MARKET CLOSE: A2 plunges on Nestle competition, Sky TV down 8% on rugby rights
(BusinessDesk) - New Zealand shares dropped 1.4 percent with A2 Milk Co and Synlait Milk sold off over competition from Nestle in China, while Sky Network Television fell on news it likely won't win the broadcasting rights for the 2019 Rugby World Cup.
The S&P/NZX50 Index fell 120.04 points, or 1.4 percent, to 8,388.08. Within the index, 40 stocks fell, seven rose and three were unchanged. Turnover was $192.3 million.
"The US tipped over very aggressively late, lead by tech stocks which New Zealand doesn't have a massive market to speak of any more, and that selling does set the direction of the day down under," said Matt Goodson, managing director at Salt Funds Management.
A2 Milk dropped 6.5 percent to $12.94, with $32.7 million in turnover. Nestle has confirmed it is "currently launching an A2 product" under its Illuma brand, with the product said to be called Atwo and sold in China.
"Today's selling has been very much lead by A2 which always has been volatile, and the main reason being news that Nestle has launched an A2-branded formula in China," Goodson said. "They're a major company with strong distribution channels and deep pockets, and the price point that looks comparable to A2, so it no longer has the market to itself."
Synlait Milk, which has booked gains over the past year in sync with A2, dropped 4.6 percent to $8.68.
Sky TV was the worst performer, down 7.9 percent to $2.23. The shares dropped after the company said it may miss out on the broadcast rights for next year's Rugby World Cup, saying it isn't the preferred bidder.
Speculation emerged last year that US internet giant Amazon was moving into sports broadcasting and may start competing for rugby rights, while it has been reported today that Spark New Zealand and TVNZ have made a joint bid and are the preferred bidder.
"It's quite a big reaction really, Sky hasn't always had the Rugby World Cup in the past and it's not that well suited to a pay-TV model, it's perhaps more suited for ads than subscriptions," Goodson said.
Spark fell 1.3 percent to $3.38. Goodson said the deal as reported wouldn't be material for the telco - "really with Lightbox it would be providing a channel to market for content rather than being a massive content owner."
The best performer was Trustpower, up 2.7 percent to $5.75, with Chorus gaining 1.3 percent to $3.94 and Argosy Property advancing 1 percent to $1.01.