Heavyweight exporters fall as dollar rises

New Zealand shares fell in the first full day of trading since last Monday with the heavyweight export stocks pulling the market lower as the kiwi dollar hit new highs.

Monday, August 31st 2020, 6:10PM

by BusinessDesk

The S&P/NZX 50 Index fell 155.96 points, or 1.3 percent, to 11,937.56. Within the index, 25 stocks fell, 17 rose and eight were unchanged. Turnover was $245.3 million, higher than usual as overseas investors re-weighted portfolios on the last day of the month.

The NZX appears to have gained the upper hand in the ongoing battle against overseas cyber criminals that has plagued the exchange since Tuesday last week.

Trading was uninterrupted today, even when the NZX website went offline briefly, holding steady for the quarterly index review of the MSCI Equity Indices, which typically sees large trading volumes as international fund managers reset their portfolios.

The biggest companies were also the weakest on the day, pulling the index back from Friday’s record close.

“It is really the large stocks having a bit of an off day and that’s enough to drag the index,” said Grant Davies, an investment advisor at Hamilton Hindin Greene.

Meridian Energy led the market lower, falling 4.5 percent from its post lockdown high to $5.08, followed by Mercury NZ, which dropped 4.1 percent to $5.19.

A2 Milk Company fell 3.7 percent to $18.59, possibly reflecting investor concern the dairy exporter could become a target as China and Australia’s trade relationship continued to deteriorate.

“If China deems New Zealand to be working against them then A2 could be hit if milk exports dry up,” Davies said. The Chinese government today announced an investigation into Australian wine exports to China in the latest chapter of the deteriorating diplomatic relationship between Beijing and Canberra.

A2’s key supplier, Synlait Milk, declined 1.6 percent to $6.36 and Fisher & Paykel Healthcare declined 2.2 percent to $36.85, again falling from a record close on Friday as some investors took the chance to cash some profit.

A stronger currency is another headwind for these stocks. ANZ strategist David Croy said the kiwi had an “eye-watering rally” on the weekend, climbing to a post-covid high.

The kiwi dollar was trading at 67.22 US cents at 5pm in Wellington, up from 66.62 cents on Friday evening but down from a peak of 67.51 at midday.

The trade-weighted index was at 72.07 at 5pm, down from 71.71 yesterday. The kiwi traded at 91.44 Australian cents from 91.34 cents, 71.02 yen from 71.08 yen, 56.48 euro cents from 56.10 cents, 50.39 British pence from 50.25 pence, and 4.6045 Chinese yuan from 4.5807 yuan.

NZX Limited dropped another 1.2 percent to $1.62 today, as the cyber campaign to disrupt trading continues to weigh on the exchange’s share price. The company had been steadily tracking up this quarter but hit reverse on Thursday when the cyber attacks started to bite.

Davies said investors were trying to price in the added expenses for upgrading cyber security systems.

“They are going to have some one-off expenses related to this attack,” he said.

Vista Group posted the day’s biggest gain, rising 4.6 percent to $1.83, continuing to rally after its earnings report reassured investors the worst-case scenario hadn’t eventuated. Its share price is up more than 35 percent since Wednesday.

Outside the NZX top 50, Abano Healthcare confirmed its board is backing a new $4.45 per share scheme of arrangement from BGH Capital and the Ontario Teachers' Pension Plan. However, that price could fall as low as $3.70 if outbreaks occur in New Zealand and Australia.

Investors appear to be betting this is the more likely outcome, with Abano’s share price jumping 41.8 percent to $3.70 on the news.

“The market is making a value statement on whether these states can stay out of lockdown and they don’t seem very confident,” Davies said.

Medicinal cannabis company Cannasouth bounced 32.9 percent to $1.01, after plummeting on Friday following its annual report.

The stock has been in favour with retail investors in the run up to the cannabis referendum. The stock was trading at 56 cents on Aug 14 and peaked at $1.21 on Thursday.

“There were not really any announcements prior to the share price kicking off that would really justify the movements we’ve seen since,” Davies said.

Tags: Market Close