New Zealand shares fell, snapping an eight-day advance, as Diligent Board Member Services and Xero fell, while concerns about a weak Australian dollar weighed on Michael Hill International and Fletcher Building ahead of earnings season.
The NZX 50 Index dropped 29.695 points, or 0.6 percent, to 4576.545. Within the index, 25 stocks fell, 11 rose and 14 were unchanged. Turnover was about $87 million.
Diligent fell 6.3 percent to $5.67 after the company was forced to explain the 17.3 percent drop in its share price in the last four days. It issued a similar notice to Diligent on March 11 asking why the company's price had spiked 26 percent. In both cases Diligent said it is in compliance with disclosure rules.
Xero, the cloud-based accounting company, fell 5.8 percent to $15.74, having tumbled from a record $18.79 on July 8.
"Diligent is having its own regulatory issues," said James Smalley, a director at brokerage Hamilton Hindin Greene. "Xero has been through a very strong bout of profit taking, which is understandable given the run up in the stock. When a company doesn't have tangible earnings then it comes down to perceptions of future earnings, which can change very quickly."
Michael Hill, the jewellery chain based in Brisbane, fell 3 percent to $1.24 and Fletcher Building, which counts Australia as its second-largest market, declined 1.5 percent to $8.57 as the New Zealand dollar traded near a five-year high against its Australian counterpart, reducing the kiwi dollar value of sales when they're brought reported back to New Zealand.
"The strength of the kiwi against the Aussie will not be helping them," Smalley said. Companies with exposure to Australia "will be particularly closely looked at" in earnings season given the slowdown in growth across the Tasman.
Investors are expecting mixed results from earnings season. New Zealand corporate earnings may fall short of investors' expectations with the reporting season for June balance dates bearing down next month, AMP Capital Investors (New Zealand) head of equities Guy Elliffe told a media briefing in Wellington.
"There's a risk of PE (price-to-earnings) contraction again as investors start to factor in lower earnings growth into their forecasts," Elliffe said. "There's a general challenge to earnings growth meeting expectations. Having said that, we're not in any sort of bubble, we're just in a little consolidating period where earnings have to catch up with PEs."
Among firms to issue profit warnings so far, shares of transport and logistics firm Freightways were unchanged today at $4.23, clothing chain Hallenstein Glasson slipped 0.4 percent to $4.88, carpet maker Cavalier Corp fell 0.6 percent to $1.59, and lender Heartland New Zealand was unchanged at 84 cents.
MightyRiverPower rose 0.8 percent to $2.42, edging back toward its IPO price and network company Chorus rose 1.9 percent to $2.74.
Smalley said investors' ongoing demand for yield in the face of low term deposit rates was underpinning stocks that had reasonable dividend yields.