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MARKET CLOSE: NZ shares rise in heavy MSCI trading; Synlait, Mercury gain while A2 falls

Thursday 31st May 2018

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New Zealand shares rose in heavy trading as several stocks entered MSCI indices, with new entrant Synlait Milk leading gains alongside Mercury NZ. A2 Milk Co fell.

The S&P/NZX 50 Index advanced 10.93 points, or 0.1 percent, to 8,658.79. Within the index, 26 stocks rose, 18 fell and six were unchanged. Turnover was $1.26 billion. Market watchers and market operator NZX had anticipated this might be the biggest ever day of trading for the market, which hit a record $1.6 billion in trading one day in 2017.

The changes announced earlier this month in the semi-annual review of the MSCI Equity Indexes were implemented today. That saw A2 Milk included in the MSCI Global Standard Index, exiting the MSCI Global Small Cap Index, and Mercury leaving the standard index to join the small cap, an index which Restaurant Brands New Zealand, Synlait and Tourism Holdings also joined. 

Investors who follow the indices are required to hold a certain amount of the stock, with changes causing selling and buying in new or departing stocks. NZX made amendments to trading times today to accommodate the heavier flows, with the pre-close session 15 minutes longer than usual and starting at 4:30pm, while the adjust session lasted until 5:50pm, rather than the usual 5:30pm, meaning enquiry (when the market closes) also took place at 5:50pm. 

A2 Milk, which was bought up following the announcement on May 15, has been sold off lately after an earnings update disappointed investors. The stock ended the day down 0.1 percent to $10.87, having traded as high as $11.13 and as low as $10.80 throughout the day. 

"Considerable index passive-type funds usually buy at the closing prices, they don't want to take any intra-day risk," said Craig Stent, executive director and head of equities at Harbour Asset Management. "There are people that buy for index reasons, but there are also hedge funds and people that arbitrage this so they get ahead of it and they do the opposite of what the index fund is doing. So there's lots of noise but when it comes to the crunch at the end of the day, not much tends to happen in terms of the share price in these bigger companies."

Synlait was the best performer, up 5.1 percent to $11.25, with Mercury gaining 2.4 percent to $3.23. Tourism Holdings fell 2.1 percent to $6.53. 

"In the smaller companies - inclusions or exclusions, their share price might be a bit more volatile," Stent said. "Some of these companies with less spotlight on them, their share prices might move around a bit more."

Restaurant Brands dipped 1.1 percent to $7.78. Along with joining the small-cap index, the fast-food operator announced it had lifted first-quarter sales 12 percent to $180 million after it acquired a further 13 KFC stores in Australia. It also shed rights to an 18 cents per share dividend.

Trustpower was the worst performer on the index, down 4.4 percent to $5.65, after shedding rights to a 17 cents per share dividend. Air New Zealand fell 3.5 percent to $3.13, Sky Network Television dropped 3.3 percent to $2.32, and Meridian Energy declined 2.1 percent to $2.985. 

Outside the benchmark index, ikeGPS dropped 15.3 percent to 50 cents. The unprofitable laser measurement tool maker narrowed its annual loss after lifting sales 37 percent and cutting a fifth from its wage bill and is optimistic positive cash flow generated in the fourth quarter will persist, meaning it won't need to raise more capital. 


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