NZX 50 finishes the week down 3 percent

New Zealand’s benchmark equity index fell 3.4 percent this week as highly priced renewable energy stocks came crashing back to earth and bond yields moved higher.

Friday, January 15th 2021, 5:56PM

by BusinessDesk

The S&P/NZX 50 Index fell 91.18 points, or 0.7 percent, to 13,024 today. Within the index, 27 stocks fell and 23 rose. Turnover was $154.5 million.

Today’s decline pulls the index back to where it was before Christmas, reversing all the gains made through the holiday period.

The main driver of this fall has been the market correcting the price of Meridian Energy and Contact Energy after both stocks were pushed higher by investors buying clean energy exchange-traded funds when the Democrats won control of the US Senate last week.

Meridian had the biggest fall across the week, with today’s 0.9 percent fall bringing its share price to $7.87 - a weekly loss of 14.7 percent. Contact fell 1.4 percent to $9.55 today, bringing its decline this week to 11.1 percent.

“Volumes in those ETFs, while still relatively strong, appear to be dying down a little bit. You haven’t seen the same ferocious buying,” said Matthew Goodson, a director at Salt Fund Management.

Contact was still finding some investor support as there was a chance it may be added to the MSCI World Index when the next review comes up, he said.

Neither stock appeared to get any bounce after the aluminium smelter at Tiwai Point was given a new lease of life.

Forsyth Barr analysts said although the two firms had the biggest short-term downside from the closure, the deal struck to keep it open means they will be paid less for their electricity, limiting any upside.

Movers

Argosy Property was the weakest stock on the day, falling 3.8 percent to $1.53.

The strongest performer was Fletcher Building, up 3.5 percent at $6.23, buoyed by yesterday’s news there had been more new dwelling consents in November than in any month since 1973.

Stock exchange operator NZX had the week’s biggest gain, up 7.5 percent at $2.15, encouraged by a broker upgrade from Forsyth Barr.

Only 16 stocks made gains this week, as the US Senate election caused a leap in bond yields with investors anticipating more fiscal stimulus - which has put pressure on asset prices across the board.

On Christmas Day, the swap rate on a 10-year NZ government bond was 0.93 percent, whereas this week the rate ran as high as 1.13 percent.

“It doesn’t sound like much, but the math of the yield rising at such low levels has a massive impact on the valuation of long-duration assets like equities,” said Goodson.

Higher bond yields in the US have also slowed the steady depreciation of the American dollar, and therefore the relative appreciation of the NZ dollar, as investors have begun to consider the possibility inflation may remerge.

Today the chair US Federal Reserve hosed down those concerns, saying the central bank would keep downward pressure on interest rates, and the kiwi dollar moved back up to 72 US cents.

The kiwi dollar was trading 71.99 US cents at 5pm in Wellington, up from 71.90 cents yesterday.

The trade-weighted index was at 74.45 at 5pm, from 74.44 yesterday. The kiwi traded at 92.72 Australian cents from 92.83 cents, 74.70 yen from 74.80 yen, 59.25 euro cents from 59.20 cents, 52.61 British pence from 52.72 pence, and 4.6578 Chinese yuan from 4.6526 yuan.

Tags: Market Close