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MARKET CLOSE: NZ shares continue weakness after shock Key resignation, A2 Milk, Air NZ fall, Orion Health bounces

Monday 12th December 2016

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New Zealand shares dipped, led lower by A2 Milk Co on bad sentiment in the infant formula sector, while Orion Health Group continued to bounce.

The S&P/NZX50 Index fell 17.27 points, or 0.3 percent, to 6,876.03. Within the index, 25 stocks fell, 19 rose and seven were unchanged. Turnover was $132.7 million.

A2 Milk was the worst performer, down 5 percent to $2.29, on the news that Australian formula producer Bellamy's had gone into a trading halt on the ASX. A2's shares gained 19 percent early this month after the company updated shareholders at its annual meeting in Sydney, before dropping later that week after rival formula producer Bellamy's said demand on single's day in China had been lower than expected. 

"It's down reasonably substantially, there's been no news out though it has had a strong run in the last while," said Mark Lister, head of private wealth research at Craigs Investment Partners. "There's potentially some more bad news coming from Bellamy's, it had a quite shocking profit downgrade recently and today it's gone into a trading halt. They've said there's an update coming so one only assumes that will be more bad news given they've had such bad news recently. You get the feeling it's going to be more of the same, maybe A2's getting caught up in a bit of the negative sentiment around the industry."

Air New Zealand fell 1.9 percent to $2.12 and Vital Healthcare Property Trust dropped 1.7 percent to $2.

"We have been quite weak over the last several days, just about every market had a strong week last week and we were flat, so I think our market still a little bit lacklustre in the wake of the political changes you've seen in the last week, " Lister said. "Obviously that was unexpected, and while we've now got a new prime minister who's very capable and credible, it's still given people a bit of reason to pause for thought and consider the political landscape."

Units in Fonterra Shareholders Fund dipped 0.2 percent to $5.94. At the annual meeting of the Fonterra Shareholders Fund today, chairman John Wilson urged new prime minister Bill English to continue to drive to regional and mult-lateral trade agreements.

Orion Health was the best performer, up 9.7 percent to $2.15. It's now bounced 30 percent from the record low of $1.65 reached last week.

"That follows hot on the heels of a very strong day on Friday, they were up 13 percent," Lister said. "If we think about the low they reached last Thursday, it's been a pretty big rebound. Having said that, Orion is still down 56 percent from the middle of the year, so it's got a long way to go to earn back all of the losses it's seen over the past few months. They're only in the NZX50 for a few more days, they'll be exiting at the end of the week."

Sky Network Television rose 1.9 percent to $4.89, Tower gained 1.8 percent to 85.5 cents, and Chorus advanced 1.4 percent to $3.975.

Heartland Bank was unchanged at $1.53. It wants to raise up to $30 million through a placement and share purchase plan to maintain its capital ratio after strong lending growth, as well as support its digital strategy. 

The placement will be conducted today through a bookbuild for institutional and other select investors, raising up to $20 million, while the share purchase plan, which will raise as much as $10 million, will offer New Zealand-resident shareholders up to $15,000 worth of shares. Heartland said the final terms will be announced early next year.

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