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MARKET CLOSE: NZX50 falls 1.3% in October; investors ponder smelter future, index reweighting

Friday 1st November 2019

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(Oct. 31, 5:56 PM) The S&P/NZX 50 Index fell 1.3 percent in October as the threat of Tiwai Point smelter closing weighed on electricity companies and as investors prepared for the upcoming reweighting of the MSCI index. 

The benchmark index was down 1.72 points, or 0.02 percent, at 10,787.82 today, with 22 stocks falling, 21 rising and seven unchanged. Turnover was higher than usual at $217.3 million. 

The local market has been one of the strongest performers across Asia-Pacific this year, with a low interest rate environment stoking demand among investors for New Zealand stocks, which typically offer reliable dividends. The dynamic looks set to stay in place after the Federal Reserve cut its key interest rate, although it signalled it probably wouldn't loosen monetary policy further, which would ease some of the pressure on other central banks to follow suit. 

Kiwi Property Group led the market lower today, down 4.8 percent at $1.59, though that's still higher than the $1.58 price the shares were sold at in a $180 million placement yesterday. Trading resumed today after being halted for the capital raising, and Kiwi Property was the most traded stock on a volume of 4.4 million shares, well up on its 90-day average of 1.5 million. 

Goodman Property Trust rose 0.2 percent to $2.13 on a volume of 2 million units, Property For Industry fell 1 percent to $2.385 with 1.4 million shares traded, Argosy Property was down 0.7 percent at $1.41 on a volume of 1.3 million, and Precinct Properties New Zealand fell 1.4 percent to $1.82 with 1 million shares traded. 

"There's a lot of demand for yield stocks and property stocks, particularly in the ultra-low interest rate environment," said Greg Smith, head of research at Fat Prophets. 

The electricity generator-retailers were sold off sharply last week after Rio Tinto said it was reviewing the Tiwai Point smelter, which is the country's biggest electricity user. Meridian Energy fell 1.1 percent to $4.60 on a volume of 3.1 million today and Contact Energy was down 1.3 percent at $7.38 with 1.5 million shares traded. 

The November reweighting of the MSCI index has also been weighing on investors. Some had been expecting Fletcher Building to be removed and Mercury NZ to be added, although the smelter review made that less certain. Fletcher rose 0.7 percent to $4.58 on a volume of 2.7 million shares and Mercury fell 1.4 percent to $4.965 with 3.2 million shares traded. 

Z Energy rose 1.9 percent to $5.36 on a volume of 1.1 million shares after a write-down on its Flick Energy investment pushed first-half profit down. The transport fuels company had already warned that competition and heavy discounting were weighing on its bottom line. 

Smith said the Commerce Commission's fuel market study still hung over Z Energy's share price, but that today's announcement may not have been as bad as some had feared. 

Australia & New Zealand Banking Group fell 3.7 percent to $28.78 after the bank reported flat annual earnings from continuing operations. While the New Zealand unit had been battered in the headlines in recent months, it still turned out one of the stronger performances for the group. Westpac Banking Corp reports on Monday, and was down 2.3 percent at $30.15. 

Freightways fell 3.1 percent to $7.70 after it told shareholders first-quarter profit fell, even as revenue gained. It announced a $117 million acquisition late yesterday, which would add refrigeration transport to its suite of businesses. 

Of other companies holding annual meetings today, Chorus fell 1.4 percent to $5.305, Vital Healthcare Property Trust was down 0.8 percent at $2.66 and Tourism Holdings decreased 0.6 percent to $3.55. 

Port of Tauranga posted the day's biggest gain, up 3.4 percent at $6.69 on a volume of 184,000 shares, more than its 137,000 average. 

Of other stocks trading on volumes of more than a million shares, SkyCity Entertainment Group rose 0.3 percent to $3.91, Auckland International Airport decreased 0.5 percent to $9.30, Spark New Zealand rose 1.5 percent to $4.48, Fisher & Paykel Healthcare increased 0.3 percent to $19.15, and Infratil was up 1.5 percent at $4.93. 


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