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MARKET CLOSE NZ shares fall; Kiwi Income drops after CBA sells stake at discount

Wed, 11 Jul 2018

New Zealand shares fell after Commonwealth Bank of Australia sold its stake in Kiwi Income Property Trust at a slight discount and SkyCity Entertainment Group said a high kiwi dollar is eroding the value of Australian sales.

The NZX 50 Index fell 7.592 points, or 0.2 percent, to 4728.019. Within the index, 22 stocks fell, 20 rose and eight were unchanged. Turnover was $204 million, including about $100 million of Kiwi Income.

Kiwi Income fell 2.3 percent to $1.075 after Australia's biggest bank by market value sold 87 million units at $1.06 apiece in a placement. The sale came after Kiwi Income unitholders voted to buy out the management contract held by CBA and the also coincided with the kiwi dollar reaching a new five-year high, as much as 92.69 Australian cents.

"By repatriating a New Zealand dollar investment now, CBA is getting the highest exchange rate in five or so years," said James Smalley, client adviser at Hamilton Hindin Greene. The high exchange rate also weighed on companies with Australian operations "because earnings will be affected unless they have got good hedging in place."

SkyCity, the casino and hotel company with operations in Adelaide and Darwin, fell 1.8 percent to $3.82 after saying first-half profit will fall as a rise in the New Zealand dollar crimps returns from its Australian businesses.

Among other companies with operations across the Tasman, Fletcher Building slipped about 0.4 percent to $8.54 and has tumbled about $1 in less than a month. A2 Corp declined 1.3 percent to 75 cents while Ebos Group edged up 0.1 percent to $9.01.

Smalley said stocks have also declined amid perceptions the New Zealand market "is reasonably fully valued" and companies need to demonstrate reasonable earnings growth to push it much higher.

Xero fell 2.5 percent to $32.17, the biggest decliner on the index.

Property for Industry led declines among other property investors. Smalley said with higher interest rates looming, yield stocks such as the listed property sector are particularly vulnerable.

Chorus gained 4.9 percent to $1.50 after a Deutsche Bank research note said the network operator would likely delay any capital raising until after the Commerce Commission completed its re-determination of copper line broadband pricing under a new methodology.

Meridian Energy slipped 0.5 percent to $1 and MightyRiverPower declined 0.5 percent to $2.06 after the government's Half Year Economic and Fiscal Update showed the Crown will miss out on some $327 million in dividends from its partially privatisation programme. Air New Zealand fell 0.6 percent to $1.625, while Genesis Energy is yet to be sold.

Dual-listed Australia & New Zealand Banking Group slipped 0.2 percent on the NZX to $33.15 and Westpac Banking Corp rose 0.5 percent to $33.31 after news their local subsidiaries will face legal proceedings from the Commerce Commission over the way they sold interest rate swaps to farmers. The regulator plans to file proceedings against ANZ Bank New Zealand, ASB Bank and Westpac New Zealand.

Units in Fonterra Shareholders' Fund fell 0.5 percent to $5.78 ahead of the next dairy auction. Prices edged up 0.1 percent at the last auction, though since then Fonterra Cooperative Group has slashed its forecast dividend by two thirds and held its expected payout to farmers at a record $8.30 per kilogram of milk solids. Rival dairy processor Synlait Milk fell 1 percent to $3.95.


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MARKET CLOSE NZ shares fall; Kiwi Income drops after CBA sells stake at discount