Market commentary

A doubledigit decline in a2 Milk’s firsthalf net profit helped tip the sharemarket into correction territory after a moderate day’s trading, but the overriding influence on prices was the upward march of bond yields.

The S&P/NZX50 index finished at 12,140.66, down 141.76 points or 1.15%, and down 10.5% from the market’s peak in early January. There were 83 falls and 67 gains while the total amount of stock traded came to $198 million.

‘‘I guess you could call it a correction but the key thing is rising bond yields,’’ Salt Funds managing director Matt Goodson said.

‘‘With 10year yields up at 1.83%, the yieldsensitive stocks and growth stocks have been under a bit of pressure,’’ he said.

The market’s decline was against the background of a generally strong reporting season in New Zealand and Australia.

Alternative dairy company a2 Milk dropped $1.79 or 16% to $9.34 after reporting a 35% decline in net profit to $120 million and lowering its earnings guidance for the year to June, due to Covid19 disruption of the daigou trade into China.

‘‘With the retail daigou trading pretty much dead thanks to Covid19, it should not come as a shock, but it does not necessarily mean that the business model its kaput,’’ he said.

‘‘For now we are just going to have to take it on trust that they can bottom this out, and that they will not have a big inventory overhang.

‘‘Its still a very large, profitable business, but the outlook was nothing like what the market expected.’’

Shares in Synlait Milk, a2 Milk’s sole supplier of infant formula, dropped by 21c or 4.9% to $4.07.

The Warehouse rallied by 16c or 4.9% to $3.40 after upgrading its earnings guidance.

The retail chain now expects its net profit to hit $110 million in the first half to January 31, up from a previous guidance of $90 million, and compared with a firsthalf 2020 result of $46.2 million.

Manuka honey company Comvita dropped by 12c or 3.6% to $3.20, despite reporting a returning to profit in the first half to $3.5 million.

Fisher and Paykel Healthcare fell 74c or 2.5% to $28.76.

Fletcher Building rallied by 11c to $6.51. Power company Genesis gained 6c to $3.48 after reporting a sharp lift in net profit to $53 million. —