Travel stocks up as Aussie reopens

New Zealand’s benchmark equity index finished Tuesday almost unchanged despite some tourism stocks jumping after Australia announced it would fully reopen its borders this month.

Tuesday, February 8th 2022, 6:58PM

by BusinessDesk

The S&P/NZX 50 Index rose 10 points, or 0.1%, to 12,289.45. Turnover was $125 million.

Yesterday, the Australian government announced it would reopen its border to all vaccinated visa holders from February 21.

Casino operator SkyCity Entertainment led the index higher as it jumped 6.2% to $3.09. The stock is now down just 2% year-to-date, despite dropping over 13% in January.

SkyCity, which has a venue and hotel in Adelaide, has previously attracted wealthy international travellers some of whom visit specifically to gamble.

Air New Zealand also climbed 4.7% to $1.67 as it continues to take off after the NZ government announced its own plan to reopen the borders last Thursday.

Shares in the airline have since risen 18% – from a one-year low of $1.40 – however Tourism NZ is not convinced Australia reopening is good news for local operators.

The tourism industry body said having Australia reopen months before NZ might allow the rival country to win a larger share of the global travel market.

Shares in Serko rose 2.9% to $5.35, the travel booking software company is mostly exposed to domestic travel but does handle some international travel as well.

Meridian Energy was up 1.3% at $4.85 after the Tiwai Point aluminium smelter – which it supplies with electricity – said it wanted to stay open beyond the 2024 closure it had previously planned.

Shares in finance company Harmoney dropped 4% to $1.70 after it announced a new A$150m warehouse facility led by another of Australia’s largest banks.

Vulcan Steel shares slid half a percent to $10.07 ahead of its inaugural half-year earnings report on Thursday.

Forsyth Barr analysts said they expect a strong first half report with revenue of $456m and earnings of $74m.

“However, of more interest will be management's expectations of activity levels in the second half of 2022 and execution on organic and inorganic growth initiatives,” they wrote.

Mark Lister, head of research at Craigs Investment Partners, told BusinessDesk investors were expecting a “solid to spectacular” earnings season in general, as there hadn’t been many profit warnings.

Companies that have underperformed their guidance or expectations usually will issue a warning ahead of the formal earnings report.

Lister warned there could still be some earnings downgrades for future periods as omicron poses a threat to revenue in the coming months.

Other cyclical construction stocks, besides Vulcan, also had some decline today. Fletcher Building fell 0.5% to $6.39 and Steel & Tube Holdings dropped 3.1% to $1.56.

The NZ dollar was trading at 66.42 US cents at 3pm in Wellington, down from 66.72 cents yesterday.

ANZ senior strategist David Croy said currency traders should “brace for a period of volatility” ahead of the US Federal Reserve’s first rate hike in March.

He said there was not much in the way of historical comparisons that can be made given the “near-unprecedented situation” global markets are in.

“Our forecasts do call for gradual NZD/USD strength over 2022, but we are no longer as bullish as we were and have recently downgraded our track,” he said.

BNZ Senior Markets Strategist Jason Wong said the NZ dollar would be driven by the US currency, but it was hard to predict where that will go.

"The models are thrown out at the moment, because nothing makes sense anymore," he told BusinessDesk.

Tags: Market Close