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MARKET CLOSE: NZ shares fall as yield stocks face selling

Friday 25th October 2019

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(Oct. 24, 5:55 PM) New Zealand shares fell, with a number of utilities and property stocks held of their reliable dividends leading the market lower. Power companies were generally flat on large volumes after yesterday's savaging. 

The S&P/NZX 50 Index decreased 22.27 points, or 0.2 percent, to 10,831.52. Within the index, 22 stocks fell, 17 rose, and 11 were unchanged. Turnover was $143.9 million of which the big four electricity suppliers accounted for $65.8 million. 

Chorus led the market lower, down 2.4 percent at $5.32 on a volume of 248,000 shares, less than half its 90-day average of 537,000. Trustpower was down 1.7 percent at $8.20, Kiwi Property Group fell 1.2 percent to $1.65 on a volume of 1.1 million shares, and Precinct Properties New Zealand decreased 1.1 percent to $1.86. 

The electricity generator-retailers traded on large volumes but were relatively flat following a sharp selloff yesterday when New Zealand Aluminium Smelters said the future of its Tiwai Point site - the country's biggest electricity user - was under review. Contact Energy was unchanged at $7.69 on a volume of 3 million shares, having shed 9.7 percent yesterday. Meridian Energy was also unchanged at $4.95 with 4.7 million shares changing hands - it sank 8.7 percent yesterday. 

Mercury NZ increased 0.5 percent to $5.02 on a volume of 3.2 million shares and Genesis Energy rose 1 percent to $3.09 on a volume of 1.2 million. 

Matt Goodson, managing director at Salt Funds Management, said it appeared the smelter's cash costs were below the current aluminium price, but that investors were grappling with the reality of the situation. 

"The market would view the most likely outcome as being a negotiation and some form of lower power price, but there's no certainty around that at this stage," he said. 

Strong demand among investors for reliable dividends had pushed the power companies to record highs and buoyed similarly defensive stocks, such as property companies and utilities.

Goodson said that was further complicated by an upcoming MSCI index reweighting, which was expected to include Mercury in the index and remove Fletcher Building. Fletcher shares fell 1.1 percent to $4.66 on a volume of 2.2 million shares.

"The share market at the moment has an awful lot of term deposit and bond investor refugees in it - they're investors who are there because there is no alternative to find some yield anywhere, and it's a reminder that when you buy equities you take equity risk," Goodson said. 

Metlifecare posted the day's biggest gain, up 3.5 percent at $4.80 on a volume of 160,000 shares, in line with its 173,000 average. Chair Kim Ellis told shareholders today that the retirement village operator would now go ahead with a $30 million share buyback in an effort to lift the share price. The company had previously resisted a buyback but was swayed by "robust feedback" from its major shareholders, he said. 

SkyCity Entertainment Group was up 1.3 percent at $3.90. The casino operator today started reopening some of its sites after a fire at the neighbouring international convention centre building site raged for several days. The fire would create further delays to the construction project. 

Outside the benchmark index, Serko shares were halted at $3.42. The company today said it would raise $45 million through a placement at $4.04 and share purchase plan. As part of the deal, Booking Holdings, the operator of, would take a cornerstone stake in Serko and help with the roll-out of the Zeno platform. 

Napier Port hit a record $3.50 and ended the day at $3.46, up 1.8 percent, after it said cargo and container volumes were slightly ahead of their prospectus forecast. 


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