MARKET CLOSE NZ shares declined as investors sell up to invest in Summerset, Meridian
New Zealand shares declined as investors sold up some of their holdings to participate in a private equity sale of shares in Summerset Group Holdings and as they prepare for next Wednesday's bookbuild for the initial public offering of Meridian Energy shares.
The NZX 50 Index dropped 17.411 points, or 0.365 percent, to 4758.591. Within the index 31 stocks fell, 18 rose, and one was unchanged. Turnover was $472 million.
"Our market might have been affected by a couple of corporate events," said James Smalley, a director at Hamilton Hindin Greene. "Today is the last day of the Meridian retail offer and also the institutional bookbuild is Wednesday next week so you might still have a number of institutions looking to raise funds out of the market to participate in the bookbuild and that affects prices."
Investors may also have been selling stocks to fund the purchase of Summerset shares after Australia's Quadrant Private Equity sold down its remaining stake in the New Zealand retirement operator and developer for $155 million. QPE Funds Management, the Quadrant unit that held the stock, sold 50 million shares at $3.10 apiece to institutional and retail investors in New Zealand and overseas.
"With that selldown being done, a bit of that money may well have come out with existing investors who took up the placement selling other stocks to raise the funds," Smalley said.
"It does show you that there is certainly very good liquidity floating around the market when you have got one of the biggest IPOs the market has seen at the same time you had the selldown. It does show you that there is very good demand for quality issues," he said.
Shares in Summerset rose 1.6 percent to $3.19.
"That would also be a reflection of the attractiveness of the company the investors have bought into but it is also a factor that everyone knew that Quadrant eventually was going to exit its entire stake and that was acting as a bit of an overhang in the share price and now that overhang has gone, the stock should trade on its own merits."
Xero was the best performer on the benchmark today, jumping 7.1 percent to $27, pushing the cloud-based accounting company's market value up to $3.44 billion and its advance this year to 232 percent.
"Xero just keeps on powering on," Smalley said. "The whole sector is extremely popular at the moment. With the capital raising, what that has done as well as give them a very good war chest, it has also probably increased their exposure significantly to those American investors. They are a lot more willing to buy growth than traditional New Zealand investors which concentrate on dividends and are probably less familiar with the type of company Xero is. Probably the majority of the buying volume would be coming from offshore in that company with its increased exposure."
SkyCity Entertainment Group, New Zealand's only listed casino operator, slipped 3.7 percent to $3.94. Chief executive Nigel Morrison told the company's annual meeting in Auckland that normalised revenue dropped 2.8 percent so far this financial year as a higher New Zealand dollar crimps returns from its Australian businesses.
"It does seem to have maybe disappointed the market today," Smalley said. "It does affect quite a few companies on the bourse, that kiwi/Aussie cross. That is something that investors have to be aware of right across the New Zealand market."
Other companies exposed to Australia include Michael Hill International which fell 4 percent to $1.46, Vital Healthcare Property Trust dropped 0.8 percent to $1.30, Kathmandu Holdings declined 3.6 percent to $3.52, Mainfreight fell 2.2 percent to $11.35, Pumpkin Patch dropped 1 percent to $1, Hallenstein Glasson Holdings declined 2.2 percent to $4.89, and Ebos Group decreased 0.5 percent to $9.55.
Fletcher Building, the biggest company on the bourse, whose shares rose 0.1 percent to $9.50
Chorus, the fourth-worst performer on the benchmark, slipped 3.5 percent to $2.45. Local investors may be selling the stock to invest in Meridian while overseas investors, who have held the stock since it split out of Telecom, could be taking advantage of the high kiwi to repatriate their funds, Smalley said