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MARKET CLOSE: NZ shares join global rout as bond markets stoke recession fears

Friday 16th August 2019

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New Zealand shares joined a global slump as investors fretted over the prospect of a worldwide recession in the wake of bond market pricing. Heartland Group was among the few local stocks in positive territory after reporting solid earnings growth. 

The S&P/NZX 50 Index dropped 145.65 points, or 1.3 percent, to 10,704.11. Within the index, 39 stocks fell, four rose, and seven were unchanged. Turnover was $134.5 million on a volume of 27.1 million shares, slightly more than the 90-day average of 25.6 million. 

Stock markets across Asia took their cues from a weak performance on Wall Street after the US Treasury yield curve inverted - where the rate on long-term bonds is lower than on short-term - for the first time since 2007. A sustained inversion is often seen as a sign of a looming recession. Australia's S&P/ASX 200 Index dropped 2.7 percent in afternoon trading, the worst performer across Asia Pacific, while Japan's Topix was down 1.1 percent and Singapore's Straits Times Index fell 1.5 percent. 

New Zealand's benchmark index is the second-best performer so far this year, with the NZX50 up 21.5 percent, just behind China's CSI 300 Index which is up 21.7 percent. 

Matt Goodson, managing director at Salt Funds Management, said volumes weren't very heavy, which is what typically comes when markets capitulate to a major slump, and that today's slide is against the backdrop of a strong performance so far this year. 

"Our market has performed incredibly well," he said. "The key risk is not the discount rate, it is: can you still deliver earnings expectations? That's why New Zealand has been a somewhat defensive market with the gen-tailers and Spark and the likes." 

Chorus led the market lower, down 4 percent at $5.35 on a volume of 548,000 shares, more than its 472,000 average. Genesis Energy dropped 2.7 percent to $3.27, Meridian Energy declined 1.9 percent to $4.75 and Infratil decreased 1.5 percent to $4.75. 

Spark New Zealand fell 1.1 percent to $4.025 on a volume of just 1.5 million shares, about half its average volume. Fletcher Building was the most traded stock, falling 1.5 percent to $4.56 on a volume of 2.8 million, more than twice its 1 million average. Kiwi Property Group declined 0.6 percent to $1.63 on a volume of 2.6 million shares. 

Of other stocks trading on volumes of more than a million shares, Goodman Property Trust increased 0.2 percent to $2.145, Contact Energy decreased 0.5 percent to $8.34, Ryman Healthcare was down 1.1 percent at $13.11, Arvida Group declined 0.7 percent to $1.39 and Auckland International Airport was up 0.5 percent at $9.65. 

Heartland was one of the few stocks to gain, up 0.6 percent at $1.63 after reporting a 9 percent lift in annual profit as its reverse mortgage, business and motor lending businesses improved lending. Goodson said the result was in line with expectations. 

Of other companies that have reported this week, SkyCity Entertainment Group dropped 3 percent to $3.85, Summerset Group fell 2.7 percent to $5.74, and NZX declined 2.4 percent to $1.20. Outside the NZX50, Colonial Motor Co fell 4.4 percent to $8.70, and PGG Wrightson rose 4.6 percent to $2.26. 

Oceania Healthcare rose 1 percent to $1.04 on a volume of 894,000 shares, more than its 671,000 average. It posted the day's biggest gain. 

Wellington International Airport's 2025 bonds paying annual interest of 5 percent were the most traded debt security on a volume of 3.02 million. The notes closed at a yield of 2.13 percent, down 4 basis points. Auckland Council's 2026 bonds paying 3.34 percent interest traded on a volume of 3 million and closed at a yield of 1.51 percent, down 17 basis points. 


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