Tourism Holdings leads second fall for NZ shares

The New Zealand share market dipped today as investors cashed in a number of stocks that had reached record highs in the two-week rally following the US election.

Thursday, November 19th 2020, 7:11PM

by BusinessDesk

The S&P/NZX 50 Index fell 48.83 points, or 0.4 percent, to 12,557.13. Within the index, 25 stocks fell, 20 rose and five were unchanged. Turnover was $144.4 million.

It was the second day of decline for the index, which had been on an 11-day bull run prior.

“When you’ve gathered so much momentum and gains have been strong, inevitably you are gonna have a couple of weaker days,” said Peter McIntyre, an investment adviser at Craigs Investment Partner.

Tourism Holdings led the market lower as it continued to drop from a pandemic-era high. After falling 3.7 percent, the stock is now trading at $2.59, levels last seen in early March before a regional coronavirus outbreak in China became a full-scale pandemic.

McIntyre said the campervan rental company had likely been hurt by comments from the new tourism minister, Stuart Nash, who suggested he would seek to ban renting out vans that are not self-contained.

Travel booking platform Serko also continued to fall back from near an all-time record, dropping 2 percent to $5.30 — a price equal to where it started the year.

Meridian Energy declined 1.8 percent to $5.97 following Forsyth Barr downgrading the electricity stock after a share price surge saw it push as high as a record $6.30 this month.

Meanwhile, an increase in interest rates has closed the gap between Meridian’s dividend yield and the 10-year swap rate on a government bond.

“Other yield and electricity investments offer better value, in our view,” analysts Andrew Harvey-Green and Scott Anderson said.

Some Meridian investors who abandoned ship appeared to climb aboard Genesis Energy’s waka. The electricity and natural gas company rose 2.2 percent to $3.25 in the day’s biggest gain.

McIntyre said there may be a bit of pressure on yield stocks more generally as it looks like interest rates have fallen about as low as they ever will.

Earlier this month, the market reversed its prediction the Reserve Bank would impose a negative cash rate and 10-year swap rates rose from below 0.5 percent at the start of the month to 0.825 percent today.

While these rates are still very low, the move should in theory reduce the value of yield stocks and turn more attention towards companies still in a growth or recovery phase.

That said, investment firm Infratil rose 1.5 percent to $5.60 after it offered up to $100 million of fixed rate infrastructure bonds with a 3 percent yield.

Stride property also rose 0.9 percent to $2.32 after saying it was buying Grant Thornton House on Wellington’s Lambton Quay for $84.5 million, which has a three-year lease currently yielding a 6 percent annual return.

Forsyth Barr analysts held their line on A2 Milk Company, which fell another 1.9 percent to $14.54 today. The analysts said while investors appeared to be focused on the FY21 earnings downgrade risk, they saw attractive medium-term growth potential.

McIntyre said the milk marketer generated huge cash flow and so there was no issue with the company financing itself through whatever difficulty was ahead. However, he warned that once a company gave one earnings downgrade others often follow.

The newest company on the NZX, Harmoney, had a rough first day with its shares falling 3.9 percent to $3.60 as traded commenced this afternoon. The firm’s primary listing is on the ASX where the stock fared even worse, falling 4.3 percent.

The kiwi dollar held near this month’s high-water mark, trading at 69.01 US cents at 5pm in Wellington, up from 68.87 cents yesterday.

The trade-weighted index was at 73.09 at 5pm, from 72.82 yesterday. The kiwi traded at 94.66 Australian cents from 94.46 cents, 71.59 yen from 71.69 yen, 58.28 euro cents from 58.05 cents, 52.17 British pence from 51.96 pence, and 4.5317 Chinese yuan from 4.5139 yuan.

Tags: Market Close