NZX50 runs out of puff as Kiwi marches higher

The S&P/NZX 50 Index ran out of puff after reaching elevated levels as investors booked profits on recent gains, and a resurgent kiwi dollar threatens to derail local export earnings.

Thursday, November 26th 2020, 6:18PM

by BusinessDesk

The benchmark index fell 65.96 points, or 0.5 percent, to 12,602.02. Within the index, 29 stocks fell, 18 rose, and three were unchanged. Turnover was $172.4 million.

The local bourse has joined other stock markets in trading at elevated levels as near-zero interest rate policies push investors into equities in their search for positive returns, and on growing optimism a covid-19 vaccine will see global activity start returning to normal as soon as next year.

Optimism over a vaccine has buoyed demand for companies more exposed to the pandemic, such as airline Air New Zealand and cinema software developer Vista Group International, and both gave up recent gains, falling 4.2 percent to $1.81 and 3.9 percent to $1.73 respectively.

That’s also ahead of the Thanksgiving holiday in the US, which Fat Prophets head of research Greg Smith said would see very light trading on Friday.

“There’s a bit of profit-taking in a lot of markets,” Smith said.

Not to worry

Pacific Edge led the market lower, dropping 5.5 percent to 69 cents. The cancer diagnostics firm today reported a smaller first-half loss and increased revenue as the benefit of its recent US contracts started to bear fruit.

Smith said the stock has soared from 15 cents in June, so today’s decline was “neither here nor there” in the wider scheme of things.

Fisher & Paykel Healthcare continued to give up recent gains after reporting record first-half profit and revenue yesterday. The stock fell 3.2 percent to $32.49.

Grant Williamson, a director at Hamilton Hindin Greene, said some investors had expected an even better performance, and were now cashing in on gains given the stock is 63.5 percent higher than 12 months ago.

The rising kiwi dollar didn’t appear to be weighing on the medical device maker, but Williamson said it might be crimping some other exporters, such as Skellerup, which was down 0.3 percent at $3.16.

The NZ dollar rose to 70 US cents at 5pm in Wellington from 69.81 cents yesterday, while the trade-weighted index was at 73.81 from 73.70.

The kiwi advanced to 95.03 Australian cents from 94.88 cents, traded at 73.01 yen from 72.93 yen, 58.70 euro cents form 58.52 cents, 52.29 British pence from 52.26 pence, and 4.5951 Chinese yuan from 4.5918 yuan.

Something to worry about

Smith said the strong currency would become an issue for exporters in the future, who have been outperforming in the covid environment. Stats NZ data today showed annual exports at $60 billion in the October year.

While the Reserve Bank would want the currency to be weaker, Smith doubted it would be able to compete against other larger central banks all vying for the same outcome.

The RBNZ’s policy of quantitative easing and near-zero interest rates spurred on the attraction of companies delivering reliable dividends.

Commercial landlord Argosy Property rose 2.1 percent to $1.46 after saying it would pay a bigger dividend than expected, while medical landlord Vital Healthcare Property Trust posted the day’s biggest gain, up 2.7 percent at $3.

Office building owner Precinct Properties increased 2.6 percent to $1.75, and retirement village operator and developer Ryman Healthcare increased 2.5 percent to $14.98.

Infratil rose 1.1 percent to $5.80, its highest close. Williamson said the infrastructure investor’s diversification into diagnostic imaging business Qscan was new territory, but noted its manager – Morrison & Co – had a good track record, including the backing of Canberrra-based CDC Data Centres.

Tags: Market Close