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MARKET CLOSE: NZ shares fall in busy trade, A2 Milk, Heartland decline while Comvita, Scales gain

Friday 15th September 2017

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New Zealand shares dropped, led lower by A2 Milk and Heartland Bank, with Comvita and Scales Corp rising.

The S&P/NZX50 Index fell 56.57 points, or 0.7 percent, to 7,762.66. Within the index, 29 stocks fell, 17 rose and four were unchanged. Turnover was $324.2 million.

The latest general election poll, released by Colmar Brunton last night, showed that a Labour-Greens coalition would have enough seats to govern alone, while a Reid Research poll released on Tuesday had the incumbent National Party leading by ten percentage points. 

"There's obviously a bit of nervousness, with what's happening in North Korea causing some concern and the latest election polls making foreign investors a bit nervous," said Grant Williamson, director at Hamilton Hindin Greene. "Retail investors particularly are being pretty cautious with just over a week to go, some will be positioning but it's too close to call so what do you do?"

Fisher & Paykel Healthcare had the largest turnover with $38.4 million. The stock ended down 0.8 percent to $12.85. Other large caps also dropped on busy volume, with A2 Milk Co down 3.6 percent to $5.70, Heartland Bank falling 3.3 percent to $1.78, Air New Zealand dropping 2.4 percent to $3.25, and Spark New Zealand declining 2.1 percent to $3.80. 

Williamson said international investors in particular had been selling out of electricity stocks, which have large numbers of foreign owners. Meridian Energy gained 0.5 percent to $2.94 while Mercury New Zealand fell 1.7 percent to $3.25.

Ryman Healthcare was down 0.7 percent to $9.04, while fellow retirement stocks Metlifecare was unchanged at $5.82 and Summerset rose 1.2 percent to $5.16.

"The news of the softening property market is not good news for the retirement sector," Williamson said. "First, people sell the house to buy one of the units, so if it gets more difficult to sell it can get more difficult to buy the units. Second, the retirement village companies get the capital gain upside when they buy back the units and they've increased in value over time, so if the market is not improving there's not so much capital gain to be had."

Comvita was the best performer, up 1.9 percent to $7.69, while Scales Corp gained 1.7 percent to $3.52

Outside the benchmark index, AWF Madison Group fell 5.9 percent to $2.40. The country's biggest contract labour firm said profit in the first half ending Sept. 30 would fall after labour hiring weakened in the second quarter.

"Volumes are down in AWF owing to a number of factors: some lower margin business has been discontinued - impacting revenue; at the same time a decline in construction activity and the wet winter has reduced chargeable hours from AWF’s construction and civil clientele," it said in a statement. "Whilst demand for trades is strong, this is largely being met by AWF’s migrant workforce channel, which has been slower to mobilise than planned."

New Zealand Oil & Gas was unchanged at 72.5 cents. Its independent directors have recommended shareholders reject a 72 cent partial takeover offer from ASX-listed Zeta Resources because it undervalues the company and favours capital return over investment for growth.

Chairman and independent director Rodger Finlay said that the appearance of OGOG, the oil and gas division of Ofer Global Group, with a proposal to offer 77 cents a share for no more than 70 percent and at least a controlling stake "further supports the view that the Zeta partial offer is too low."

"Obviously there's a competing offer on the table so we could be coming in for a bit of a battle. The stock has under-performed the market for some time now, so it's nice to see current investors see some upside in that share price," Williamson said.



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