Market commentary
WELLINGTON: 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 declined 46.02 points, or 0.4%, 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% of New Zealand’s electricity.
Rio Tinto, which owns nearly 80% of New Zealand Aluminium Smelters, advised Meridian early yesterday that the smelter will close in August next year. The news sent energy stocks tumbling and prompted the index’s biggest singleday drop since March.
Yesterday, the worst affected 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 today,’’ he said.
Meridian dropped a further 3.8% to $4.51, bringing its total loss for the week to 8.7%.
Standard & Poor yesterday downgraded the company’s credit rating outlook to BBB+/negative from BBB+/stable to reflect the ‘‘challenging operating environment’’ in the two to three years following the closure of the smelter in 2021.
Contact Energy shed another 3.1% to $5.62, bringing its total fall to 16.1% this week.
Other energy stocks were mixed. Genesis Energy declined 0.7% to $2.88, Mercury held at $4.68, Vectorwhich also provides natural gasrose 0.6% to $3.61 and Trustpower gained 1.5% at $6.90.
Internet infrastructure company Chorus led the market lower, dropping 8% to $7.07 after the Commerce Commission said it would review the way it allowed Chorus to account for losses that have been incurred while building its fibre network.
The stock had been up 22% yeartodate at market close yesterday. Infratil dropped 0.2% to $4.73 after it said it does not yet have sufficient certainty to provide earnings guidance for the 2021 financial year but made a point of noting the downgrade of Tilt Renewables’ guidance range yesterday.
Tilt Renewables, in which Infratil is a 65% shareholder, announced it expects earnings to be between $A65 million and $A80 million, a decrease from its earlier guidance range of $A80 million to $A95 million.
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% to $5.84.
Restaurant Brands rose 5% to $12.07, posting the day’s biggest gain. — BusinessDesk