Shares end muted week with small rise

New Zealand's main share index rose half a percent today, closing out a week of muted trading.

Friday, October 23rd 2020, 6:28PM

by BusinessDesk

Markets across the globe have failed to gain traction as US stimulus negotiations floundered in the run up to the presidential election.

The S&P/NZX 50 Index rose 63.05 points, or 0.5 percent, to 12,470.34. Within the index, 31 stocks rose, 14 fell, and five were unchanged. Turnover was $163.8 million.

Today’s half a percent rise was one of the more significant moves in a week where bullish and bearish investors seemed to be stuck in a tug of war.

“Markets globally have been churning around a relatively flat level over the last few days, with the US elections being a key aspect there,” said Matthew Goodson, a director at Salt Funds Management.

While the political climate is still looking uncertain, longer term bond yields in the US have risen off recent lows.

“If we do get a Democratic sweep, there could be significant fiscal expansion and that could see a lift in interest rates and a change in the types of stocks which have been driving the market,” Goodson said.

In recent times, investors have been buying defensive stocks with high yields to replace investments in fixed interest assets. If interest rates were to rise significantly the focus would shift back to growth stocks.

“Even here, our 10-year bond yields have crept up about 15 points from their lows in the last month, although it hasn’t had any impact on our equity market as of yet.”

On the local market today, reliable dividend yielding stocks remained in fashion.

Meridian Energy led the market higher, climbing 3.8 percent to $5.54, although it has had volatile movements in the past week,

Goodson said the stock price had been destabilised by its inclusion, alongside Contact Energy, in a clean energy index and the wait for confirmation of extension at the Tiwai Point aluminium smelter.

Mercury Energy rose 3.5 percent to $5.334, Genesis Energy gained 1.9 percent at $3.29 and Contact Energy advanced 0.1 percent to $7.65.

Infrastructure investment firm Infratil rose 2 percent to $5.60 after the company confirmed media speculation it was in talks to purchase a group of radiology practices in Australia.

However, Goodson said the main motivation for Infratil buyers was its investor day on Wednesday where it outlined the significant potential for its datacentre business.

“Buying a radiology business off a private equity owner, whether that is value adding or not we’ll have to wait and see in the fullness of time,” he said.

Goodman Property Trust was another yield stock to see strong gains, rising 2.3 percent to $2.49.

Growth stock Pacific Edge posted the day’s biggest loss, falling 2.6 percent to 75 cents, followed by SkyCity Entertainment which dropped 2.3 percent to $3.00.

Investors may be selling SkyCity shares as new community cases of covid-19 have emerged in Auckland. The casino operator is unable to operate at the higher alert levels.

Travel expense management software company Serko also fell 2 percent to $5.00 and Tourism Holdings declined 1.3 percent to $2.37.

The kiwi dollar was trading 66.63 US cents at 5pm in Wellington, up from 66.45 cents yesterday.

The New Zealand dollar was one of the stronger currencies, with BNZ's currency strategist, Jason Wong, observing early Friday morning it was outperforming its peers “for reasons that are not obvious.”

The trade-weighted index was at 71.44 at 5pm, from 71.23 yesterday. The kiwi was trading at 93.65 Australian cents from 93.72, traded at 69.77 yen from 69.60 yen, 56.46 euro cents from 56.12 cents, 50.99 British pence from 50.62 pence, and 4.4534 Chinese yuan from 4.4304 yuan.

Tags: Market Close