Power rally pauses ahead of election

Contact Energy and Meridian Energy shares today ended their long rally.

Friday, October 16th 2020, 6:39PM

by BusinessDesk

The power companies led the local stock market lower in heavy trading as investors cashed in recent gains ahead of tomorrow’s election.

The companies – with their significant South Island generation - have been on a tear since Sept. 28 when the incumbent Labour Party and likely victor in tomorrow’s election said it will offer NZ Aluminium Smelters a lower transmission price in a deal to keep the operation running for another three-to-five years.

Contact fell 4.4 percent to $7.74, leading the market lower, and Meridian dropped 4.2 percent to $5.65, having climbed from $6.27 and $4.65 respectively before the smelter reprieve emerged.

“There’s a little money being taken off the table pre-election – both Labour and National said they're going to support NZ Aluminium Smelters and they’ve had a strong run,” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

The S&P/NZX 50 Index decreased 53.57 points, or 0.4 percent, to 12,433.16, coming off a record earlier this week. Within the index, 23 stocks fell, 22 rose, and five were unchanged. Turnover was $366.8 million, of which Contact accounted for $112.5 million and Meridian $130.2 million.

Investor sentiment across Asia was generally subdued due to the resurgence of covid-19 in Europe and the US.

SkyCity Entertainment Group chief executive Graeme Stephens told shareholders today the casino operator won’t be back to normal for a couple of years, with virtually no international business because of the virus. It fell 1.6 percent to $3.11.

Auckland International Airport, NZ’s major gateway for international travel, fell 3.3 percent to $7.20, while Air New Zealand declined 0.7 percent to $1.50, having flown its first quarantine-free flight to Australia today.

The falls weren't universal. Some of the companies hardest-hit by the pandemic gained today. Vista Group International, which has been grappling with the closure of cinemas around the world, rose 2.8 percent to $1.54, while Serko, which is hoping for a pick-up in interstate travel across the Tasman, rose 2.3 percent to $5.20.

The latest unease over the pandemic has hit on risk-sensitive currencies such as the kiwi, which is poised for a 1.1 percent decline this week. It traded at 65.92 US cents at 5pm in Wellington from 66.45 cents yesterday.

However, the kiwi gained against its trans-Tasman counterpart with economists now predicting the Reserve Bank of Australia will cut the target cash rate next month. NZ’s central bank has pledged to keep the official cash rate at a record low 0.25 percent until at least next year. The kiwi rose to 93.13 Australian cents from 92.89 cents yesterday.

On the other crosses, it fell to 69.38 yen from 69.95 yen yesterday, was down to 56.32 euro cents from 56.55 cents, traded at 51.12 British pence from 51.06 pence, and dropped to 4.4311 Chinese yuan from 4.4681 yuan. The trade-weighted index was at 71.01 from 71.40 yesterday.

Weaker dollar boon for exports

The weaker kiwi should be a boon for exporters, such as Fisher & Paykel Healthcare and Scales Corp, by increasing the value of their export receipts. F&P Healthcare rose 1 percent to $35.20 and Scales was up 1.4 percent at $5.20.

Mainfreight posted the day’s biggest gain, up 3.6 percent to a record $53.90. The global logistics group reported a strong trading update earlier this week.

Local courier and information management firm Freightways edged up 0.2 percent to $8.29 and trucking firm TIL Logistics increased 1.4 percent to 73 cents.

NZX rose 1.2 percent to $1.70 after NZ Rural Land Company said it’s targeting a December listing following an initial public offering to raise as much as $150 million.

Medicinal cannabis firm Rua Biosciences will join the bourse next week in the first IPO of the year.

Allied Farmers will have a role in the NZ Rural Land Company listing after agreeing to buy half of the management company, NZ Rural Land Management.

Rival rural services firm PGG Wrightson increased 1.1 percent to $2.85 today.

The rural outlook was buoyed yesterday by Fonterra raising its forecast farmgate payout by 40 cents per kilogram of milk solids, adding an estimated $10 billion to NZ’s regional economies.

Fonterra Shareholders’ Fund units increased 0.5 percent to $4.10.

Tags: Market Close