Market commentary
THE New Zealand sharemarket finished at a record high after the Democrats’ success in runoff elections the US state of Georgia added to investors’ appetite for New Zealand’s hydrodominated power companies.
The S&P/NZX50 Index finished at 13,485.67, up 151.74 points, or 1.1%, following on from another record day on Wall Street.
Local turnover totalled 53.1 million shares, worth $153.2 million, with trade very much dominated by the power companies.
In the US, investors were prepared to look past the civil unrest in Washington, D.C. to instead focus on what a Democratcontrolled senate would mean for the world economy, the Dow Jones Industrial Average breaking through 31,000 points for the first time.
The market is now looking to the new US administration to provide extra stimulus for the Covid19hit US economy and for it to favour more environmentally friendly energy solutions, following on from the Georgia runoffs.
The Georgia result means the Democratic Party will control Congress and the White House for the first time in a decade, potentially allowing the new administration to enact sweeping, liberal legislation without Republican support.
‘‘Georgia has had its influence, even on our little market,’’ Harbour Asset Management portfolio manager Shane Solly said.
‘‘With that comes an expectation of increased fiscal stimulus, more spending, and more infrastructure,’’ he said.
The local power generators had already been keenly sought by greenoriented indextracking exchangetraded funds, which had seen them start the new year on a very strong note. The Democrats’ success had added more fuel to the fire.
‘‘We have seen Meridian, Contact and Mercury all benefit from that,’’ Mr Solly said.
Meridian rallied by $1.40, or 16.4%, to close at a record $9.93.
At that price, the stock is easily the biggest in terms of market cap — $24 billion — dwarfing number two stock Fisher & Paykel Healthcare’s market cap of $18.6 billion.
Contact Energy was also highly sought, the stock gaining 70c, or 7%, to finish at $10.60, while
Mercury finished up 20c, or 2.8%, at $7.20.
The rise and rise of New Zealand’s power sector stocks, which had a stellar run last year despite the threatened closure of the Tiwai Point aluminium smelter, will be good news for KiwiSaver investors, as they typically form a big part of many standard portfolios.
Expectations that a Democratled US government would mean greater economic stimulus was also interpreted as being good for the banking sector and cyclical stocks — a theme that played out locally with ANZ gaining $1.20 at $25.44 and Fletcher Building firming 27 cents to $5.94.
On the flip side, the tech sector lost favour in the US because expectation the new administration would mean more regulation had its local impact, which meant electronic donation specialist Pushpay dropped by eight cents, or 4.4%, to $1.74.
Electrical components maker Rakon firmed eight cents to 72c, which Mr Solly said may have been a delayed reaction to announcements made by the company late last year, among which was a comment that it expected improved demand in the second half, despite ongoing economic uncertainty from geopolitical tensions and Covid19, and the slow rollout of 5G networks.
While the local market had put on another strong performance, Mr Solly said concern was mounting about the strengthening New Zealand dollar, which finished the day at $US0.728c.—