NZ market dips as election looms

New Zealand share prices slipped again as investors took to the sidelines before the election, with a looming battle between Fletcher Building and Western Australia’s BGC and a possible bid for Sky TV being the main talking points.

Friday, October 13th 2023, 6:18PM

by BusinessDesk

The S&P/NZX50 closed at 11,265.72, down 26.86 points or 0.24%.

Turnover, worth $71.3 million, was again light. There were 66 gains and 57 falls among the 185 stocks traded.

While Fletcher remained in a trading halt, the company mounted a stout defence against claims by the Australian building firm that its Iplex pipes were defective.

Fletcher stressed that the plumbing failures are limited to Perth, indicating that the issue does not have widespread implications.

Jeremy Sullivan, investment advisor Hamilton Hindin Greene, said there were some wide estimates on how much the claims would cost.

He said $50m to $100m for an Australia-wide fix had been talked about, adding Fletcher was not likely to be “on the hook” for the total.

Current market pricing suggests that Fletcher’s shares, when trading resumes on Monday, could fall to $4.59 – down 21 cents or 4.3% from its last traded price – representing a $164m hit to its market capitalisation.

“Our take is that this is likely to result in a lengthy legal battle,” he said. “I would expect that this may drag on for several years, and the final costs will not be known for quite some time,” he said.

Shares in Sky TV rallied by 33 cents (13.3%) to $2.80 after the company said it had started engaging with a potential acquirer, although discussions were at a very early stage. Sky said, “There can be no certainty that any transaction will eventuate”.

Sullivan said Sky had been a potential takeover target for several years.

News of the approach to Sky came from an announcement regarding its share buyback.

“What that tells me is that Sky, whilst obliged to disclose it, does not feel that it has the legs to go through.”

Investors stay on the sideline

In general, investors were holding back before the election at a time when the leads from offshore were mostly negative, such as data from the US showing inflation was higher than forecast in September, raising the prospect that the Fed may raise interest rates once again.

NZ’s CPI is due on Tuesday. ANZ expects annual CPI inflation re-accelerated to 6.1%, year on year, in the third quarter, slightly above the Reserve Bank’s August forecast of 6.0%.

Several of the big names were weaker, reflecting generally bearish market sentiment.

In transport, Auckland International Airport fell 6.5c or 0.8% to $7.86 and Freightways fell 10c (1.18%) to $8.35.

China-exposed A2 Milk was again soft, falling 3c to $4.55.

Among the power generators, Contact Energy lost 6c to $8.00, Meridian dropped 9c to $5.11, and Genesis declined 4c at $2.44.

Medical goods distributor and pet food company EBOS lost 8c to $34.57.

Medical appliance maker and developer Fisher and Paykel Healthcare dropped 31c or 1.4% to $20.99.

In aged care, Ryman fell 10c (1.7%) to $5.90.

Among the smaller issues, property company Asset Plus dropped 1c or 4.2% to 23c.

Last month, Asset Plus said the buyer of 35 Graham Street, in central Auckland had exercised its right to extend the settlement date on this property by 12 months.

The settlement date would, therefore, be Nov 28, 2024.

Last June, Asset Plus shareholders approved the sale of the property, the former Auckland council service centre, to Mansons for $65m.

Tags: Market Close