Investors cash up $100m for renewable energy sell-off

New Zealand shares fell as investors raised cash to buy shares in renewable energy stocks tomorrow when fund manager BlackRock is required to reduce its holdings.

Thursday, April 15th 2021, 6:57PM

by BusinessDesk

The S&P/NZX 50 Index fell 114.83 points, or 0.9%, to 12,636.55. Within the index, 30 stocks fell, 17 rose and three were unchanged. Turnover was $197.9 million.

Traders have drawn jagged lines on NZX 50 charts this month as a pattern with one or two strong days immediately followed by a correction.

The trend has resulted in a gradual gain with the index up 4.5% from its lowest point this year, albeit still down 5.5% year-to-date.

Sam Trethewey, a portfolio manager at Milford Asset Management, said the impending rebalance of S&P Dow Jones’s clean energy index had been destabilising the market.

S&P is changing the makeup of its Global Clean Energy Index tomorrow after the demand for the fund overwhelmed the two relatively small Kiwi utility firms included in it.

A new set of index rules will see 51 new stocks added to the index tomorrow, greatly reducing the weight of the NZ stocks in the process.

“It hasn’t helped that for several weeks now investors have known this trade was coming,” he told BusinessDesk.

The new rules prevent the index from owning more than 4% of any single company, while BlackRock – which runs an ETF based on the index – currently owns 14% of Contact and 7% of Meridian.

It is difficult to predict exactly how many shares BlackRock will be forced to sell, nor how much it has been able to sell in advance.

Still, investors want to have plenty of cash on hand to buy positions in Meridian and Contact if their share prices fall below fair value.

Trethewey said selling in recent days had been focused on stocks that would be held in a portfolio alongside the two utilities.

Genesis Energy saw the biggest decline today, falling 3.2% to $3.36, with 550,000 shares traded which would have freed up almost $2m for investors.

Auckland International Airport, which can be considered a utility stock, dropped 2.6% to $7.50 with almost $10m of stock sold.

But the most volume was running through the two stars of the show which together saw 10m shares traded for a value of more than $72m — Meridian fell 0.8% to $6, and Contact was down 1.5% at $7.50.

The kiwi dollar was trading at 71.48 US cents at 5pm in Wellington, up from 70.87 cents yesterday.

The trade-weighted index was at 74.77 at 5pm, from 74.29 yesterday. The kiwi traded at 92.60 Australian cents from 92.45 cents, 77.84 yen from 77.24 yen, 59.66 euro cents from 59.26 cents, 51.87 British pence from 51.45 pence, and 4.6722 Chinese yuan from 4.6330 yuan.

Tags: Market Close