NZX 50 has fallen 8.5% this year

New Zealand’s benchmark index finished the week down 8.5% year-to-date as bond yields creep higher and investors sell down stocks that collected outsized gains in 2020.

Friday, May 28th 2021, 6:04PM

by BusinessDesk

The S&P/NZX 50 Index fell 61.09 points, or half a percent to 12,182.25. Within the index, 22 stocks fell, 21 rose and six were unchanged.

Fisher & Paykel Healthcare was again one of the key causes of weakness on the index. The heavyweight stock dropped another 1.7% to $29.21 today, bringing its total decline in the past month to almost 20%.

Head of research at Fat Prophets, Greg Smith said the lack of forward guidance had spooked investors who were struggling to justify the stock's ultra-high valuation without knowing what future earnings would be.

Smith said investing in the healthcare exporter was “starting to look interesting” at these prices, as the company had exposure to the reopening economy as well as the pandemic.

While the company has seen incredibly elevated sales in its hospital products, its home care and sleep apnoea products had taken a hit. Sales in those divisions should increase even as pandemic-related sales settle down, he said.

Mercury NZ had the day’s biggest loss, down 5.8% to $6.54, as it fell back from a sudden share price surge yesterday. The stock has ended the week unchanged from where it started on Monday.

Auckland Airport had the biggest gain, up 4.1% at $7.30 but still down 1.1% across the week.

Pushpay Holdings also finished the week unchanged, after dropping 2.9% to $1.70 today. The higher kiwi dollar will be a headwind to profits earned in the United States.

Smith said the Reserve Bank of New Zealand’s indication it will soon raise interest rates had pushed the kiwi dollar higher and created a headwind for US dollar earnings stocks.

“The RBNZ is being a little more realistic than some of its peers,” he said. “NZ may be the first country to raise interest rates, which does take away some the appeal of yield stocks”.

NZ’s 5 year swap rate jumped 8 basis points, to 1.39%, on Thursday as the market continued to price in the possible rate hikes from the middle of next year.

Gentrack was the big winner, gaining 22% across the week and hitting a 14 month record at $1.89, after it reported half-year earnings well ahead of analyst forecasts – $7m as opposed to Jarden’s $1.5m.

The utilities software company expects to earn between $5m and $10m in the full year 2021, prompting Jarden analysts to add 52 cents to bring their target price up to $1.92.

Eroad grew earnings by 13% to $30.7m, up from $27.1m last year as it increased the number of contracted units by almost 10,000 during the year ended March. Its share rose 2.8% to $5.56 today.

The kiwi dollar was trading 72.77 US cents at 3pm in Wellington, down slightly from 72.81 cents yesterday.

The trade-weighted index was at 75.51 at 3pm, from 75.63 yesterday. The kiwi traded at 93.96 Australian cents from 94.14 cents, 79.98 yen from 79.46 yen, 59.73 euro cents from 59.76 cents, 51.30 British pence from 51.64 pence, and 4.6399 Chinese yuan from 4.6542 yuan.

Tags: Market Close