Shares tumble as investors return to work

Most New Zealand shares tumbled today as investors took profit from electricity utilities and other stocks run up to record highs during the holiday period.

Monday, January 11th 2021, 6:07PM

by BusinessDesk

The S&P/NZX 50 Index fell 268.1 points, or 2 percent, to 13,290.09. Within the index, 34 stocks fell, 12 rose and four were unchanged. Turnover was $136.6 million.

The vast majority of stocks fell as investors who returned from holidays found the market sitting at a record high and decided to cash in some profits.

Renewable electricity generators took the biggest falls, as strong demand from global clean energy funds had inflated their price during the holiday season.

Meridian Energy led the market lower, falling 7.9 percent to $8.42, while Contact Energy dropped 6.6 percent to $10.04. Both are included in BlackRock’s iShares Clean Energy ETF.

Jeremy Sullivan, an investment advisor at Hamilton Hindin Greene, said while these stocks were weaker today, the flow from the index funds may resume when Wall Street reopens tonight.

Other utilities that have followed the two renewable generators higher also fell. Mercury NZ was down 4.1 percent at $7.08 and Genesis Energy declined 2.8 percent to $3.78.

“It’s not just the utility stocks, although they are making up the biggest amounts. Even without them, we’d still be having a down day,” Sullivan said.

Across the board

Investors appeared to be taking profit from virtually all stocks, with a dozen of the top 50 companies falling more than 2 percent.

Pushpay Holdings fell 4.2 percent to $1.60, Chorus dropped 2.8 percent to $7.825, Pacific Edge was down 2.5 percent at $1.17, and Infratil declined 2.1 percent to $7.32.

The swap rate on 10-year government bonds ticked higher last week, climbing from 0.92 percent to 1.1 percent today.

Extremely low interest rates have been a key driver of asset prices throughout this year. If interest rates begin to rise it will take some heat out of the share market.

Summerset Holdings, however, is still benefiting from the low interest rate environment which has been pushing the price of housing higher. The retirement village operator today reported record December-quarter sales.

Its share price was still caught up in the sell-off but to a much lesser extent, falling just 0.6 percent to $12.56.

“A very good announcement for them, tepid in terms of their share price performance today but very encouraging tailwinds,” Sullivan said.

“They have held back on increasing the prices for units, but were very much hinting towards increases in prices which will be good for margins.”

Kiwi dollar

The New Zealand dollar fell for a second day - after 10 straight weeks of upward momentum - as the increased likelihood of more fiscal stimulus for the world’s largest economy and the resulting higher yields drove investors to the US currency.

Weak labour market data has raised investors' expectations that the incoming Biden administration will enact a large stimulus package, including US$2,000 cheques for all.

The kiwi dollar was trading 71.94 US cents at 5pm in Wellington, down from 72.53 cents the same time on Friday.

The trade-weighted index was at 74.63 at 5pm, from 74.97 on Friday. The kiwi traded at 93.28 Australian cents from 93.42 cents, 74.93 yen from 75.32 yen, 59.08 euro cents from 59.15 cents, 53.26 British pence from 53.48 pence, and 4.6645 Chinese yuan from 4.6896 yuan.

Tags: Market Close