a2 climbs as short sellers scared off

A2 Milk led the New Zealand share market higher for a second day after a positive earnings report from a competitor scared short sellers into closing their positions.

Thursday, October 14th 2021, 6:25PM

by BusinessDesk

The S&P/NZX 50 Index rose 23 points, or 0.2%, to 13,048.5. Turnover was $181 million.

Shares in infant formula exporter A2 climbed another 4.6% to $7.22 today, extending a rally from yesterday when the stock surged 12%.

A trading update from a smaller competitor yesterday reported an improvement to the all-important daigou channel which has been closed down during the pandemic.

One broking firm said in a note to clients the update was enough to scare some short sellers who pushed the price up as they closed their positions.

The share price surge has come at a good time for A2 Milk investors as the MSCI Standard Index will reassess which companies are eligible for index in the last 10 days of October.

A2 has been teetering on the edge of exclusion with its market capitalisation almost half what it was at the start of the year.

The index methodology is complicated and hard to predict for certain, but one estimate suggested the milk marketing firm could be excluded if it was trading much below $6.70.

If removed, index trackers may need to sell more than 50m shares, or $335m, which is 40x its average daily volume.

At its current market price of $7.22, the stock looks likely to retain its spot in the index which gives short sellers yet another reason to throw in the towel.

Shares in dual-listed Harmoney jumped 10.1% to $1.96 after the personal lender reported a record quarter, with loan originations up 390%.

The company has also broken even on its loan book, on a proforma basis, which chief executive David Stevens said demonstrated the value of its automated consumer-direct model.

Vital Healthcare Property Trust units declined 2.3% to $2.94 as it came off a trading halt having raised $115m in a capital raise priced at $2.90 per share.

The property investor will now seek to raise another $35m from existing unit holders.

Z Energy shares finished the day unchanged at $3.63, despite more than 10 million shares changing hands.

Growth investors were likely selling to buyers who were happy to accept the 5.5% return, assuming the Ampol takeover is successful.

One shareholder freeing up capital for greener pastures is the Accident Compensation Corporation which has sold a net 5 million shares for $16.7m since May.

ACC still holds a 7.1% stake in the fuel retailer, with a market value of $135m.

Tags: Market Close