Investors brace for omicron

New Zealand shares fell on Thursday as investors prepared for an outbreak of covid’s omicron variant, which is widely considered to be imminent with many cases arriving in managed isolation.

Thursday, January 20th 2022, 7:53PM

by BusinessDesk

The S&P/NZX 50 Index fell 115 points, or 0.9%, to 12,497.10. Turnover was still light at $111 million.

This was a second large decline for the index after it fell 1.5% yesterday after an increase in market interest rates was driven by inflation fears.

Today, it was two aged-care providers who led the index lower as investors appeared to be positioning for a looming omicron outbreak that has dominated the news cycle.

Greg Smith, head of retail at Devon Funds, said both higher interest rates and the arrival of omicron have always been a matter of ‘when’ and not ‘if’.

Retirement village operators, Ryman Healthcare dropped 3.7% to $11.08, and Summerset Holdings fell 3.5% to $12.43.

A research note from Forsyth Barr said retail and healthcare had been the worst-performing sectors on the Australian market since it was hit with the omicron variant.

“The aged care sector will likely suffer acute staff shortages, significant additional expenses and may also suffer reputational damage,” said analyst Aaron Ibbotson.

Aged-care providers are on the frontline of the pandemic with their customers a high risk for severe infection, he said.

Additionally, these businesses already experience staff shortages which could be made much worse by staff having to self-isolate during a large outbreak.

Forsyth Barr said retail and travel were heavily exposed to an omicron wave as it would result in absent staff and reduced customer demand.

Casino operator, SkyCity Entertainment dropped 2.3% to $2.96 today. It earns 80% of its revenue from its NZ operations which could be closed, or heavily restricted during an outbreak.

Air New Zealand also fell 2.3% to $1.46 as the airline is likely to experience weaker demand as people stay at home and could also experience pilot shortages if exposed.

Australia's Qantas Airways reduced its domestic capacity by approximately 30% for the March quarter because it expects the omicron outbreak to mean fewer people flying.

Seeka shares rose 1.4% to $5.27 after it declared a full year dividend of 13 cents per share.

Shares of Smartpay Holdings jumped 15.5% to 82 cents after saying consolidated revenue rose 43% year-on-year in the December quarter.

The company said the challenge of the omicron outbreak in Australia led to some “disruption for our customers early in 2022” but it still expects to report another positive quarter in March.

Z Energy was up 0.6% at $3.59 as it reported retail fuel volumes were lower than forecast, down 12.2% in the third quarter of 2022.

However, the company said volume had increased in December and it still expected to meet its earnings guidance between $270m and $310m.

The kiwi dollar was trading at 67.81 US cents at 3pm in Wellington, up from 67.74 cents yesterday.

Tags: Market Close