A2 and F&P Healthcare pull the market down

New Zealand shares edged lower as the two biggest companies - Fisher & Paykel Healthcare and A2 Milk - weighed on the broader index, following Australia lower amid concerns over the latest wave of new covid-19 cases across the Tasman.

Wednesday, July 22nd 2020, 6:29PM

by BusinessDesk

The S&P/NZX 50 Index declined 13.8 points, or 0.1 percent, to 11,722.97. Within the index, 32 stocks rose, 16 fell, and two were unchanged. Turnover was $130.3 million.

Australia's S&P/ASX 200 Index was down 1.5 percent in late trading as a record number of new cases in Victoria and growing numbers in New South Wales kept investors nervous across the Tasman.

A2 and F&P Healthcare - which both have secondary listings on the ASX - followed suit, which dragged down the NZX 50, given their importance to the index. The kiwi dollar at a six-month high added to the negative outlook for the two export companies.

F&P Healthcare dropped 2 percent to $35.99 and A2 Milk fell 1.3 percent to $20.93.

“They are leading the index down,” said Peter McIntyre, an investment advisor at Craigs Investment Partners. The two stocks account for almost 30 percent of the index, meaning the NZX 50 tends to follow them.

The trans-Tasman equity markets missed out on a rally across Asia as investors were cheered by a stimulus package agreed by the European Union to mitigate the economic impact of covid-19.

McIntyre said the “jaw dropping-ly large” stimulus package in Europe had flowed through to Asian markets, because Europe was a key trading partner.

Much of the NZX 50’s recovery in the June quarter was driven by just a handful of stocks, and only 12 out of the 50 have made year-to-date gains. It is a similar story in the US, where the S&P 500 Index turned positive for the year, yet most companies have missed out the rally.

Restaurant Brands New Zealand posted the day’s biggest decline, dropping 2.5 percent to $11.73.

Meridian Energy fell 1.1 percent to $4.72. It said today national electricity demand in June was 1.1 percent lower than in the same month a year earlier. Genesis Energy declined 1.3 percent to $2.99, Mercury Energy fell 0.6 percent to $4.72, and Contact Energy slipped 0.5 percent to $5.73.

Z Energy rose 5.1 percent to $2.89, the day’s biggest gain, after it gave a first quarter update warning of low first-half operating earnings but in line with expectations.

McIntyre said the key point for Z was that it gained market share through its reduced price strategy, although margins shrank materially.

“On balance, it is a positive update with better than expected retail volumes and that cost out programme working well for them,” he said.

New Zealand Refining Company rose 1.5 percent to 68 cents. It said it had “detailed planning” underway to simplify the refinery and to evaluate becoming an import terminal.

Z Energy, a cornerstone shareholder of the reginery operator, would benefit from the ability to import cheaply refined oil the way its competitors do.

Global dairy prices held up in the overnight auction as some buyers jostled to shore up supply against a backdrop of rising covid-19 cases in key markets

Fonterra Shareholders’ Fund units fell 0.8 percent to $3.85 and Synlait Milk rose 1 percent to $7.12.

Retirement village operator Summerset Group Holdings rose 4.2 percent to $7.89, Ryman Healthcare gained 1.7 percent at $13.58 and Oceania Healthcare was up 1 percent to $1.03.

Goodman Property Trust told unitholders it would probably offer a new retail bond to replace a $100 million bond maturity in December to keep its bank funding available for other uses. The units rose 0.9 percent to $2.19 today.

Tech stocks were stronger. Vista Group International rose 2.4 percent to $1.30, and Pushpay Holdings increased 1.8 percent to $7.95. Broadband network operator Chorus advanced 1.8 percent to $7.44 and telecommunications retailer Spark New Zealand was up 1.5 percent at $4.91.

Outside the benchmark, Briscoe Group shares bounced 7 cents, or 2.1 percent, to $3.37 on advice that the retailer's half year results to end July "may be closer to last year" than expected on the back of unexpected strength in sales, combined with cost saving measures.

Tags: Market Close