Chorus, power companies lead stocks lower

New Zealand shares fell as energy stocks declined for a second day following the announcement Rio Tinto’s New Zealand aluminium smelter will close.

Chorus led the market lower on the risk of more regulation.

The S&P/NZX 50 index fell 46.02 points, or 0.4 per cent, to 11,394.86. Within the index, 20 stocks fell, 23 rose and seven were unchanged. Turnover was $144.6 million.

The benchmark dropped as investors continued to sell positions in energy stocks that have been negatively affected by the closure of the aluminium smelter that uses 13 per cent of New Zealand’s electricity.

Rio Tinto, which owns nearly 80 per cent of New Zealand Aluminium Smelters, advised Meridian early on Thursday that the smelter will close in August next year. The news sent energy stocks tumbling and prompted the index’s biggest single-day drop since March. Yesterday, the worstaffected energy firms lost further ground and continued to weigh on the benchmark.

Matthew Goodson, joint managing director of Salt Funds Management, said the widespread impact of the closure was the key focus for investors.

“The initial reaction to Rio’s decision was fairly well ordered, but we are seeing the stocks starting to come off further,” he said.

“As one would expect, Contact and Meridian have borne the brunt of it.”

Meridian dropped a further 3.8 per cent to $4.51, bringing its total loss for the week to 8.7 per cent.

Contact Energy shed another 3.1 per cent to $5.62, bringing its total fall to 16.1 per cent during the week.

Other energy stocks were mixed. Genesis Energy declined 0.7 per cent to $2.88, Mercury held at $4.68, Vector — which also provides natural gas — rose 0.6 per cent to $3.61 and Trustpower gained 1.5 per cent at $6.90. Internet infrastructure company Chorus led the market lower, dropping 8 per cent to $7.07 after the Commerce Commission said it would review the way it allowed Chorus to account for losses incurred while building its fibre network.

Goodson described it as a shock from leftfield which had injected an element of uncertainty that investors hadn’t priced in.

Metlifecare started the day in a trading halt at $5.79 while the board considered a takeover offer at $6 per share. The stock resumed trading at 4:44pm with an announcement that the deal had been approved and its shares rose 0.9 per cent to $5.84.

Goodson, speaking to BusinessDesk before the decision, said in his view $6 was not a good enough price considering the longterm potential of the company.

Restaurant Brands rose 5 per cent to $12.07, posting the day’s biggest gain.