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MARKET CLOSE: NZ shares down, Chorus and Vector fall while A2, Trilogy rise

Friday 10th February 2017

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New Zealand shares dropped, led lower by Chorus and Vector on regulation news, while A2 Milk Co and Trilogy gained.

The S&P/NZX 50 Index fell 17.19 points, or 0.2 percent, to 7,104.44. Within the index, 24 stocks rose, 18 fell and eight were unchanged. Turnover was $133 million.

"Given pretty positive leads offshore it's a little bit disappointing - the market is almost flat today. Maybe investors are just sitting back, waiting to see what happens when reporting season really gets into the swing of things," said James Smalley, director at Hamilton Hindin Greene.

Chorus led the index lower, down 3.6 percent to $4.215. Communications Minister Simon Bridges today unveiled plans to deregulate the company's copper network where it competes with fibre from 2020. Chorus general counsel Vanessa Oakley said the changes create "some additional complexity for regulatory implementation, such as cost allocation, that we will need to consider carefully" and "raises questions around incentives to invest in the high-cost rural areas currently served by copper".

"It is a bit of regulatory uncertainty but if anyone's got the experience to deal with that type of scenario, it would be Chorus," Smalley said. "It had been on a pretty strong run over the past wee while, I'm thinking the announcement has just made a few investors an incentive to take a bit of profit off the top." 

Kiwi Property Group declined 1.7 percent to $1.42, Auckland International Airport fell 1.7 percent to $6.89, and Mercury New Zealand dropped 1.6 percent to $3.02.

Vector fell 1.2 percent to $3.25. The Commerce Commission is proposing to cap regulated sales for gas pipeline firms, including Vector, which it estimates will lower their maximum revenue by 18 percent a year. The Commerce Commission regulates what gas distribution and transmission firms can charge, and will make a final decision by May 31. The changes would lower Vector's revenue cap by 23 percent or $43 million over five years

"It's an interesting company, there's a billion shares on issue but the free float is minute - just 250 million - and of that you've got a couple of major institutions," Smalley said. "It's almost too thinly traded for institutions to really get involved with the stock, you can see that by the volumes that trade each day. It's more for retail investors who perhaps may not have fully realised the import of that announcement."

Air New Zealand dipped 0.2 percent to $2.095. The government is still negotiating with the national carrier in a cross-agency air travel contract that will add a number of new airlines to the list of approved flyers, with Jetstar added to the domestic list. 

Sky Network Television was the best performer, up 2.8 percent to $4.45, while Australia & New Zealand Banking Group gained 2.6 percent to $31.39.

A2 Milk Co rose 2 percent to $2.54.

"It's getting very close to a record, they've managed to skirt a few pitfalls unlike other associated companies like Bellamy's. Investors are obviously still buying into that growth story - it's certainly not for the faint of heart, because it's been up and down a few times," Smalley said.

Outside the benchmark index, Trilogy rose 4.4 percent to $2.62. The skincare and home fragrance company said it continues to comply with continuous disclosure rules in response to a query from NZX after its shares fell 22 percent in a month to yesterday.

"The stock had really come off its highs, it's a very similar scenario to Pushpay where they had a capital raising and compliance listing in Australia and the stock really fell away post that," Smalley said. "When you've got a relatively thinly traded company with new investors on the share register, what can happen is professional investors have a stop-loss scenario - just decide to vote with your feet, so it can have an impact in the short term."

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