Frothy A2 Milk extends gain as investors find faith in daigou

A2 Milk led the local stock market higher as it extended its gain so far this month to 19.4% as investors' confidence in China’s informal daigou market recovers.

Wednesday, October 20th 2021, 6:11PM

by BusinessDesk

The S&P/NZX 50 Index rose 48.32 points, or 0.4%, to 13,114.24, with A2 Milk accounting for $21.2 million of today’s $151.5m turnover on the wider market.

The milk marketing firm continued its recovery from its $5.53 trough in September, rising 6.2% today to $7.68. A2 fell out of favour after multiple earnings downgrades when the covid-19 pandemic shut down travel, effectively shutting down the profitable daigou channel.

An upbeat outlook by smaller rival Bubs Australia last week helped unwind that pessimism about A2 ahead of next month’s annual meeting. That spilled over into A2 supplier Synlait Milk, which rose 2.1% to $3.82.

“A2’s gain is on the back of this daigou channel that’s starting to show growth,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “There’s been a couple of positive commentaries out of Australia, particularly from research firms, saying A2 may be oversold.”
Contact Energy rose 1.4% to $8.13 and Meridian Energy was unchanged at $4.87 after Meridian’s operating statistics showed increased hydro storage in its South Island catchments.

McIntyre said US corporate earnings are being closely watched after better than expected results from the big banks, and ahead of next week’s big tech sector reports.

Vista Group International rose, up 4.2% at $2.50, with the cinema software firm set to benefit as economies around the world reopen.

Streaming content giant Netflix beat analysts’ quarterly earnings expectations and added more subscribers than anticipated, with the Squid Game series seen as luring in viewers.

NZX-listed media group Sky Network Television rose 1.1% to $1.93.

Telco Spark NZ, which also sells premium sports streaming services, slipped 0.2% to $4.59.

Exporters remained under pressure as the NZ dollar extended its gains, climbing to a six-month high against the greenback, trading at 71.78 US cents at 5.30pm in Wellington.

Mainfreight, which has operations around the world, posted the biggest decline on the benchmark index, down 2.7% at $88.70, while the Fonterra Shareholders’ Fund fell 2.3% to $3.88 and Pushpay slipped 1.1% to $1.82.

McIntyre said utilities and companies offering reliable dividends remained under pressure as faster than expected inflation ratchets up pressure on the Reserve Bank to raise interest rates, making those dividend yields less attractive.

Napier Port declined 1.6% to $3.10, Vector fell 1.2% to $4.03, Port of Tauranga decreased 1% to $6.70 and Chorus was down 1% at $6.40.

Outside the benchmark index, TruScreen jumped 39.1%, or 2.5 cents, to 8.9 cents after a clinical study confirmed the efficacy of the firm’s cervical cancer screening devices.

DGL Group continued its march higher, up 5.8% at $3.30, after continuing its acquisition spree yesterday.

Tags: Market Close