NZ shares down, Russian threat remains

New Zealand's headline share index followed global markets lower as investors lost their optimistic view that Russia might be backing away from the Ukrainian border.

Friday, February 18th 2022, 7:33PM

by BusinessDesk

The S&P/NZX 50 Index fell 115 points, or 0.9%, to 12,141.89. Turnover was $100 million.

The narrative in financial markets for the past couple of days has been that investors were regaining confidence as tensions on the Russia/Ukraine border eased.

There was never much evidence for this supposed de-escalation and US President Joe Biden reiterated overnight a “very high” risk of a Russian invasion and he warned there may be a false flag attack as a pretext.

ASB’s Nathaniel Keall said the warning “sent investors flocking to safe assets” – such as the US treasuries and the Japanese yen – and away from riskier assets like stocks and bitcoin.

Local investors are also facing up to the prospect of the Reserve Bank of New Zealand (RBNZ) delivering another rate hike next week.

Stephen Toplis, head of research at BNZ, said it was clear the cash rate needs to be raised at the meeting on Wednesday, but it was less obvious by how much.

He said the central bank will likely opt for the standard 25-basis point increase, but it would not be too surprising if it went for 50-basis points.

“In our opinion, at this meeting, the Reserve Bank will be torn between a strict least regrets view of the world and the growing uncertainty that pervades,” Toplis said.

Technology stocks were worst affected, following falls on the Nasdaq exchange overnight.

Serko led the NZX 50 lower, falling 5.8% to $5.11, while Pacific Edge fell 4.6% to $1.04, Rakon declined 4.4% at $1.75, and Plexure dropped 6.3% to 37 cents.

Some larger stocks also saw significant falls: Fisher & Paykel Healthcare was down 2.3% at $28.81, Ryman Healthcare dropped 2.1% to $9.40, and Mainfreight fell 2.6% to $2.11.

It wasn’t all bad news; Sky TV announced a new six-year deal for English Premier League football rights in NZ – which were previously held by Spark Sport.

Jarden’s head of research, Arie Dekker, said the football rights were not as strategically important as local sporting content but ranked highly amongst “second-tier sports”.

Dekker questioned whether Spark will reiterate a long-term commitment to sporting content, considering it has now lost several sets of broadcast rights.

“We would think there is a route out of its remaining sporting commitments were Spark to make the decision that it no longer wants to pursue sports media in a direct capacity,” he said.

That would be a significant win for Sky TV, which saw its shares climb 3.6% to $2.57 today. Shares in Spark NZ also climbed 1.2% to $4.535, with the stock seen as a safe haven.

Skellerup Holdings climbed half a percent to $6.24 after reporting results this week.

Analysts at Forsyth Barr – which holds a 6% stake in the company – said they were attracted to the company’s “solid growth outlook, capital-light growth model, and ungeared balance sheet”.

Forsyth Barr downgraded NZX to a ‘neutral’ rating as its valuation has gotten ahead of the rest of the market, trading on a price-to-earnings ratio of 30x.

The stock market operator is on a trading halt at $1.73 while it raises $44m of capital at $1.42 per share, to fund the GDT acquisition and growth opportunities relevant to it, as well as pay down $25m of debt.

The NZ dollar was little changed, trading at 66.89 US cents at 3pm in Wellington, down from 66.90 cents yesterday.

Tags: Market Close