NZ shares plunge as Putin invades Ukraine

New Zealand shares tumbled on Thursday after Russian President Vladimir Putin ordered a military operation in Ukraine which may be the beginning of a full-scale invasion.

Thursday, February 24th 2022, 6:24PM

by BusinessDesk

The S&P/NZX 50 Index had its biggest fall since the covid crash in March 2020, dropping 400 points, or 3.3%, to 11,797.30. Turnover was $112 million.

The Associated Press reported President Putin said he was deploying troops in neighbouring Ukraine, claiming the move was intended to protect civilians.

Other media reported explosions near the capital Kyiv and elsewhere in the country.

Ukrainian President Volodymyr Zelenskyy gave a speech warning the country would defend itself, saying in Russian: “When you attack us, you will see our faces, not our backs.”

The Ukrainian military doesn’t have the strength to repel a full-scale invasion and it is relying on Western nations to help punish Russia with economic sanctions.

One key sanction may be Europe cutting off oil and gas pipelines from Russia, which will force countries like Germany to reduce their energy usage which will slow economic activity.

“Either the Ukraine gets thrown under the Russian tank tracks in a gross act of appeasement, or the rest of the world aligned against Russian aggression will have to wear some economic pain,” said Jeffrey Halley, a senior market analyst at Oanda.

Russia is also a significant crude oil producer and may retaliate to sanctions by holding back supplies, potentially forcing other countries to draw down from strategic stockpiles.

Crude oil futures were moving close to $100 a barrel today, a level at which Devon Fund’s Greg Smith said starts to slow economic activity.

“High oil prices act as a bit of a handbrake on economic growth,” he told BusinessDesk.

As an example, Air New Zealand warned this morning – prior to the invasion – it was already expecting higher fuel costs to detract from earnings in the second half of the year.

Every stock on NZ’s benchmark equity index fell and only 14 of the 187 total listed securities moved higher – all very small companies

Peter McIntyre, an investment advisor at Craigs Investment Partners, said investors were rushing to reduce their equity positions and move into safe-haven assets.

Stocks and bond yields fell in markets around the world, while the US dollar, gold and oil prices rallied.

The kiwi had fallen from 67.72 US cents to 67.15 US cents by 5pm shortly after the reports of explosions began.

Speculative or high-risk stocks were the hardest hit in the sell off today.

Sky Network Television dropped 7.4% to $2.49, Serko fell 7.3% to $4.82, A2 Milk Company declined 6.1% to $5.73 and Tourism Holdings dropped 5.9% to $2.40.

Energy companies also took heavy losses: Mercury NZ tumbled 7.3% to $5.56, Meridian Energy was down 6.3% at $4.71,

NZ Refining Company dropped 5% to 96 cents, the oil refinery recently began converting into a fuel import terminal and supplies airline fuel directly to Auckland Airport.

Air New Zealand dropped 4.1% to $1.52 and shares in the airport fell 3.4% to $6.88.

Fuel retailer, Z Energy's shares held up comparatively well, falling just 0.6% to $3.63 while NZ Oil & Gas made one of the few gains – climbed 2.9% to 53.5 cents.

Safe-haven stock, Spark NZ held up well with just half a percent fall to $4.59.

Tags: Market Close