Vaccine hopes prompt rotation into hardest hit covid stocks

Investors today sold recently top-performing stocks in favour of those worst affected by the covid-19 pandemic as news of an effective covid-19 vaccine prompted a massive rotation.

Tuesday, November 10th 2020, 7:54PM

by BusinessDesk

The S&P/NZX 50 Index rose 50.19 points, or less than half a percent, as money was shifted away from the few pandemic success stories and into the wider market. Within the index, 36 stocks rose, 11 fell and three were unchanged. Turnover was much higher than usual at $326.1 million.

Investors’ focus shifted towards companies set to benefit as the vaccine clears a path to return to normal, said head of private wealth research at Craigs Investment Partners, Mark Lister.

“What we are seeing today is a lot of professional investors sell their Fisher & Paykel and buy Vista or Kathmandu,” he said. “It’s a rotation away from 2020’s winners to where there might be some bargains to be had.”

Fisher & Paykel Healthcare dropped 12.2 percent to $32.43 and Pushpay Holdings fell 5.8 percent to $8, together freeing up almost $45 million to be invested elsewhere.

Cinema software firm Vista Group International was the biggest winner, leaping 20 percent to $1.80, as the vaccine raised the possibility of movie theatres reopening around the world.

Travel stocks rallied as investors imagined a return of the international tourist.

Tourism Holdings rose 11.6 percent to $2.60, Serko was up 9.1 percent at $5.50, Air New Zealand climbed 8 percent to $1.62 and Auckland International Airport advanced 6.9 percent to $7.60.

As international travel requires jet fuel, Z Energy rose 6.2 percent to $3.10 on the hope fuel volumes may return to pre-pandemic levels sooner. Oil prices rose more than 9 percent in response to the vaccine news.

Fletcher Building saw the day’s second biggest rise, climbing 15.3 percent to $5.19, after it told the market operating profit in the past four months was up 55 percent.

Lister said there was an element of luck involved as the announcement had landed on a day where investors were looking for opportunities linked to the domestic economy such as Fletcher.

“It is a very fortunate day to put out a better than expected trading update,” he said.

Consumer stocks within the index were up 9.5 percent, while other bellwether stocks such as financial and freight companies saw strong gains.

Lister said the swap rate on government bonds rose overnight as financial markets predicted improving economic conditions, which introduced the possibility central banks could begin to unwind stimulus sooner.

“You can’t have your cake and eat it too. You can’t have a bright outlook and central bank life support because it is only there because the outlook is bleak,” he said.

“You can’t have all this good news and infinitely low interest rates forever. So you might see expectations for further interest rate cuts evaporate.”

The Reserve Bank of New Zealand will release a monetary policy statement tomorrow which is expected to hold the current policy settings and unveil the details of its funding for lending programme.

Mike Jones, an economist at ASB bank, said there was the chance a dovish surprise could knock the kiwi dollar back.

The risk sensitive kiwi dollar today climbed to a 20-month high, trading at 68.24 US cents at 5pm in Wellington, up from 68.13 cents yesterday.

The trade-weighted index was at 72.44 at 5pm, from 72.10 yesterday. The kiwi traded at 93.77 Australian cents from 93.46 cents, 71.62 yen from 70.41 yen, 57.67 euro cents from 57.28 cents, 51.76 British pence from 51.67 pence, and 4.5116 Chinese yuan from 4.70.41 yuan.

Tags: Market Close