MARKET CLOSE: NZ shares fall as prospect of smaller US rate cut knocks yield stocks

Wednesday 10th July 2019

New Zealand shares fell, joining a decline across Asia, as expectations of a smaller interest rate cut by the US Federal Reserve reduced the attraction of stocks held for a reliable income.

The S&P/NZX 50 Index dropped 67.87 points, or 0.6 percent, to 10,538.11. Within the index, 31 stocks fell, 10 rose and nine were unchanged. Turnover was $103.5 million.

Stocks across Asia were weaker, with Australia's S&P/ASX Index down 0.2 percent in afternoon trading. Hong Kong's Hang Seng fell 0.7 percent and Singapore's Straits Times Index declined 0.3 percent. Better-than-expected US jobs data last week prompted some analysts to rethink the extent of predicted US rate cuts, and upcoming testimony by Fed chair Jerome Powell this week will be closely watched for any hints on which way the central bank is leaning.

Peter McIntyre, an investment advisor at Craigs Investment Partners, said lower swap rates had weighed on Asian stock markets as investors weigh up the new rate outlook.

"We've seen in New Zealand that weakness follow through and we got weaker as the day went on," he said. "The potential impact will be hitting some of those yield stocks and infrastructure stocks."

Precinct Properties New Zealand declined 2 percent to $1.01 on a volume of 1.4 million shares, Genesis Energy fell 1.9 percent to $3.445, Mercury NZ decreased 1.1 percent to $4.59 and Infratil was down 1 percent at $4.655.

McIntyre said port stocks were also weighed down by fears that the US-China trade stoush was spilling over into other trading relationships after an ANZ report yesterday showed log export prices in China slumped after a rapid gain.

Port of Tauranga fell 2.5 percent to $6.22, while outside the benchmark index, South Port New Zealand was down 2.5 percent at $6.60. Napier Port is due to lodge its product disclosure statement for an initial public offering next week with a view to listing on the NZX next month. NZX shares were unchanged at $1.12.

Pushpay Holdings led the market lower, down 3.4 percent at $3.46 on a volume of 313,000 shares. Former chief executive Chris Heaslip recently sold down his stake in the mobile payments software developer.

Z Energy fell 3 percent to $6.06 on 283,000 shares after the government announced proposals to encourage greater uptake of electric vehicles.

"The Z announcement this morning welcomed the move but the market hasn't liked it at all," McIntyre said.

Sky Network Television was the most traded stock on an unusually large volume of 7.3 million shares. It was unchanged at $1.16. Recent substantial shareholder notices show Australian fund manager Allan Gray has shrunk its investment in the pay-TV operator, whereas Accident Compensation Corp's investment arm has lifted its stake to 6.2 percent.

The pay-TV operator has been trading near an all-time low. However, its 2021 bonds, which pay annual interest of 6.25 percent, last traded at a yield of 3.62 percent and have dropped 39 basis points over the past 12 months.

Summerset Group's 2025 bonds, paying interest of 4.2 percent, were the most traded debt security on a volume of 725,000. The notes closed at a yield of 2.98 percent, down 2 basis points. Summerset shares fell 0.5 percent to $5.52.

Of stocks trading on volumes of more than a million shares, Auckland International Airport was unchanged at $9.40, Spark New Zealand rose 0.3 percent to $3.98, Arvida Group slipped 1.5 percent to $1.33, Fletcher Building dropped 1.9 percent to $5.06, Kiwi Property Group decreased by 0.3 percent to $1.61, Meridian Energy was down 0.8 percent at $4.81, Oceania Healthcare was unchanged at $1.05 and Contact Energy fell 0.6 percent to $7.80.

Vital Healthcare Property Trust posted the day's biggest gain, up 1.4 percent at $2.52 on a volume of 205,000 units. Fonterra Shareholders' Fund units increased 1.3 percent to $3.80 on a volume of 535,000.

Outside the index, TruScreen dropped 3.9 percent to 12.5 cents when it resumed trading. The cervical cancer test maker raised $1 million at 10.6 cents apiece, including $106,000 from chair Anthony Ho. It had been targeting $2 million of new funds.

Scott Technology was unchanged at $2.20 after saying it has a strong forward order book, despite restrained investment in Europe.

Turners Automotive was unchanged at $2.28, as was Colonial Motor Co at $8.80, after the Biosecurity New Zealand announced tougher import requirements in an effort to combat the brown marmorated stink bug.

Australia & New Zealand Banking Group fell 1.3 percent to $28.92 and Westpac Banking Corp was down 0.9 percent at $29.18 after the Australian Prudential Regulatory Authority said it will require the major Australian banks to lift their total capital requirement by 3 percentage points of risk-weighted assets. The lenders expect to raise tier 2 capital to meet the new requirement. AMP decreased 0.4 percent to $2.25.

Heartland Group Holdings, which owns licensed local lender Heartland Bank and operates a reverse mortgage business in Australia, fell 1.2 percent to $1.70.

(BusinessDesk)

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