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MARKET CLOSE: NZX50 stumbles over smelter scare

Tuesday 29th October 2019

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(Oct. 25, 5:57 PM) New Zealand shares fell 2.5 percent this week as the threat of the Tiwai Point smelter closure tripped up electricity companies that had been on a tear, and gave investors cause to ponder the slowing economy. 

The S&P/NZX 50 Index decreased 42.88 points, or 0.4 percent, to 10,788.64, and was down from 11,067.12 last week. Within the index, 26 stocks fell, 13 rose, and 11 were unchanged. Turnover was $110.8 million. 

The electricity generator-retailers have been in focus this week due to Rio Tinto warning that the future of the Tiwai Point smelter is under review. 

Supplier Meridian Energy was down 2.8 percent at $4.81 on a volume of 2.4 million shares, compared to its 90-day average of 1.5 million. Contact Energy declined 0.3 percent to $7.67, with 1.3 million shares traded. Genesis Energy posted the day's biggest gain, up 3.6 percent at $3.20 on a volume of 840,000 shares, compared to its 562,000 average, and Trustpower decreased 0.1 percent to $8.19. 

"We've had real information, particularly with electricity prices, and while that certainly had an impact on the generators and the retailers, it also speaks to the broader outlook for New Zealand," said Michael McCarthy, chief market strategist at CMC Markets. 

"That's why we saw some fairly dramatic reactions this week to the downside - that fall off to consumption in electricity does not say good things about overall economic activity." 

The upcoming MSCI index reweighting continued to drive trading in Fletcher Building and Mercury NZ, with speculation that the construction company will leave the index and the power company will join it. Fletcher fell 1.3 percent to $4.60 on a volume of 2.4 million shares, while Mercury was up 0.6 percent at $5.05 with 2.2 million shares changing hands. 

Sky Network Television led the market lower, down 4.9 percent at 98 cents on a volume of 213,000 shares, compared to its 90-day average of 1.2 million. 

Gentrack fell 3.4 percent to $5.12 on a typically small volume of 19,000 shares. The utilities software developer has significant operations in the UK, and has previously noted limited investment appetite among firms because of the Brexit ructions. 

Port of Tauranga decreased 0.3 percent to $6.46. The country's biggest export hub expects full-year earnings to remain strong, despite telling shareholders at today's annual meeting that first-quarter cargo volumes were weaker. 

Synlait Milk slipped 0.1 percent to $9.70 after it said it planned to buy dairy product processor Dairyworks for $112 million. A2 Milk decreased 0.5 percent to $12.74, and Fonterra Shareholders' Fund units rose 1 percent to $4.14. 

Outside the benchmark index, Serko soared 29 percent to $4.42 on a volume of 4.5 million shares, more than 100 times its 37,000 average. The company raised $40 million in a placement at $4.04 a share, which brought in operator Booking Holdings as an investor. Existing shareholders also sold into the placement. 

Scott Technologies fell 9.4 percent to $2.23 after the company yesterday reported a 20 percent fall in annual profit, even as revenue grew. The company's cornerstone shareholder - JBS Australia - also reached a deal with the Overseas Investment Office over the influence of the meat firm's shareholders, Joesley and Wesley Batista. They do not meet New Zealand's good character test, having admitted to bribing officials in Brazil. 

AWF Madison rose 2.2 percent to $1.84 after it yesterday reported flat revenue and a 20 percent increase in earnings before interest, tax, depreciation and amortisation. 

Wellington Drive Technologies fell 9 percent to 17.3 cents after it said it plans to raise $5.3 million in a one-for-five pro-rata rights issue at 10 cents a share to accelerate growth. The issue is 100 percent committed with either underwrite agreements or pro-rata rights commitments, the company said. 


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