MARKET CLOSE: NZ shares fall with commodities; A2, Kathmandu drop, Precinct Properties gains

Wednesday 3rd February 2016

New Zealand shares fell as weaker commodity prices weighed on equities in countries dependent on exports of raw materials. Synlait Milk, A2 Milk, Kathmandu Holdings and Air New Zealand declined, while Precinct Properties rose.

The S&P/NZX 50 Index dropped 46.7 points, or 0.8 percent, to 6133.38. Within the index, 34 stocks fell, nine rose and seven were unchanged. Turnover was $161 million.

Overnight, Brent crude oil fell about 3 percent while in the GlobalDairyTrade auction, whole milk powder fell more than 10 percent. Stocks were weaker on Wall Street and the selloff carried into markets across Asia. Australia's S&P/ASX 200 dropped 2.1 percent, Hong Kong's Hang Seng fell 2.7 percent, as did Japan's Nikkei 225, while China's large cap CSI 300 index fell 1.2 percent.

A2 Milk declined 3.4 percent to $1.72 and Synlait Milk fell 1.7 percent to $2.82. NZ Refining, the nation's only refinery operator, fell 2.1 percent to $3.67.

"Some of the commodities have been pretty weak - oil has seen lower prices, the latest dairy auction wasn't impressive at all, and that combined with weaker offshore markets has led the New Zealand bourse down," said James Lindsay, senior portfolio manager at Nikko Asset Management. "New Zealand, Canada and Australia are seen as commodity-exposed economies, so any time there's any significant weakness in commodities it leads to our markets underperforming. The beta of the Australian market to that is higher, because of their higher exposure to those companies."

Kathmandu led the index lower, dropping 4.9 percent to $1.55. The shares jumped 7.2 percent to $1.63 on Monday after the company lifted first half sales, but have given up some of those gains.

Air New Zealand fell 4.4 percent to $2.81, a two-month low.

"Oil is a major input into their operations and will be helping out significantly with the price of that coming down, but the counter to that is there's been a significant amount of new capacity come on from airlines in competing routes," Nikko's Lindsay said. "They're quite big capacity uplifts, and all of this will be impacting on the perception of competition and where earnings go for the next couple of years."

Fonterra Shareholders' Fund, which give holders access to Fonterra Cooperative Group's dividend stream, was unchanged at $5.95. Further declines in dairy prices at the latest GlobalDairyTrade auction last night are casting doubt over Fonterra's ability to meet its newly revised farmgate milk price for farmers and prompting concern that next season's price may also be weak. That weakness is probably not hurting the fund, and maybe mildly helping it, Lindsay said.

Orion Health Group shed 3.5 percent to $3.04.

With Australia's ASX 200 down, the dual-listed Australian banks were weaker. Westpac Banking Corp fell 3.2 percent to $31.78, and Australia & New Zealand Banking Group dropped 3.2 percent to $25.75.

Metlifecare lost 2.7 percent to $4.35, Summerset Group was down 2.4 percent to $4, and Mighty River Power closed 2.3 percent lower at $2.54.

Precinct Properties was the biggest gainer, up 1.6 percent to $1.245. Skellerup Holdings gained 1.4 percent to $1.45, and Chorus advanced 1.3 percent to $3.835.

Outside the benchmark, Briscoe Group rose 3.2 percent to $2.95, The retailer expects to report a record full-year profit of $46.5 million, up from 2015's $39.3 million.

Wynyard Group dropped 4.4 percent to $1.54, a near three-month low. The company's shareholders will vote on granting the board more freedom to issue shares in two weeks, after a downturn in global markets took the sheen off its existing plans to raise capital.

BusinessDesk.co.nz

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