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NZ shares drop on US-China trade jitters, Infratil's Vodafone purchase

Tuesday 14th May 2019

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New Zealand shares fell on fears the US-China trade stoush will hit global growth, and as investors were wary of Infratil and Brookfield Asset Management's $3.4 billion purchase of Vodafone New Zealand. 

The S&P/NZX 50 Index was down 1 percent at 10,029.37 points shortly after 1pm. Within the index,  three stocks rose, 39 fell and eight were unchanged. Turnover was $44.3 million.

Infratil was down 4.3 percent at $4.405 after it said the deal will see both it and Brookfield pay $1.03 billion for a 49.9 percent stake each. The balance will come from taking on about $1.34 billion of Vodafone New Zealand's debt, and the 0.2 percent equity set aside for the telco's executive team. 

The New Zealand company expects to pay its share through a fully underwritten equity raising of up to $400 million to be undertaken by UBS New Zealand, $400 million of debt from a committed acquisition debt facility, and the use of existing debt facility headroom.

Investors were leery as "it does add risk," said  Grant Williamson, a director at Hamilton Hindin Greene. The prospect of the capital raising will also be weighing on the stock, he said. 

New Zealand was also caught up in a sea of red across Asia as equity markets followed Wall Street lower after China announced it would impose higher tariffs on US$60 billion of US goods following Washington’s decision to hike its own levies on US$200 billion in Chinese imports.

The Dow Jones Industrial Average fell 2.4 percent, the S&P 500 lost 2.4 percent and the Nasdaq Composite dropped 3.4 percent. 

In a pre-budget speech to the Wellington Chamber of Commerce, Finance Minister Grant Robertson signalled there were "significant challenges in the global economy" and underscored New Zealand "is not immune to them."

He noted "the tariff war between the US and China has burst back into life" and is contributing to a global environment in which New Zealand exporters operate that is "both unstable and uncertain."

Local exporters including Synlait Milk, Pushpay and Vista Group International were all down. Synlait shed 2.3 percent to $9.96, Pushpay was down 2 percent at $3.92 and Vista Group was down 2.3 percent at $5.55. 

While Williamson said sentiment was getting hit by the US-China worries, he noted that the New Zealand market is outperforming Wall Street as well as several Asian markets. Japan's Topix was down 1.5 percent in early trading and Australia's S&P/ASX 200 index was down 1.3 percent. 

"There is still some support," he said. 


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