A2 Milk jumps 6% as market falls

New Zealand's headline share index fell for a fifth consecutive session on Tuesday, but A2 Milk was lifted from a five-year low by rumours it could be a takeover target for a Canadian dairy firm.

Tuesday, January 25th 2022, 7:03PM

by BusinessDesk

The S&P/NZX 50 Index fell 62.8 points, or 0.5%, to 12,128.21. Turnover was $178 million.

Shares in infant formula exporter A2 Milk jumped 6.2% to $5.79 on a speculative column in The Australian which said the troubled company could be bought out by Saputo, of Canada.

Rumours like these are common in Australian media. Some turn out to be true while others do not.

While A2 had a significant price spike in reaction to the speculation, it had been trading at a multi-year low of $5.32 yesterday and is still down 1.3% this month.

The wider market fell again as investors reduced exposure to risk ahead of the US Federal Reserve meeting and local consumer price index data this week - both of which will have implications for interest rates.

Vista Group led the decline, falling 6.5% to its lowest closing price since March last year at $2.03.

Fellow software firm, Serko, dropped 4.9% to $5.23 and is now trading at its lowest price since late 2020.

General manager of CMC Markets NZ, Chris Smith, said the global equities selloff had been exceptionally severe in stocks that were highly priced on future earnings forecasts.

“The headline drops in the index at the moment aren’t telling the full story. There is decimation in the tech sector,” he said.

Smith said market volatility was extreme leading into the Federal Reserve meeting.

“There is a huge rush to safety with investors taking risk off across the board, including crypto,” he said.

Among the few stocks making gains on the NZX today were relatively safe utilities such as Contact Energy, up 3.3% at $7.85, and Auckland International Airport, which rose 2% to $7.34.

Although AIA has been badly affected by the pandemic, the stock remains valuable as it owns a large amount of real estate and has a dominant market position for future international travel to and from NZ.

Contact Energy today gave its December monthly operating report, which showed electricity and gas sales up from a year earlier.

Rakon jumped a massive 11% to $1.80, as it rebounded from the recent selloff. The company also announced the appointment of Sinead Horgan as independent director today.

Horgan has worked in finance and investment roles with PwC, Accenture, ANZ and BNZ around the world.

Synlait Milk did not share in A2’s bump and instead fell 4.6% to $3.28.

Fletcher Building shares fell 2.8% to $6.63. However, a Jarden analyst has forecast first-half earnings will hit $311 million next month and has added $20m to his expectations of full-year earnings.

The NZ dollar was trading at 66.93 US cents today, down from 67.12 cents yesterday.

Tags: Market Close