NZ shares rise; A2 Milk slumps

New Zealand shares rose despite A2 Milk dropping to a three-year low as more analysts lost faith in its earnings guidance.

Friday, April 23rd 2021, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index rose 73.16 points, or 0.6%, to 12,650.64. Within the index, 27 stocks rose, 17 fell and six were unchanged. Turnover was $198.5 million.

Offshore equity markets were lower overnight after reports that US president Joe Biden will propose to almost double the US capital gains tax on wealthy individuals.

Local investors ignored the negative offshore lead and most stocks on the NZ index rose, led by Oceania Healthcare, which jumped 5.2% to $1.42.

Investors may have been encouraged by a shareholding disclosure released today which revealed senior management had bought shares in the capital raise last month.

“Anything to do with capital gains tax is going to put a shudder through markets and it certainly did overnight in the US which paused what had been a nice bounce after a couple of weaker days of trading,” said Peter McIntyre, an investment advisor at Craig's Investment Partners.

Clean energy share price volatility continued, with Mercury NZ up 4.1% at $6.815 and Meridian Energy up 3.6% at $5.69. Contact Energy rose 1% to $7.58.

10-year government bond yields have been declining over the past month, having started April above 1.8% and now having slid closer to 1.6%. This may be providing some support for equity market buyers.

A2 Milk has further to fall

On the other side of the board, former market darling A2 Milk dropped 4% to $7.90 - the stock’s lowest price since January 2018.

Brokers and analysts are predicting a fourth earnings downgrade from the company, which disappointed investors when it suddenly revealed a key export channel which operated out of Australia had collapsed.

Yesterday, brokerage firm Morgans warned retailers in the China market were discounting inventory and said another earnings downgrade was possible.

Citi Research echoed their concerns, adding that Chinese consumers are increasingly preferring domestic brands over imports.

Craig's Investment Partner’s McIntyre said analysts had reached a consensus that further downgrades were the more likely outcome.

“Another downgrade and then potentially that’s when you might buy,” he said.

Vista Group International slipped 3% to $2.25 and NZX dropped 1.4% to $2.05.

Dual-listed AMP Limited rose 1.7% at $1.23 on the NZX after the company resumed an A$200 million share buyback programme after completing its portfolio review, the outcome of which was to spin off AMP Capital into an independent business.

The kiwi dollar was trading at 71.74 US cents at 5pm in Wellington, down from 71.90 cents yesterday.

The trade-weighted index was at 74.80 at 5pm, from 74.88 yesterday. The kiwi traded at 92.83 Australian cents from 92.84 cents, 77.42 yen from 77.65 yen, 59,66 euro cents from 59.74 cents, 51.77 British pence from 51.60 pence, and 4.6606 Chinese yuan from 4.6595 yuan.

Tags: Market Close