MARKET CLOSE: NZ shares fall; Genesis, MRP decline, A2 surges on takeover news

Monday 22nd June 2015

New Zealand shares fell as investors looked to crystallise some of their recent gains. Mighty RiverPower and Genesis Energy declined, while A2 Milk Co surged on news of a possible takeover.

The benchmark index, called the S&P/NZX 50 Index from today under a deal with S&P Dow Jones Indices, fell 9.721 points, or 0.2 percent, to 5772.040. Within the index, 27 stocks fell, 14 rose and nine were unchanged. Turnover was $118 million.

The benchmark index has gained some 3.8 percent since the start of the year, climbing to record levels as New Zealand's relatively high-yielding equities and an appreciating kiwi dollar attracted offshore investors. The local currency has since fallen about 10 percent, or 8 US cents, to trade at around 69.60 US cents, prompting some offshore investors to sell local stocks to retain some of their gains. Genesis declined 1.8 percent to $1.885. MRP fell 1 percent to $2.61.

When equities were rising, international investors "made gains and now they're reducing their currency-based exposure," said James Smalley, director at Hamilton Hindin Greene. "They would have made some good money on the way up, but the currency is falling and what they might make on the yield, they'll loose on the currency."

Offshore fund managers were also selling equities to be overweight in cash amid uncertainty surrounding Greece and the eurozone and on the possibility the US Federal Reserve may move to lift rates in the world's largest economy sooner than expected, Smalley said.

A2 Milk Co climbed 16 percent to 66 cents, paring an intraday gain to as high as 72 cents. The dual-listed milk marketing company has received an expression of interest from two associated trade parties keen on taking over the company, which may force the firm to shelve a planned capital raising. The parties have requested confidentiality and warned their expression of interest could be withdrawn if their names become public.

"The capital raising is generally negative for a share price because it's normally done at a discount to encourage people to take it up and that's perhaps why we've seen the stock start with a hiss and roar and now it's come back down," Smalley said. "Yes it is good that people are sniffing around, but then if nothing comes of it then the rights issue might actually mean the stock might come off."

Heartland New Zealand, the Christchurch-based bank, led the benchmark index lower, falling 2.4 percent to $1.20.

Air New Zealand rose 0.4 percent to $2.50 after the national carrier said it had signed a conditional agreement to sell its wholly-owned engineering subsidiary Safe Air to Airbus Group Australia Pacific, which is a major supplier to the Australian defence forces and civil helicopter retailer. The value of the deal, which is expected to be completed next month, is being kept confidential.

Fonterra Shareholders' Fund rose 1.6 percent to $4.95, as it extended its rebound from record lows.

Auckland International Airport, the nation's busiest gateway, advanced 0.5 percent to $4.965. Spark New Zealand, formerly Telecom Corp, was unchanged at $2.83. Fletcher Building, the building supplies and construction firm, declined 0.8 percent to $8.26. Ryman Healthcare, the retirement village operator slipped 0.4 percent to $7.97.

Outside the benchmark index, Livestock Improvement Corp was unchanged at $4.80, having declined 38 percent in the past 12 months. Presentation notes released today show the company, which aims to lift annual revenue to $1 billion by 2025, plans to establish $125 million of debt facilities this year and is likely to require $140 million in equity capital over the next 10 years to meet its growth goals. LIC shares are a closed market on the NZX and are only available for its shareholder-farmers.

BusinessDesk.co.nz

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