NZ shares finish shocker week down 3.5%

New Zealand shares fell on Friday as the local market continued to follow the US which has been falling precipitously ahead of interest rate hikes pencilled in for March.

Friday, January 21st 2022, 6:44PM

by BusinessDesk

The S&P/NZX 50 Index fell 149.1 points, or 1.2%, to 12,348. Turnover was $172 million.

US markets spent most of the overnight session trading higher but reversed course in the last two hours of trading.

Perhaps investors were listening to a warning from well-known investor Jeremy Grantham, who released a paper arguing the US markets were approaching the end of a “super-bubble”.

Grantham said there was a bubble in all assets including housing, equities, and commodities – propelled by low interest rates – which was beginning to deflate starting with the riskiest assets.

While predictions of bubble’s collapses are commonplace these days, it is true that the prospect of the US Federal Reserve raising interest rates has spooked investors enough to cause a correction in the Nasdaq Index.

It is currently down 10.6% in the year to date, which has contained just 12 trading days so far. The S&P 500 has fallen less dramatically but is still down 6.5%.

Grant Davies, an investment adviser at Hamilton Hindin Greene, said the local market was just following this lead.

“There have been a lot of stocks that have been bid up to fairly high levels and, for a lot of them, the earnings just weren't there to justify it,” he said.

Infant formula exporter A2 Milk led the index lower as it fell 4.2% to an almost five-year low at $5.48.

Davies said the sell-off in the US equity market hits technology stocks hardest, but only because that is the sector with the highest valuations rather than because of the sector.

“It's all about uncertainty rather than whether it's a technology stock or not. Stocks with high uncertainty tend to get sold off more in these types of scenarios,” he said.

A2 Milk’s key export channel – a grey market called the daigou – was shut down during the pandemic when borders closed, and the once-promising company has lost 70% of its value.

The exporter now faces two class-action lawsuits in Australia’s high court which allege the company breached continuous disclosure rules when issuing earnings downgrades.

It wasn’t the only stock that got whacked in today’s selloff. On the NZX50, just 12 companies moved higher while 34 fell – 14 stocks fell more than 2%.

These included: Pacific Edge which dropped 4% to $1.22, Heartland Group Holdings which fell 3.6% to $2.42, and Kathmandu which was down 3.5% at $1.38.

Fisher & Paykel Healthcare declined 3.5% to $29.35, which is its lowest close since June last year.

My Food Bag fell 0.9% to $1.13 after it said its earnings guidance would remain unchanged despite sales in the December quarter rising 15%.

Increasing labour and food prices were putting pressure on the company, which is simultaneously preparing for the possible disruption from an omicron outbreak.

IkeGPS bucked the trend and climbed 3.7% to 85 cents per share after it signed yet another deal with a new customer.

The communications and electric utility systems provider said it had signed a deal worth $900,000 with a new “tier-1 electric utility customer”.

General insurer Tower shares fell 2.8% to 68 cents after it announced it was investigating the financial impact of last weekend’s underwater volcano and tsunami in Tonga.

The NZX-listed company has 2,500 customers in the island nation, mostly with personal lines policies, and 300 commercial customers.

The early-stage software company TradeWindow climbed 3% to $2.40 after it integrated Mastercard’s payment network and technology into its digital trade platform ‘Cube’.

Mastercard’s vice president of global trade, Claire Thompson, said the collaboration with TradeWindow aims to remove barriers to cross-border trade, simplifying payment processes and empowering Australasian businesses.

The kiwi dollar was trading at 67.34 US cents at 3pm in Wellington, down from 67.81 cents yesterday.

Tags: Market Close