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MARKET CLOSE: NZ shares fall in light trading after index reweighting; A2, Synlait weaken, Air NZ gains

Friday 1st June 2018

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New Zealand shares fell in more subdued trading following yesterday's billion-dollar MSCI rebalancing, with A2 Milk Co and Synlait dropping while Air New Zealand gained. 

The S&P/NZX50 Index declined 22.63 points, or 0.3 percent, to 8,636.16. Within the index, 28 stocks fell, 14 rose and eight were unchanged. Turnover was $123 million.

Yesterday, index turnover was $1.26 billion as trading was boosted by the rebalancing of MSCI's indices. James Smalley, investment adviser at Hamilton Hindin Greene, said a number of stocks were reverting to where they had been trading yesterday. Synlait Milk, which was the best performer yesterday when it rose 5.1 percent, today fell 2.6 percent to $10.96.

A2 Milk was the worst performer, down 3.9 percent to $10.45. The stock, which joined the MSCI's Global Standard index, dipped 0.1 percent yesterday to $10.87. It has been on the decline since an earnings update last month disappointed some investors. Some 61.5 million shares in A2 changed hands yesterday, the heaviest trading day since 2012.

"Although the volume isn't huge today, it really must be continuing to be affected by the reweighting - that level of turnover in a stock takes a while to find its feet again," Smalley said. "Two-thirds or three-quarters of the trading is done in Australia these days. We will be following Australia's leads, and the currency can have an impact: we've strengthened against the Aussie which will reduce the price over here." 

Infratil dropped 13 cents, or 3.8 percent, to $3.30, after giving up rights to a 10.75 cent dividend.

Air New Zealand was the best performer, up 3.8 percent to $3.25. However, Smalley said the stock was "making back what it lost yesterday on heavy volume" when it fell 3.5 percent. 

Meridian Energy rose 2.5 percent to $3.06, Mainfreight gained 1.7 percent to $27, and Fisher & Paykel Healthcare Corp advanced 1.5 percent to $13.48.

With company reporting for the year ended March 31 now over, and the next slew of earnings not due until August, Smalley said investors will pay attention to potential regulatory changes in the power sector or fuel market, with power companies like Meridian, Trustpower and Contact Energy - which are often held by retail investors for their yield - and Z Energy making up a large part of the index.

"We've all seen the effect regulatory action can have, even though we're going through a period where stock-specific news might be light, you'd still want to keep an eye on the broader macro environment," Smalley said.


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