Sharemarket investors go bargain hunting

New Zealand shares fell as investors rotated out of the best-performing stocks such as Fisher & Paykel Healthcare, and into some of the cheaper, beat-up firms including Air New Zealand, on the prospect of their recovery.

Tuesday, August 11th 2020, 6:05PM

by BusinessDesk

The S&P/NZX 50 Index declined 38.12 points, or 0.3 percent, to 11,645.32. Within the index, 27 stocks rose, 19 fell, and four were unchanged. Turnover was $206 million.

Companies that have been successful during the pandemic were the biggest decliners on the index today, while struggling travel and retail stocks received a boost as investors positioned for more recovery.

“Across global equity markets we are seeing profit-taking occur on winners,” said Sam Trethewey, a portfolio manager at Milford Asset Management.

The US Nasdaq fell overnight as investors trimmed some tech holdings in favour of stocks that appeared cheap. NZ was experiencing the same trend, Trethewey said.

F&P Healthcare has climbed more than 50 percent this year as demand for its respiratory products and hospital hardware skyrocketed in the pandemic. Today, its share price fell 2.3 percent to $34.75.

Telecommunications firm Spark New Zealand, which was relatively unaffected by the pandemic, fell 1.6 percent to $4.85.

A2 Milk Co dropped 0.7 percent to $20.58, but is still up more than 35 percent year-to-date. Today, the infant formula exporter announced a replacement for Geoffrey Babidge, the well-admired interim chief executive.

Trethewey said the incoming executive David Bortolussi, who will take up the reins early next year, shouldn’t take the share price fall personally, because A2 was being sold down less than the other top-performing stocks.

Fletcher Building rose 0.3 percent to $3.50 despite pre-empting its earnings result by adding $150 million to its near $1 billion legacy projects losses. The company expects to report a net loss of $196 million next week, partly due to impacts from covid-19.

Trethewey said the jury was still out on how the stock will perform, but that the increase may be investors encouraged by the firm's extensive cost cutting.

“They have signalled $300 million of cost savings, which is large and will increase the leverage Fletchers will have to do a recovery if the economy was to pick back up,” he said.

Across the Tasman, Sydney Airport announced of A$2 billion capital raising to shore up its balance sheet as it struggles through the covid-19 travel restrictions. Because the raising was widely expected, the news had little impact on Auckland International Airport’s share price, Trethewey said.

Shares of Auckland Airport rose 2.6 percent to $6.32, and Air New Zealand also rose 2.6 percent to $1.375, benefiting from investors' bargain hunting.

Summerset Group fell 2.1 percent to $7.59 after a Christchurch retirement village - owned by a local family - was put into lockdown after residents developed symptoms of a respiratory illness. Other retirement village operators weren't affected by the news, with Ryman Healthcare up 0.8 percent at $12.90.

Outside the NZX50, dual-listed Telstra Corp announced it has brought entrepreneur Bridget Loudon — founder of talent-platform Expert 360 — onto its board as a non-executive director to bring a “fresh perspective” to the Australian telecommunications company’s leadership. The stock’s primary listing is on the ASX, but locally shares rose 1.4 percent to $3.72.

The New Zealand dollar rose ahead of the Reserve Bank monetary policy announcement tomorrow. Some analysts have speculated there may be an attempt to talk down the kiwi which has been strengthening on the country’s covid-free status.

The NZ dollar traded at 66.21 US cents at 5pm in Wellington from 66.05 cents yesterday. The trade-weighted index was at 72.81 from 72.71.

The kiwi traded at 92.18 Australian cents from 92.24 cents yesterday, 70.24 yen from 70.85 yen, 56.34 euro cents from 56.02 cents, 50.60 British pence from 50.55 pence, and 4.6029 Chinese yuan from 4.6023 yuan.

Tags: Market Close