Market commentary

WELLINGTON: Leading stock a2 Milk, caught with an earnings downgrade, hogged the limelight again and dragged the New Zealand sharemarket down for the second day running.

The S&P/NZX 50 Index fell 60.19 points or 0.51% to 11,742.09, after reaching an intraday high of 11,876.67. There were 80 gainers and 60 decliners over the whole market, with trade reaching 48.75 million shares worth $192.83 million.

After falling nearly 10% the day before, a2 Milk lost another 81c or 4.86% to $15.84 on trade worth $37.7 million — and the move made up a third of the index’s decline. Synlait Milk, which supplies a2 Milk, was down 19c or 3.39% to $5.41.

The milk marketer has now fallen nearly 35% from its high of $21.50 posted on August 18. It was not how a2 Milk would like to be seen on the centre stage — it was also the leading decliner on the steady S&P/ASX 50 Index.

Before midAugust, a2 Milk was on a magnificent 50% gain after starting its rise at $14.56 on January 15 and had reached $20.33 by April 28. It is still more than 28% up over the past 12 months.

It all came unstuck when a2 Milk reported that firsthalf revenue for the 2021 financial year would drop because of lower demand from Chinese resellers in Australia. The Melbourne lockdown had affected the daigou sales, which represent a significant proportion of its infant formula business.

Analysts said the new forecast for firsthalf revenue was 11% lower than expectations, even though the fullyear outlook was still better than last year’s result.

Jeremy Sullivan, investment adviser with Hamilton Hindin Greene, said there had been some broker downgrades in Australia and when their market opened the selling in a2 Milk continued.

‘‘When you get a stock that has risen so quickly, investors will look for any reason to sell it. The daigou sales channel was more profitable for a2 Milk but it was not without risk. However, I’m sure the demand will come back postCovid,’’ Mr Sullivan said.

While a2 Milk dominated proceedings, the rest of the market was more or less in a holding pattern with very few big movers. The other heavyweight Fisher and Paykel Healthcare lent a hand in pulling the market down, falling 19c to $33.50.

Network operator Chorus recovered some ground, rising 21c or 2.47% to $8.72, and retailer Briscoe Group gained 8c or 2.04% to $4.01.

Software firm Gentrack fell 7c or 5.11% to $1.30.

Retirement village stocks were reviving with Ryman Healthcare gaining 27c to $14.09 and Oceania Healthcare increasing 1c or to $1.12, having risen nearly 10% in the past week.

After all the excitement and rises of the day before — with the Tiwai Point aluminium smelter likely to extend its stay in Southland — the energy stocks settled and then most of them fell 1c or 2c, except Meridian, up 2.2c to $4.865. Mercury was down 6c to $5.03.

At its annual meeting, Air New Zealand told shareholders it had tapped into $110 million of the $900 million government loan. It is not able to provide specific 2021 earnings guidance.

Air New Zealand’s available liquidity is about $1 billion, comprising $215 million of cash on hand and $790 million remaining on the Crown standby loan facility. The airline’s share price was 1.5c to $1.38 with investors looking forward to a transtasman travel bubble.

Auckland International Airport gained 5c to $7.23 and SkyCity was up 1c to $2.89 – two other stocks that would benefit from the resumption of travel between New Zealand and selected Australian states. —