NZ sharemarket falls nearly 0.5% at the start of a pivotal week

A nervous New Zealand sharemarket fell nearly 0.5% at the start of a pivotal week for stocks, particularly Synlait Milk.

Monday, July 8th 2024, 6:27PM

by BusinessDesk

The S&P/NZX 50 Index declined steadily all day and then had a sharp rise in the last half hour broker matching session to close at 11,745.53, down 49.28 points or 0.42% after reaching an intraday low of 11,692.19.

There were 49 gainers and 73 decliners over the whole market on volumes of 29.39 million share transactions worth $120.05m.

On Wednesday, the Reserve Bank will make its monetary policy review, and the market will be looking for a timeline on interest rate deductions. The bank is expected to keep the official cash rate (OCR) at 5.5% in the meantime.

Jeremy Sullivan, investment adviser with Hamilton Hindin Greene, said the commentary, rather than the headline decision, will be most important.

“There could be subtle changes in the wording for bringing rate cuts forward – from August next year to February, or November this year.

“The Reserve Bank will be cautious not to give the market too much hope, but leaving the OCR unchanged till August next year is a little too optimistic considering the present economic landscape,” Sullivan said.

Local market

Synlait Milk gained 0.005c or 2.04% to 25c ahead of Thursday’s special meeting to approve the $130m loan from Bright Dairy, which holds a 39.01% stake. The shareholder loan will repay bank debt due on July 15.

Synlait told the market it had been talking with another major shareholder a2 Milk which had not advised how it will vote on the special meeting resolution.

George Adams, Synlait chair, said it is particularly important that everyone cast their vote as the future of the company is at stake and failure to approve the loan will mean the board has limited options available to them.

Sullivan said it looks like Synlait has got the bankers onside, and every vote counts. The meeting will be closely watched as the outcome affects shareholders, bondholders and the rural sector as a whole.

The local market was weighed down by the utilities sector, which fell 2.26% on the NZX.

Contact Energy declined 37c or 4.04% to $8.78 after telling the market its 174MW Tauhara geothermal plant near Taupo is in the final commissioning stage. The plant will initially run at 152MW until the first planned outage in October next year, when modifications are undertaken to reach full capacity.

The 51.4MW Te Huka 3 plant will be online in the fourth quarter of this year, and at the same time, Contact will make its final investment decision on a new 100MW2 binary plant to replace the Wairakei A&B geothermal power station.

Contact is forecasting operating earnings (ebitdaf) of $770m for the 2025 financial year, up from the present full-year guidance of $620m, and is expecting to increase its annual dividend 4c to 39c a share through to the middle of next year.

Sullivan said there would be no further increase in dividend till the Wairakei station was replaced (expected completion in mid-2027) and this move affected the rest of the sector.

“The energy stocks have strong cash flow and are nice, reliable dividend payers. It is prudent of Contact to hold onto cash for the Wairakei project, but investors like regular increased dividends,” he said.

Mercury declined 19c or 2.79% to $6.61; Meridian Energy was down 4c to $6.51; Genesis decreased 4.5c or 2.02% to $2.185; and Manawa shed 5c to $4.14.

In the retail sector, Briscoe Group increased 19c or 4.77% to $4.17; Michael Hill rose 5c or 10% to 55c; and Hallenstein Glasson was down 10c or 1.81% to $5.43.

Sky TV decreased 6c or 2.41% to $2.43; Eroad fell 7c or 5.6% to $1.18; CDL Investments was down 2c or 2.74% to 71c; Restaurant Brands shed 9c or 3.27% to $2.66; Colonial Motor fell 32c or 4.74% to %6.43; and Enprise declined 1.5c or 3.66% to 39.5c.

Ebos Group bounced 76c or 2.37% to $32.80; Ryman Healthcare improved 8c or 2.34% to $3.50; Fletcher Building gained 5c to $2.;90; Gentrack was up 40c or 3.88% to $10.70; PGG Wrightson rose 90c or 4.59% to $2.05; and Tourism Holdings added 5c or 2.7% to $1.90; South Port NZ increased 14c or 2.43% to $5.90; NZME was up 2c or 2.13% to 96c; Green Cross Health improved 2c or 2.67% to 77c; and Comvita was up 2c or 1.83% to $1.11.

TruScreen, up 0.001c or 5.88% to 18c, reported its first sales in Vietnam, following an order from its distributor Gorton Health Services for 10 cervical cancer screening devices and 1800 single-use sensors worth $100,000. Gorton is targeting 64 hospitals in Vietnam.

Tags: Market Close