MARKET CLOSE: NZ shares fall to month-low; Air NZ drops on Jetstar expansion

Thursday 18th June 2015

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 percent, 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 percent 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 percent in New Zealand when Jetstar began flying the main trunk routes and he’d expect a similar impact this time round.

Government figures showed the economy grew just 0.2 percent 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 69 US cents.

"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 percent to $2.07 and Chorus, the network operator, fell 2.7 percent to $2.88. SkyCity Entertainment Group fell 1.4 percent to $4.15 and Ryman Healthcare, the biggest listed retirement village operator, dropped 1.9 percent to $7.95.

Nikko's 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 percent net yield."

Summerset Group was the biggest gainer on the NZX 50 today, rising about 2 percent to $3.58. The shares have surged 29 percent this year.

Fonterra Shareholders' Fund, whose units are entitled to the dividends on the dairy company's ordinary shares, rose 1.7 percent to $4.68. Pacific Edge, which has developed a test for bladder cancer, rose 1.6 percent to 63 cents.

Nuplex Industries, which makes resins used in paints and adhesives, rose 1.4 percent to $4.28 and Xero, the cloud-based accounting service, gained 1.4 percent to $19.45.

Fisher & Paykel Healthcare declined 0.1 percent to $6.99 and Fletcher Building rose 0.9 percent to $8.24. Spark New Zealand rose 0.6 percent to $2.75.

BusinessDesk.co.nz

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