Shares join regional sell-off
New Zealand shares joined a regionwide sell- off with Asian equity markets following Wall Street lower as global investors second-guess the outlook for US interest rates, and as local analysts absorb a “pretty good” earnings season. Sky Network Television fell for a second day.
The S&P/NZX 50 index fell 31.11 points, or 0.4 per cent, to 8342.71. Within the index, 28 stocks declined, 15 gained, and seven were unchanged. Turnover was $113.3 million.
Stocks across Asia declined, with Australia’s S&P/ASX 200 index down 0.8 per cent in afternoon trading and Japan’s Topix down 1.3 per cent, following Wall Street lower as investors prepare for Federal Reserve chair Jerome Powell’s second congressional testimony, where they’re seeking clues on how quickly US interest rates will rise, which reduces the appeal of equities.
That comes as the local company earnings season winds down with most results falling in line with expectations, which supports the current price-to-earnings ratio at 18.5. The two biggest surprises in the reporting period were a2 Milk Co, which more than doubled first-half profit and entered into a supply deal, while Fletcher Building unveiled wider construction losses in its Buildings + Interiors unit. A2 shares fell 1.1 per cent to $13.09 and Fletcher dropped 1.2 per cent to $6.43.
“Earnings season looked to be pretty good, skewed by two significant names — one on the plus side and one on the downside,” said James Lindsay, a portfolio manager at Nikko Asset Management, which this week was named Morningstar’s New Zealand fund manager of the year. “With the end of reporting season, there wasn’t a lot to drive prices. A lot of the market continues to wait to see what Fletcher Building announces with regard to the US private placement market debt.”
Fletcher announced it was granted a waiver by the US private placement noteholders after trading had closed.
Sky TV led the market lower, falling 2.8 per cent to $2.46, adding to Wednesday’s 9.6 per cent decline when the pay-TV operator slashed its dividend and lowered the price of its entry-level service. New Zealand Rugby yesterday unveiled a return to profit in 2017, and chief executive Steve Tew said he’s keen for two or three bidders in negotiations for the 2021 broadcasting rights, which are currently held by Sky.
“Sky’s made its first attempt, and I don’t think it’s the end of it for it at trying to reduce the subscription losses and going into those negotiations for when the rights run out. It’s probably better that it’s in a good solid position as far as the number of customers,” Lindsay said. “The dividend cut is a very well thought out strategy as far as getting the corporate entity right-sized as far as debt going into those negotiations.”
Kathmandu Holdings fell 2.2 per cent to $2.20 and SkyCity declined 2.1 per cent to $3.82.
NZX was the best performer on the day, rising 1.9 per cent to $1.07. Metro Performance Glass gained 1.2 per cent to 84c and Tourism Holdings advanced 1 per cent to $6.
Outside the benchmark index, Tower rose 3.7 per cent to 70.5c after the insurer’s board said it will resume dividend payments in the 2018 financial year, having settled a dispute with reinsurer Peak Re on Wednesday. The company told shareholders at yesterday’s annual meeting in Auckland it had boosted gross written premium 14 per cent in the first four months of the year.
AWF Madison Group sank 11 per cent to $2.02 after the contract labour firm warned profit would fall on softness in labour hiring and delays in mobilising its migrant workforce to meet pent-up demand in the Auckland construction sector.