Meridian Energy shares keep on defying gravity

Shares in utility firm Meridian Energy leapt a further 10 percent, pushing New Zealand’s benchmark equity index higher.

Thursday, January 7th 2021, 7:12PM

by BusinessDesk

Investors appeared to ignore today's extreme political turmoil in Washington DC while banking the fact that the Democratic Party now controls the presidency, and both Houses of the US Congress following wins in yesterday's Georgia state Senate run-off election.

The S&P/NZX 50 Index rose 151.74 points, or 1.1 percent, to 13,485.67. Within the index, 24 stocks rose, 19 fell and seven were unchanged. Turnover was $209.6 million.

With respect to the surge in Meridian's share price, it is understood that offshore exchange traded funds are buying Meridian and Contact Energy, which are heavily weighted in clean energy indices. The two stocks make up almost 10 percent of a clean energy index built by S&P/Dow Jones.

“The utilities are not being driven by decisions made by active investors, they are driven by a flow of money from clean energy ETFs,” said Mark Lister, head of private wealth research at Craigs Investment Partners.

Lister said that with long term interest rates moving higher, utility stocks - often bought for their high dividend payout - should be coming down in price as investors rotate towards more speculative stocks.

Instead, shares in yield-heavy Meridian jumped 10.2 percent to $9.40 bringing its total gain just this week to 34 percent. In the past six months, the stock has more than doubled in value.

“You should never ever see a utility go up 15 percent in a day. These are safe, predictable boring companies that shouldn’t behave like that,” Lister said.

Contact Energy is also climbing, up 24 percent this week after jumping 7.1 percent to $10.60, today. TrustPower rallied 6.8 percent to hit $8.60 and Mercury NZ added 2.9 percent at $7.20.

Several fund managers have told BusinessDesk that Joe Biden’s election win in November US presidential election triggered a wave of investors to buy stakes in clean energy funds.

That trend was reinforced overnight as his Democratic party won two more seats in the Senate, clearing an important roadblock to his energy policy goals.

ANZ bank group climbed 5.2 percent to $25.44 and Westpac rose 4.5 percent to $21.50, both on light volume.

Fletcher Building was up 4.8 percent at $5.94 and logistics firm Freightways added 4.2 percent to $10.70. Both stocks are bellwethers for economic conditions.

US church fundraising software developer Pushpay Holdings took the day’s biggest fall, dropping 4.4 percent to $1.74.

The US dollar tested three-year lows through trade overnight as traders reacted to the Democrats wresting control of the Senate away from the Republicans, delivering all three branches of US federal government to one party and paving the way for increased fiscal stimulus and deficits.

The kiwi dollar was trading at 72.91 US cents at 5pm in Wellington, up from 72.46 cents yesterday.

Its rise slowed as demand for risk assets faltered when Trump supporters in Washington D.C stormed the Capitol building in a violent, last-ditch attempt to overturn the confirmation of presidential election results.

The trade-weighted index was at 75.11 at 5pm, from 74.73 yesterday. The kiwi traded at 93.49 Australian cents from 93.47 cents, 75.18 yen from 74.46 yen, 59.13 euro cents from 58.96 cents, 53.60 British pence from 53.25 pence, and 4.7078 Chinese yuan from 4.6794 yuan.

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