MARKET CLOSE: NZ shares flat as Chinese, Australian markets down; Vector, Warehouse rise while Air NZ falls

Wednesday 27th January 2016

New Zealand shares were almost unchanged today after a sell-off in Chinese equities unwound some of the positive sentiment leftover from Wall Street. Vector, Warehouse Group rose while Air New Zealand fell.

The S&P/NZX 50 Index decreased 0.2 points and was almost unchanged at 6148.43. Within the index, 25 stocks rose, 15 fell and 10 were unchanged. Turnover was $94 million.

The local bourse rose as much as 0.6 percent, but fell away as Chinese markets traded down this afternoon. China's Shanghai Composite index was down 2.8 percent, while the large-cap CSI 300 Index dropped 2.2 percent.

Overnight news out of Wall Street was positive, with better-than-expected corporate earnings adding to positive sentiment. That optimism continued through most Asian markets excluding China and Australia's S&P/ASX 200 which fell 1.3 percent, having been closed for trading yesterday for Australia Day.

"We have weakened off during the day on extremely light volumes - that volume hasn't come back yet before our earnings season, "said Peter McIntyre, investment adviser at Craigs Investment Partners.

Vector showed the biggest gain, up 2.2 percent to $3.24, a one-month high. Warehouse Group rose 1.9 percent to $2.70, and Meridian Energy was up 1.7 percent to $2.34.

Kathmandu Holdings gained 1.3 percent to $1.54, and Goodman Property Trust advanced 1.2 percent to $1.265. Xero grew 1.2 percent to hit $17, having fallen 15 percent since the start of the year.

Air New Zealand posted the biggest fall today, down 4.8 percent to $3.07. The stock price has rallied as oil prices have floundered, hitting a high of $3.225 yesterday, a price last seen in September 2001.

"There's definitely been some profit taking even though there's still light volumes," McIntyre said. "It's a crowded trade, there are lots of investors in there and when investors look to exit it does put some weakness on their share price."

The airline was still cheap, despite the share price rally, McIntyre said.

"It's trading below 10-times earnings, so with the market trading below 16 it would still be considered to be a relatively cheap equity based on current multiples."

Orion Health Group fell 2.3 percent to $3.01, Steel & Tube dropped 1.8 percent to $2.15, and Nuplex Industries shed 1.4 percent to $4.29.

Contract Energy shed 1.1 percnt to $4.60, and Westpac Banking dipped 0.9 percent to $32.79.

Outside the benchmark index, Veritas Investments plunged 42 percent to 29 cents after the food and beverage investor downgraded its outlook for earnings to $3 million-$3.5 million from $5.3 million-$5.5 million previously flagged, and nixed a first-half dividend. Veritas had affirmed its profit guidance in November, saying first-quarter trading was in line with expectations and the second quarter was expected to be more profitable.

"Obviously that business is struggling," McIntyre said. "They seem to have a history of downgrading, and investors are lacking confidence about what's happening within that business currently. Those that are able to get out, even though there's not a lot of liquidity in the stock, are tending to jump and run."

OceanaGold rose 6.9 percent to $3.10. The Melbourne-based company, which bought the Waihi Gold Mine last year, extracted more gold than it expected in 2015 and is predicting it will exceed that again this year.

"They're developing themselves as one of the low-cost producers of gold on an 'all-in sustaining costs' perspective globally," McIntyre said. "Management seem to have done a really good job in what is typically quite a tough environment for some miners outside of the gold sector.

BusinessDesk.co.nz

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