside the top 50, Michael Hill International rose 9.7 percent to 34 cents. The company today reported a robust return to trade with adjusted same-store sales for the quarter down just 4.1 percent against prior year. Same stores sales for the year were up by 2.7 percent.

Wine maker Delegat Group today reported unaudited profit after tax for the June year rose 37 percent to $64.1 million. Its shares rose 0.9 percent to $12.8

Tags: Market Close