MARKET CLOSE: Shares fall to month-low; Air NZ drops on Jetstar expansion
NZX 50 Index fell 29.558 points.
NZX 50 Index fell 29.558 points.
New Zealand shares fell, pushing the NZX 50 Index to a month-low. Air New Zealand tumbled on increased domestic rivalry from Jetstar and weak economic growth figures drove down the kiwi dollar, unsettling offshore equity investors. Meridian Energy and Chorus also declined.
The NZX 50 Index fell 29.558 points, or 0.5%, to 5749.705, the lowest since May 15. Within the index, 27 stocks fell, 13 rose and 10 were unchanged. Turnover was $113 million.
Air New Zealand fell 9.6% to $2.395. Qantas Airways' Jetstar unit said today it will confirm which of seven prospective destinations it will fly to in New Zealand, breaking Air New Zealand stranglehold on some routes. Options include Hamilton, Rotorua, Napier, New Plymouth, Palmerston North, Nelson and Invercargill. Qantas chief executive Alan Joyce said typically fares dropped 40% in New Zealand when Jetstar began flying the main trunk routes and he would expect a similar impact this time round.
Government figures showed the economy grew just 0.2% in the first quarter, a third of the pace expected by economists and the Reserve Bank. The weak data prompted traders to bring forward expectations for another cut to the official cash rate to next month and pushed the kiwi dollar below 69USc.
"There's a slowdown compared to most people's expectations of GDP and that quite logically flows through to the currency," said Stuart Williams, head of equities at Nikko Asset Management New Zealand. "You're still talking about very good growth in a global sense but, specific to New Zealand, it is slowing a bit and that does weigh against sentiment in the market."
Meridian declined 3.7% to $2.07 and Chorus, the network operator, fell 2.7% to $2.88. SkyCity Entertainment Group fell 1.4% to $4.15 and Ryman Healthcare, the biggest listed retirement village operator, dropped 1.9% to $7.95.
Nikko's Mr Williams said there are competing forces from the prospect of lower interest rates because they typically lead to lower-term deposit rates and make higher-yielding stocks look more attractive as people "look at putting money in the bank versus putting it in the New Zealand (stock) market and getting a 6% net yield."
Summerset Group was the biggest gainer on the NZX 50 today, rising about 2% to $3.58. The shares have surged 29% this year.
Fonterra Shareholders' Fund, whose units are entitled to the dividends on the dairy company's ordinary shares, rose 1.7% to $4.68. Pacific Edge, which has developed a test for bladder cancer, rose 1.6% to 63c.
Nuplex Industries, which makes resins used in paints and adhesives, rose 1.4% to $4.28 and Xero, the cloud-based accounting service, gained 1.4% to $19.45.
Fisher & Paykel Healthcare declined 0.1% to $6.99 and Fletcher Building rose 0.9% to $8.24. Spark New Zealand rose 0.6% to $2.75.
(BusinessDesk)