New Zealand sharemarket withstands woes on Wall Street
New Zealand stocks partially withstood a sharp fall on Wall Street yesterday, thanks mostly to the local market’s defensive characteristics, fund managers said.
The NZX50 index ended 1 per cent down at 8781.53 in contrast to the US stock market, which dropped by 3.10 per cent on the Dow Jones index on the back of renewed fears of a trade war and bearish signals coming from the US government bond market.
Fund managers said the predominance of defensive style stocks such as the big power generators on the local market gave it a degree of insulation from overseas volatility.
“It’s been the pattern for quite a while now — the US market is more volatile than here, which is not how things used to be a few years back,” Josh Wilson, senior portfolio manager at NZ Funds said.
Harbour Asset Management portfolio manager Shane Solly said the local market had also largely ignored Wall Street’s recent gains.
“We did not follow the big rally that the US has had over the last couple of days, and nor should we have given the mix of stocks that we have,” Solly said.
Lending support to the New Zealand market was the competing bid for Trade Me from US private equity player Hellman & Friedman.
Overseas markets are getting spooked by a flattening yield curve in US government debt, seen by some commentators as raising the possibility that the world’s biggest economy could be heading towards a recession.
On the trade front, the economic agreement US President Donald Trump said he reached with Chinese leader Xi Jinping on Saturday showed signs of unravelling on Tuesday, with the White House threatening new penalties against Beijing and multiple officials seeking to downplay expectations for an eventual deal.
Trump, in a series of Twitter posts, threatened to slap a range of import penalties on Chinese products if they did not make major changes in their economic relationship with the US.
New Zealand shares fell for a second day as doubts about the ceasefire in the USChina trade stoush weighed on global markets, hitting growth stocks and exporters such as Gentrack Group and Fisher & Paykel Healthcare.
The S&P/NZX 50 index dropped 84.23 points, or 1 per cent, to 8781.53. Within the index, 38 stocks fell, seven gained and five were unchanged. Turnover was $107.1 million.
Stock markets across Asia followed Wall Street lower, with Australia’s S&P/ASX index down 1.1 per cent in afternoon trading and Hong Kong’s Hang Seng falling 1.6 per cent. Volatility re-emerged as investors questioned the details about the USChina truce.
“It’s not too bad given it was such an ugly day on the Dow,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “For all that, US shares are still up quite a bit from the lows they got to back in October.”
Utilities software developer Gentrack, which has extensive operations in the UK and Europe, led the market lower, down 4 per cent at $5.52 in light trading, continuing its weakness since acknowledging concerns about its growth outlook. Fisher & Paykel Healthcare, which has manufacturing operations in Mexico and derives more than half its earnings in US dollar, fell 3.5 per cent to $12.55.
Lister said growth stocks typically bear the brunt when markets underperform. However, he said many hadn’t fared too badly, singling out a2 Milk Co as holding up reasonably well. The milk marketing firm decreased 1.4 per cent to $11.06 on slightly lighter volumes than usual, while its supplier Synlait Milk dropped 3.1 per cent to $9.45.
Heartland Group dropped 3.3 per cent to $1.47 on smaller than average volumes. Dual-listed lenders Australia & New Zealand Banking Group and Westpac Banking Group fell, with ANZ down 2.3 per cent to $27.40 and
Westpac declining 2 per cent to $26.95. Trade Me rose 3.1 per cent to $6.22 after receiving a second and more attractive indicative offer from a global private equity firm. Hellman & Friedman is offering $6.45 a share, compared to Apax Partners’ $6.40 bid.
Spark New Zealand was the most traded stock with 3.9 million shares changing hands. The stock was unchanged at $4.21.
Kiwi Property Group increased 0.4 per cent to $1.36, Contact Energy fell 1.9 per cent to $5.77, and Argosy Property declined 1.3 per cent to $1.14. Scales Corp slipped 0.5 per cent to $4.38.
Fonterra Shareholders’ Fund units were unchanged at $4.71.