Shares fall amid rising fears about Covid

Worry that second wave will disrupt global recovery

New Zealand shares fell as investors grow increasingly concerned about a second wave of Covid-19 disrupting the global economic recovery. The S&P/NZX 50 Index dropped 96.28 points, or 0.9 per cent, to 11,158.46. Within the index, 24 stocks fell, 18 rose, and eight were unchanged. Turnover was $115.8 million.

Investors, once excited by economies reopening, are becoming increasingly nervous about the apparent link between communities reopening and renewed outbreaks.

While China closes parts of Beijing due to an unexpected flare-up of 200 new cases, other parts of the world continue to ease lockdowns.

Recent data shows rising Covid-19 cases in parts of the United States. For the first time since the start of May more than 30,000 new cases have been recorded in a day in the US.

Experts say more testing accounts for some, but not all, of the rise.

Markets turned weaker as investors had to balance the positive impacts of economies reopening with the increased risk of a virus flare-up.

On Wall Street, the S&P 500 fell half a per cent and the Dow Jones Industrial Average dropped 0.8 per cent.

The New Zealand market followed that lead. NZ’s own difficulty keeping incoming Covid-19 cases contained at the border also reminded investors a second wave in NZ remains a risk.

“Over the last week the news around the risk of a second wave, and what we are seeing locally in terms of re-emergence, has been detrimental,” said Sam Trethewey of Milford Asset Management.

The recent weakness in travel stocks showed investors were being put off by bad data, and were unlikely to let share prices continue to rise without a material improvement.

“After the strong recovery we have seen in April and May, it is difficult to see any more positive catalysts to push the market further,” he said.

Stocks directly exposed to travel took a tumble: SkyCity Entertainment fell 3.9 per cent to $2.74, Auckland International Airport dropped 3.4 per cent to $6.58, Air New Zealand fell 2.3 per cent to $1.475 and Tourism Holdings declined 1 per cent to $1.96.

A2 Milk led the market lower, falling 4.7 per cent to $19.38. Australian media speculated the Kiwi dairy giant was seeking to buy producer Mataura Valley Milk for $400m.

A2’s share price rose 8 per cent last week. Synlait Milk, which supplies all of A2’s infant formula, fell 4.2 per cent to $7.14. Trethewey said A2 adding its own manufacturing capability would increase the dairy firm’s negotiating power with Synlait.

Napier Port fell 2.8 per cent to $3.79 on its first day of trading as part of the NZX 50, giving up some of the 8.6 per cent rally in the lead-up.

Port of Tauranga held last week’s 13 per cent gain at $8.09.

Kiwi Property fell 0.9 per cent to $1.07. It said it would resume paying dividends this year as visitors to its shopping portfolio had recovered 1 per cent above pre-Covid levels.

Pushpay Holdings — which has doubled in value this year after gaining another 14 per cent last week — climbed a further 5.1 per cent to $8.66, the day’s biggest gain.

Fisher & Paykel Healthcare rose 2.2 per cent to $1.25.