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MARKET CLOSE: NZ shares sink; rising rates sap demand for yield stocks

Thursday 12th September 2019

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(Sept. 11, 5:48 PM) New Zealand shares dropped to a one-week low as higher interest rates reduced demand for reliable dividends from the likes of Meridian Energy and Spark New Zealand. 

The S&P/NZX 50 Index fell 217.7 points, or 2 percent, to 10,924.88. Within the index, 36 stocks dropped, nine rose, and five were unchanged. Turnover was $176.6 million. 

The local market was the worst performer across Asia-Pacific as bond yields followed US Treasuries higher. New Zealand's 10-year swap rate at 1.37 percent has climbed almost 20 basis points this month. Low interest rates have underpinned the NZX50's high proportion of yield stocks, such as utilities and property investors, and they were among the hardest hit in today's sell-off. 

Meridian led the market lower, down 5.1 percent at $5.08 on a volume of 2.2 million shares, more than its 90-day average of 1.4 million. Spark dropped 4.8 percent to $4.425 on a volume of 4.3 million shares, Z Energy fell 4.4 percent to $6.30 with 1.5 million shares changing hands, Mercury NZ declined 3.8 percent to $5.33 on a volume of one million and Contact Energy was down 3.7 percent at $8.45 with one million shares traded. 

"We've seen that dramatic drop in yields rebound a little bit and that's part of the reason why our market is getting sold off," said Peter McIntyre, an investment advisor at Craigs Investment Partners. "It suggests we are seeing a bit of offshore selling in our market." 

The benchmark index is still up 24 percent so far this year, the second-best performer behind China's CSI 300 Index which has climbed 31 percent. 

Vista Group International was the most traded stock on a volume of 4.4 million shares, almost 10 times it 446,000 average. The shares fell 3.6 percent, or 15 cents, to $4.01. It sheds rights to a 1.2 cent interim dividend tomorrow. 

Of other companies trading on volumes of more than a million shares, Air New Zealand fell 2.2 percent to $2.70, Kiwi Property Group decreased 0.9 percent to $1.67, Fletcher Building was up 0.6 percent at $5, Precinct Properties New Zealand fell 1.6 percent to $1.86, and Property For Industry was down 0.2 percent at $2.43. Pushpay Holdings was unchanged at $3.32, Goodman Property Trust declined 1.1 percent to $2.215, and Fisher & Paykel Healthcare dropped 2.6 percent to $16.90. 

Vital Healthcare Property Trust was down 3.1 percent, or 8.5 cents, at $2.70, having shed rights to a 2.19 cent dividend. Refining NZ was down 0.5 percent, or 1 cent, at $2.12, giving up rights to a 2 cent dividend. 

Synlait Milk posted the day's biggest gain, up 2 percent at $9.64 on a volume of 217,000 shares, more than its 91,000 average. The milk processor will report its annual earnings tomorrow. A2 Milk, which counts Synlait as a supplier, fell 0.6 percent to $14.52. 

Fonterra Shareholders' Fund units fell 1.5 percent to $3.23 after S&P Global said Fonterra can't waver in its restructuring plans if it wants to retain its 'A-' credit rating. The dairy exporter was scheduled to report earnings tomorrow, but delayed that until later this month as it works through asset writedowns with its auditor. 

Tourism Holdings increased 0.2 percent to $4.13 after Statistics New Zealand figures showed growing numbers of Australian and American visitors more than offset declining Chinese tourist numbers in July. 

Outside the benchmark index, Cannasouth jumped 26 percent to 68 cents on a volume of 1.6 million shares. The medicinal cannabis research firm got a 'please explain' note from the stock market supervisor over its rapid gains in the past week and a half, and has been trading on unusually large volumes. 

Cavalier Corp rose 1.9 percent to 27.5 cents on a volume of 2 million shares, well above its 49,000 average. 

Heartland Bank's 2024 bond paying annual interest of 3.55 percent was the most traded debt security on a volume of 1.2 million. The notes closed at a yield of 2.75 percent, up 10 basis points. Heartland Group shares fell 1.8 percent to $1.60. 


Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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