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MARKET CLOSE: NZ shares bounce back from Turkish sell-down, Summerset falls on mixed result

Tuesday 14th August 2018

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New Zealand shares bounced back from some of yesterday's sell-off as investors are yet to see serious contagion from Turkey's burgeoning financial crisis, led higher by Synlait Milk and A2 Milk Co. Summerset Group Holdings fell after reporting first-half earnings. 

The S&P/NZX 50 index rose 26.9 points, or 0.3 percent, to 8,971.94. Within the index, 22 stocks gained, 20 fell and eight were unchanged. Turnover was $137 million. 

Stocks across Asia were mixed as investors digest the impact of Turkey's economic woes, where a plunging lira increases the burden of foreign indebtedness which has funded the Middle Eastern nation's rapid growth in recent years. Japan's Topix was up 1.3 percent in afternoon trading, while Hong Kong's Hang Seng fell 0.9 percent. 

Matt Goodson, managing director at Salt Funds Management, said Turkey's large foreign currency debt was a "very significant problem" and investors are wondering whether the government will impose capital controls. That uncertainty is causing ructions in other emerging markets and weighing on risk-sensitive assets, such as the kiwi dollar, which hit a two-and-a-half-year low this week. 

Exporters were among today's leaders, with A2 up 3.6 percent to $11.16 and its key supplier Synlait Milk leading the benchmark higher, up 3.9 percent to $10.80. Fisher & Paykel Healthcare rose 1.7 percent to $14.79. 

Still, Goodson said a weaker currency isn't one-way and given the New Zealand market's popularity with overseas investors in recent years, a depreciation in the kiwi for unhedged investors would cause "a fair degree of pain". 

Earnings season remains the focal point for domestic investors, with Summerset the first major retirement village operator and developer to report. The Wellington-based company lifted underlying earnings 27 percent and declared an increased dividend, although the net profit fell 9 percent as the slowing housing market produced smaller property revaluation gains. The shares fell 0.8 percent to $7.66. 

"There are some fears in the sector given house prices and turnover are starting to slow down," Goodson said. "It's a little bit early to really come through and the company's numbers were broadly in line with market expectations." 

Fonterra Shareholders' Fund units posted the biggest fall, down 3.2 percent to $4.80, a new three-year low. Fonterra Cooperative Group lowered its farmgate payout for the 2018 season and said it probably won't pay a final dividend this year as it retains cash to bolster its balance sheet. 

Freightways fell 1.9 percent to $7.60 after yesterday reporting a small increase in annual profit, while Heartland Bank declined 1.7 percent to $1.74 before reporting its earnings tomorrow. NZX, which also reports tomorrow, was unchanged at $1.09.

Spark New Zealand rose 0.7 percent to $3.85 after securing broadcasting rights to the English Premier League and Manchester United TV. The country's biggest telecommunications company has staked out its claim with premium sports since it won the 2019 Rugby World Cup rights earlier this year. Sky Network Television was unchanged at $2.57. 

Among blue-chip stocks, Fletcher Building gained 0.4 percent to $6.83, Mainfreight dipped 0.1 percent to $27.81, Air New Zealand declined 0.2 percent to $3.325, Kiwi Property Group fell 0.7 percent to $1.36, Meridian Energy fell 1.3 percent to $3.125 and Auckland International Airport dropped 1.9 percent to $6.74. 

Outside the benchmark index, PGG Wrightson was unchanged at 67 cents after reporting a record profit, while lowering its dividend to reinvest earnings back into the business. 

Rubicon gained 3.6 percent to 29 cents after founding chief executive Luke Moriarty and chief financial officer Mark Taylor said they will leave the biotech company this financial year. 

Pacific Edge rose 1.6 percent to 31 cents after saying the Counties Manukau district health board will start using its Cxbladder cancer detection device from next month. 


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