NZX50 soars as Meridian joins $20b club

The expansion of the US fiscal stimulus helped New Zealand's share market extend its Christmas Day rally with Meridian Energy leading the market deeper into record territory.

Tuesday, December 29th 2020, 6:34PM

by BusinessDesk

The S&P/NZX 50 Index rose 208.83 points, or 1.6 percent, to 13,037.94. Within the index, 34 stocks rose, nine fell, and seven were unchanged. Turnover was quiet at $77.2 million.

US indices climbed to new records after US President Donald Trump signed the long-awaited pandemic relief stimulus bill despite initially demanding the US$600 stimulus cheque was increased to US$2,000. Democrat lawmakers in Congress voted to increase the payment anyway, although it is yet to be voted on in the Republican-controlled Senate.

Asian markets rallied as investors welcomed the news that the world’s biggest economy would be receiving US$2.3 trillion of support and avoid a federal government shutdown.

“Unemployment cheques provide that immediate key consumption bridge through the first quarter until the vaccines become more widely distributed,” said Stephen Innes, chief global markets strategist at Axi.

“The stipends will arrive quickly and are spent rapidly, providing the US economy with immediate retail sales spending bonanza boost.”

Innes said the prospect of this spending splurge being multiplied by three if the Senate approves the increase was getting investors excited.

The positive mood translated into a broad-based rally on NZ’s benchmark equity index with fewer than 10 stocks falling.

Meridian led the market higher as it jumped 8.8 percent to an all-time high of $7.83, leapfrogging Fisher & Paykel Helathcare as the country's biggest listed company with a market value of $20.06 billion. The renewable energy generator has been in hot demand from overseas investors who are putting money into clean energy indices.

Meridian and Contact Energy are both in the S&P Global Clean Energy Index to which many clean energy funds are benchmarked. Contact rose 3 percent to $9.04, while Mercury NZ climbed 4.7 percent to $6.745.

Stocks exposed to the heated housing market also found favour with investors, who are looking for alternatives to miniscule returns in term deposits.

Summerset Group rose 4.6 percent to $12.66, and Oceania Healthcare climbed 4.4 percent to $1.44.

Commercial property owners were also in demand with Goodman Property Trust up 3.7 percent at $2.36, and Precinct Properties rising 3.5 percent to $1.76.

Synlait Milk and A2 Milk Company both continued to recover from precipitous falls after A2’s earnings downgrade before Christmas. Synlait rose 3.2 percent to $5.17 today, and A2 was up 1.3 percent at $12.22.

F&P Healthcare posted the day’s biggest fall, slipping 1.5 percent to $33.50.

Outside the top 50 index, New Zealand Oil & Gas took a nasty fall after it announced a prospective field, Ironbark, it was drilling off the coast of Western Australia showed no significant hydrocarbons.

Had the drilling been successful, it would have been a massive boost for NZOG. Instead, the shares dropped 29.7 percent to 52 cents.

The kiwi dollar was trading 71.15 US cents at 5pm in Wellington, down from 71.27 cents yesterday. It traded at 93.70 Australian cents from 93.57 cents yesterday.

The trade-weighted index was at 74.12 at 5pm, up from 73.98 on Christmas Day. The kiwi traded at 73.81 yen from 73.50 yen on Dec. 25, was unchanged at 58.15 euro cents, 52.74 British pence from 52.33 pence, and 4.6498 Chinese yuan from 4.6333 yuan.

Tags: Market Close