NZ shares flat as Tiwai smelter rumours swirl

New Zealand shares edged higher as rumours of negotiations to delay closing the Tiwai Point aluminium smelter pushed Contact Energy and Meridian Energy higher. Exporters A2 Milk and Fisher & Paykel Healthcare fell.

Thursday, August 6th 2020, 6:51PM

by BusinessDesk

The S&P/NZX 50 Index increased 6.87 points, or 0.1 percent, to 11,764.59. Within the index, 31 stocks rose, 15 fell, and four were unchanged. Turnover was $151.4 million.

Meridian has been in talks with smelter owner Rio Tinto to try to extend the scheduled closure of the aluminium smelter beyond August next year and allow for a more orderly exit of the country’s biggest electricity consumer. Today, media reported smelter staff had said the fourth potline would be operating in September potentially exciting investors who saw it as a signal the smelter may remain open.

Meridian said that as of today, its view is that the smelter will shut on Aug. 31 next year and a spokesperson for Rio Tinto declined to comment on whether the fourth potline will open.

Still, Contact rose 5.5 percent to $6.29 and Meridian Energy advanced 2.7 percent to $5.

Other energy stocks were mixed. Genesis Energy declined 0.2 percent to $2.955 and Mercury NZ fell 0.8 percent to $4.70.

Stuart Williams, head of equities at Nikko Asset Management, said there had been lots of noise about the smelter but that investors should remember, even on the current timeline, there was a full year of earnings before the smelter closes.

“It has dominated our minds in recent weeks, but they are on the hook until after the next financial year,” he said.

A few relatively positive broker reports released ahead of earnings season may be supporting the share price as well.

“Contact is a bit of a standout in terms of dividend yield,” Williams said.

A Jarden analyst described Contact as the preferred generator-retailer on a medium-term valuation outlook. Contact reports its full year result on Monday.

Sky Network Television led the market higher, jumping 6.9 percent to 13.9 cents. Williams said the stock may be finding some support with sport returning to TV and a lack of other entertainment options.

“What started with just local rugby, you’ve now got quite a few sports for people to engage with,” he said.

The index’s two biggest stocks both fell, keeping the benchmark flat on the day.

A2 Milk dropped 2 percent to $20.85 and F&P Healthcare declined 1.4 percent to $36.45.

Other healthcare companies offshore issued negative updates in recent days, which Williams said may have weighed on the country's biggest listed company.

“It is hard for a global company like Healthcare to perform when some of its peers have got headwinds,” he said.

Outside the index, T&G Global shares climbed 7.7 percent to $2.80 after the fresh produce exporter announced a twofold jump in net profit to $9.5 million in the six months through June.

Global markets were broadly stronger today as investors anticipate the US policymakers to soon strike a deal on a new stimulus package. The greenback fell while oil prices rose, and gold inched back toward a record.

The kiwi dollar traded at 66.41 US cents from 66.40 cents yesterday and the trade-weighted index was at 71.82 from 71.97. US jobs data is in focus this week as traders fret over a string of weaker economic indicators in the world’s biggest economy. Meanwhile, NZ’s Reserve Bank survey of expectations showed a small lift in inflation expectations.

The kiwi traded at 92.20 Australian cents from 92.42 cents yesterday, 70.07 yen from 70.15 yen, 55.88 euro cents from 56.22 cents, 50.53 British pence from 50.74 pence, and 4.6103 Chinese yuan from 4.6191 yuan.

Tags: Market Close