MARKET CLOSE: NZ shares join global rout as Chinese manufacturing contracts; Xero, Z Energy drop

Tuesday 5th January 2016

New Zealand shares fell, joining a global rout in equity markets after figures showed a deeper contraction in Chinese manufacturing. Xero, Z Energy and Fisher & Paykel Healthcare fell on light trading.

The S&P/NZX 50 Index slipped 46.15 points, or 0.7 percent, to 6278.11. It dropped as much as 1.4 percent in intraday trading, recovering some ground as Asian markets rebounded. Within the index, 26 stocks fell, 21 rose and three were unchanged. Turnover was $98 million.

The Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI), fell to 48.2 in December, from 48.6 in November, the 10th straight month of contraction. Chinese stocks plunged yesterday, with the large-cap CSI 300 Index plummeting 7.02 percent, triggering a trading halt. Stock markets across Asia were weak yesterday, with Hong Kong's Hang Seng closing 2.7 percent lower. Wall Street also took a hit, with the Nasdaq Composite Index falling 2.1 percent, the Dow Jones Index declining 1.6 percent and the Standard & Poor's 500 Index down 1.5 percent.

"It's the flow on effect from what's happened in China, which led into the Dow overnight, and we've got that same negative tone," said Chris Timms, investment adviser at Craigs Investment Partners. "Asia's in the green now, so we've recovered some of our position."

The Chinese share market is driven by retail investors, who tend to be a bit more fickle, rather than institutions, he said. "There was quite a lot of borrowing (to buy shares) in China, whereas ours has got an institutional focus. We still get the tone, but we tend not to be quite as volatile."

Xero led the index lower, falling 5.6 percent to $18.70.

"It's a growth story, it doesn't have that income to back it up when things go a bit weak," Timms said. "When you've got a bit of volatility and nervousness, shares that move around significantly tend to get a bit more grief. If you're in a volatile market and you've got a company which is paying a dividend stream, you can ride that volatility out, but there's no income with a company like Xero, so you're relying on the gains to make money."

Z Energy fell 4.1 percent to $6.48, Fisher & Paykel Healthcare declined 3.8 percent to $8.56, and New Zealand Refining Co was down 2.9 percent to $4.30. Timms said there had been some profit-taking from the stocks, which have all rallied recently.

Warehouse Group, which owns the Noel Leeming chain, fell 0.8 percent to $2.65. Noel Leeming's competitor Dick Smith Holdings, which is listed on the ASX, today announced it had been put into receivership and the receivers hope to sell the consumer electronics chain with 393 stores in Australia and New Zealand as a going concern.

Mighty River Power was the biggest gainer on the index, rising 3.8 percent to $2.885.

A2 Milk Co rose 3.2 percent to $1.92. The shares were sold down heavily at the end of 2015, falling 18 percent in the final two days of trading to hit $1.86 on Dec. 31, having more than doubled in value after it announced a second earnings upgrade for the year on Dec. 17. Managing director Geoffrey Babidge was one of a number of the specialty milk marketing company’s shareholders to cash in when he sold 500,000 shares for about $1.18 million, or about $2.36 apiece, on Dec. 30, according to a notice to the NZX today.

"People looked at that selldown on Thursday when the share price got sold down under $1.90, and it did seem a bit overdone at that point," Timms said. "It's an exciting story, the company's in an interesting position, and the market's said the selldown has given us a bit of an opportunity to get back into the share rather than treating it as time to bail out."

Outside the benchmark index, Wynyard Group rose 5.4 percent to $1.94,. The Auckland-based company, whose shareholders agreed to a $30 million private placement last month, has signed a three-year deal worth $27 million with an unnamed national security bureau. Wynyard will provide its crime analytics and investigations case management applications to help the bureau solve high consequence crime, security and deal with big data issues, it said in a statement.

IkeGPS was unchanged at 70 cents. The laser measurement tool developer will stop paying to use the General Electric brand as its own product gains more recognition, improving its profit margin. The Wellington-based company will now label its electric utility solution as "by ikeGPS", rather than "GE MapSight by the team at ikeGPS", it said in a statement. Its reseller relationship won't be materially affected with GE Digital Energy, the operating GE business unit that serves the utility and infrastructure market, it said.

BusinessDesk.co.nz

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