NZX 50 finishes first week of 2021 up 3%

New Zealand shares rose 3 percent in the first week of trading as investors focused on economic recovery, rather than the pandemic and political unrest in the United States.

Friday, January 8th 2021, 7:50PM

by BusinessDesk

The S&P/NZX 50 Index today rose 72.52 points, or half a percent, to 13,558.19. Within the index, 29 stocks rose, 18 fell and three were unchanged. Turnover was $232.5 million.

Telecommunications firm Spark New Zealand led the market higher, rising 3.8 percent to $4.90, with network provider Chorus not far behind, up 2.8 percent at $8.05.

However, electricity generator Meridian Energy was the winner of the week, closing 19.5 percent higher even after a 2.8 percent correction today brought the stock back to $9.14.

The renewable energy generator has gained more than 60 percent since the November elections in the US as offshore investors have rushed to buy clean energy index funds amid expectations a post-Trump administration will pursue climate change action.

With Meridian and Contact Energy making up 9.5 percent of BlackRock’s clean energy index and liquidity constrained with many investors on holiday, both stocks surged well above market analysts' views of fair value.

Today some shareholders began to take profit from Meridian’s elevated share price, but Contact Energy rose another 1.4 percent to reach $10.75, with 4.3 million shares traded.

Holdings

Grant Davies, an investment adviser at Hamilton Hindin Greene, said some institutions would be reluctant to sell a significant share of their holdings in the two firms as they are benchmarked to the NZX 50 index.

“A lot of the institutions, even the active ones, have to be near the market and these stocks are a large part of the free float,” he said.

Other utility stocks continued to climb as they offered better value relative to the two indexed stocks. Mercury NZ rose 2.6 percent to $7.3850, Genesis Energy was up 1.3 percent at $3.89, and Trustpower added 1.1 percent at $8.70.

Outside of the top 50 stocks, shares in The Warehouse climbed 1.8 percent to $2.80 after the company raised its half-year profit forecast by $20 million after strong Christmas sales.

“The Warehouse is back,” Davies said. “It is trading well, and that bodes well for retail and the New Zealand economy more generally.”

Tech component maker Rakon rose 6.9 percent to 77 cents today, and the stock has climbed 30 percent across the week. That prompted exchange regulator NZ RegCo to ask the firm to confirm it was meeting continuous disclosure obligations.

Within the benchmark index, Pushpay Holdings had the day’s biggest fall, down 4 percent at $1.67. That extended a period of weakness that has seen the price decline about 25 percent since October.

Davies said the strong kiwi dollar was likely hurting the church fundraising software developer, which earns most of its revenue in the US.

Kiwi

The kiwi was trading at 72.53 US cents at 5pm in Wellington, down from 72.91 cents yesterday. It has risen more than 3 percent in the past month.

The US dollar bounced off a near three-year low as the confirmation of Democrat Joe Biden's election as president improved the outlook for the recovery of the economy there, and as investors consolidated their positions in the heavily sold currency.

The trade-weighted index was at 74.97 at 5pm, from 75.11 yesterday. The kiwi traded at 93.42 Australian cents from 93.49 cents, 75.32 yen from 75.18 yen, 59.15 euro cents from 59.13 cents, 53.48 British pence from 53.60 pence, and 4.6896 Chinese yuan from 4.7078 yuan.

Tags: Market Close