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MARKET CLOSE: NZ shares drop as rising US bond yields dim dividend allure; A2, Air NZ, Pushpay fall

Wednesday 10th January 2018

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New Zealand shares fell as rising US bond yields trimmed the attraction of the local market's relatively high dividend yields, and prompted investors to crystallise some gains. A2 Milk Co, Air New Zealand and Pushpay Holdings declined.

The S&P/NZX50 Index dropped 68.33 points, or 0.8 percent, to 8,364.9. Within the index, 33 stocks fell, 9 rose and 8 were unchanged. Turnover was $140.9 million.

"Investors are starting to come back into the market and they're looking to take a bit of profit off the table," said James Smalley, investment adviser at Hamilton Hindin Greene. "I would still say the market is typified by relatively low volume - we're still waiting for a number of participants who won't be back until next week." 

Overnight, the yield on US 10-year Treasuries rose almost 6 basis points to 2.54 percent, the highest since March last year, as investors cooled on bonds with an upcoming glut of supply coinciding with the Bank of Japan surprising markets by reducing its purchases of long-dated Japanese bonds. Smalley said US interest rate movements will be a key factor for markets around the world in 2018. 

A2 Milk, last year's best performer, led the index lower, dropping 2.9 percent to $8.10, while Genesis Energy, which traded at dividend yield of 8.7 percent, dropped 2.8 percent to $2.42.

National carrier Air New Zealand fell 2.6 percent to $3.02.

"The oil price has affected that - Brent crude is the highest it has been since 2015," Smalley said. "Air New Zealand has had a pretty strong run, it has been in an absolute sweet spot with tourism and oil being cheap." 

Pushpay dipped 1.4 percent to $4.29. The company exceeded its target of US$100 million in annualised committed monthly revenue and will move forward its US listing date as it continues to target bigger churches. 

"People have done the old 'buy the rumour, sell the fact'," Smalley said. "The thing about market updates is it does provide volume, so if you wish to take profits you might not be able to do that on a normal trading day, but you can today."

Scales Corp was the best performer, up 1.9 percent to $4.87. Sky Network Television rose 1.1 percent to $2.83 and Comvita gained 1.1 percent to $8.69.

Outside the benchmark index, ERoad rose 0.3 percent to $3.89. It met its unit sales expectations in the third quarter of the 2018 financial year, lifting total contracted units by 17 percent. The logistics and fleet management firm said total contracted units, a non-GAAP measure it uses, rose to 69,391 in the three months ended Dec. 31, from 59,538 at the end of September. 


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