Frothy markets simmer down

New Zealand's main share index fell on Monday after highly valued global stocks and cryptocurrencies traded lower over the weekend in anticipation of US rate hikes and in fear of omicron.

Monday, December 6th 2021, 7:04PM

by BusinessDesk

The S&P/NZX 50 Index fell 78 points, or 0.6%, to 12,597.81. Turnover was $162 million.

US markets are ending the year with a small correction triggered by the emergence of the omicron covid variant and the Federal Reserve’s sudden concern about inflation.

The S&P 500 has fallen about 3.5% since the end of November, having tracked higher virtually all year long.

Sam Trethewey, a portfolio manager at Milford Asset Management, said there was something of a “washout” happening in global markets.

Omicron was creating uncertainty and investors were waiting to see how the US Federal Reserve will adjust its policy, having now conceded that inflation is not transitory, he said.

While it was the “frothy” – that is speculative or highly priced – stocks that were most affected in global markets, he said, the impact on NZ was more general.

Electricity generators Genesis Energy and Meridian Energy led the market lower as they fell 4.2% to $2.95 and 3.6% to $4.59, respectively.

Some local technology stocks also took a tumble: Pushpay Holdings dropped 2.2% to $1.33, Trade Window declined 2.8% to $1.77, and Serko was down 1.6% at $6.33.

However, Plexure bucked the trend and climbed 9.5% to 46 cents in the day’s biggest climb.

Investors may have been reacting to the news that newly acquired Task had won a contract to install its transaction management platform in Sydney’s cricket and football grounds, which was announced late on Friday afternoon.

Vulcan Steel rose 5.6% to $8.85 after it lifted its profit forecast by as much as 35% in a trading update.

The company now expects net profit for the year ending June 2022 will come in between $93m and $100m compared with its prospectus forecast of $74m.

Managing director Rhys Jones said trading had been stronger than anticipated across all its Australasia business units.

PGG Wrightson also climbed after boosting its guidance $5m to $58m, its shares were up 2.5% at $4.46 today.

Napier Port Holdings declined 1.3% to $3.10 in the first day of trading since S&P Dow Jones confirmed it would be removed from the NZX 50 to make room for Eroad later this month.

Investors who track the benchmark will have been aware this was on the cards and have been positioning for it in recent weeks.

Analysis by Forsyth Barr estimated passive funds will have to buy approximately 1.5 million Eroad shares and sell 1.7 million Napier Port shares by market close Dec 17.

The New Zealand dollar is facing its fifth week of losses as the double threat of omicron and US rate hikes send traders into the American dollar.

Westpac’s head of NZ strategy, Imre Speizer said he had upgraded the outlook for the US dollar as recent strong economic data should bring forward interest rate hikes to mid-2022 and boost their currency.

“The NZD/USD should weaken as a result, with potential to reach 66 US cents during the months ahead,” he said.

The NZ dollar was trading at 67.48 US cents today, down from 67.99 cents yesterday.

Tags: Market Close