Energy sell-off sends stocks lower
Fresh virus case in LA adds to jitters affecting markets
New Zealand shares slipped for a third day as Kiwi energy stocks came under pressure and global markets continued to decline. The S&P/NZX 50 index declined 96.69 points, or 0.8 per cent, to 11,437.17. Within the index, 31 stocks fell, 14 gained, and five were unchanged. Turnover was $191.2 million.
David Price, an equity manager at Forsyth Barr, said the market turned after the US Centres for Disease Control and Prevention reported a new case of Covid-19 in California that had no obvious links to China, suggesting the virus may be spreading in the US.
Following the news, equity markets across the globe turned red. The S&P 500 was down 0.4 per cent, the Dow Jones fell 0.5 per cent, the Hang Seng in Hong Kong was down 0.4 per cent and Australia’s S&P/ASX 200 fell 1 per cent. Sky Network Television, which is overhauling its satellite business to compete with streaming rivals, led the market lower for a second day. The shares sank 10.7 per cent to a new record low of 50c on a volume of 560,000 shares.
Energy retailers came under pressure. Meridian Energy fell 7.7 per cent to $4.7 with 2.2 million shares changing hands. Mercury NZ followed close behind, declining 6 per cent to $4.815 and Contact Energy slipped 2.4 per cent to $6.85.
Price said the uncertainty around Rio Tinto’s Tiwai Point aluminium
smelter was putting downside risk on energy retailers, making them first in line for investors looking to reduce risk. New Zealand Refining Company
fell 6.6 per cent to $1.28. It reported an 86 per cent drop in net profit after the US-China trade war and new marine fuel standards slashed margins.
The stock has fallen about 23 per cent since January 21 when the company said its average margin for 2019 had fallen to a five-year low. Yesterday, the company said it would withhold its dividend to help it navigate the difficult outlook. Z Energy, which has a 15 per cent stake in the refinery, also fell 4.7 per cent to $4.24.
Air New Zealand fell 1.3 per cent to $2.37 after noting weaker earnings in its half-year report, down 8.8 per cent to $198m from $217m a year earlier.
The airline said it will look to stoke demand on its domestic and transtasman routes to counter the effect of the coronavirus on international demand. The interim dividend remained unchanged at 11c a share.
Vista Group International rose 4.3 per cent to $3.15 despite reporting a result weakened by Covid-19.
Annual net profit fell 1.5 per cent with revenue growth of 11 per cent, as the company increase market share outside of China.
A2 Milk rose 4.7 per cent to $16.42 with 2.6 million shares being traded, posting the biggest gain on the day. The company reported a 21.1 per cent jump in first-half net profit and said the scale of its infant nutrition business meant it was now looking at additional manufacturing. Price said the stock gaining against the market was a “huge performance” and the annual report was reassuring for investors to see earnings were on track despite coronavirus disruptions to a key market.
Shares in tech component maker
Rakon rose 14.6 per cent to 27.5c following a media report it had received private equity interest. About 585,000 shares traded hands, more than six times its 90-day average, despite chair Bruce Irvine saying the company was unaware of any takeover or investment.