Sharpest drop on NZX in months

New Zealand's benchmark stock index had its biggest fall in almost two months after Wall Street saw a sharp correction overnight. Growth stocks with US exposure led the market lower.

Friday, September 4th 2020, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index fell 230.74 points, or 1.9 percent, to 11,824.31. Within the index, 37 stocks fell, 10 rose and three were unchanged. Turnover was $152.5 million.

Technology stocks that have been driving US markets to record highs hit reverse overnight, with the Nasdaq Composite index down almost 5 percent in its biggest fall since June.

Asian markets followed the lead: Australia’s S&P/ASX 200 was down 2.8 percent in afternoon trading and Hong Kong’s Hang Seng was off 1.8 percent.

On the local market, firms with US revenues were the most heavily sold.

Cinema software developer Vista Group International led the market lower, dropping 6.2 percent to $1.82. The US made up almost 40 percent of its revenue in the first six months of 2020.

NZ’s largest listed-company, Fisher & Paykel Healthcare declined 5.4 percent to $34.25, singlehandedly responsible for 15 percent of the index’s total decline today.

Pushpay Holdings, which provides online payment services to US churches, declined 3.5 percent to $7.80.

“Growth stocks are off, US markets off, so we’ve seen our growth stocks with US exposure come off in kind,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene.

The fall was cushioned by a weaker kiwi dollar as traders, spooked by weaker equities, bought into haven currencies such as Japan's yen.

The kiwi dollar was trading at 67.04 US cents at 5pm in Wellington, down from 67.48 cents yesterday, and dropped to 71.15 yen from 71.73 yen

The trade-weighted index was at 72.13 at 5pm from 72.54 yesterday. The kiwi traded at 92.16 Australian cents from 92.26 cents, 56.56 euro cents from 57.15 cents, 50.47 British pence from 50.69 pence, and 4.5865 Chinese yuan from 4.6159 yuan.

“The currency is a natural offset for exporters; they would be off by more if it wasn’t for the currency providing them with a natural hedge,” Sullivan said.

A2 Milk Co dropped 2.8 percent to $18.27, extending its downward trend. The dairy exporter has fallen 18 percent from its August record as the triple threat of reduced demand, the strong currency, and China sanctioning Australian exports prompted investors to exit.

“There are some people who are concerned about trade tensions (and) that there are going to be some tariffs on NZ products and that would be a large headwind for our economy,” Sullivan said.

SkyCity Entertainment Group rose 3 percent to $2.75. Sullivan said the casino operator was “the only shining light” on the market today, gaining momentum after broker Credit Suisse and UBS upgraded the stock's target price.

Auckland International Airport also bucked the trend, rising 1.2 percent to $7.085, as investors were more buoyant with Auckland in level 2.5 and domestic travellers getting moving again. Air New Zealand outperformed the index, dropping just 1.1 percent to $1.34.

Property for Industry also dodged the sell off, after it reinstated pre-covid guidance for dividends to be between 7.65 cents and 7.7 cents this year. It shares rose 0.6 percent to $2.685.

Chief executive Simon Woodhams said adjusted funds from operations were "materially in line" with the previous first half with a fall in rental income being offset by savings on interest and tax.

Tags: Market Close