MARKET CLOSE: NZ shares fall for 7th day as US bond yields hold sway

Tuesday 9th October 2018

New Zealand shares fell for a seventh day. Rising US bond yields kept a lid on equity markets across Asia, weighing on growth-orientated stocks such as A2 Milk Co and Pushpay Holdings.

The S&P/NZX 50 index dropped 77.12 points, or 0.8 percent, to 9,069.98. Within the index, 32 stocks fell, 13 gained, and five were unchanged. Turnover was $104.6 million.

New Zealand's benchmark index has dropped 3 percent during the past seven sessions as rising US bond yields inject new volatility into financial markets. The yield on US 10-year Treasuries has climbed to 3.24 percent on growing expectations the Federal Reserve will keep raising interest rates, reducing the attraction of equities.

Greg Smith, head of research at Fat Prophets, said investors are readjusting to higher interest rates, which is putting pressure on stocks that have been trading at high valuations.

"In a rising interest rate environment, equities still win the beauty parade, but cash is becoming more attractive than it has been," he said. "New Zealand is still one of the higher-yielding markets around."

A2, which trades at a price-to-earnings multiple of 39.5 times, fell 3.7 percent to $10.20. Pushpay, which is chasing global growth at the expense of short-term earnings, declined 3.3 percent to $3.81.

Restaurant Brands New Zealand led the market lower, down 3.8 percent to $7.53.

Smith said the rising US interest rate track is also boosting the greenback, which benefits exporters who can sell more of their product with a weaker currency. The kiwi dollar has dropped almost 9 percent this year, closing at 64.54 US cents.

Air New Zealand, which benefits from increased tourism numbers, rose 1.4 percent to $2.965, the biggest gain on the day. Auckland International Airport increased 0.2 percent to $7.28.

Sky Network Television, which has to pay more for overseas broadcasting rights when the kiwi dollar's weak, fell 2.8 percent to $2.08.

Synlait Milk declined 1.9 percent to $9.89. Director John Penno has reduced his stake in the milk processor since resigning from the chief executive role. A notice today showed he sold about 1 million shares at an average price of $10.80 last week. He still owns 5.1 million shares.

Z Energy rose 0.1 percent to $7. Chief executive Mike Bennetts hit back at Prime Minister Jacinda Ardern's claim petrol companies were fleecing their customers. saying her attack was out of line with Z Energy's experience.

Infratil increased 0.1 percent to $3.535 and Mercury NZ gained 0.3 percent to $3.31 after they extended their takeover bid for Tilt Renewables without raising their $2.30 per share offer. Tilt slipped 0.9 percent to $2.28.

Chorus fell 1 percent to $4.85 after hiring consultancy Martin Jenkins to review the employment practices of its subcontractors. The Labour Inspectorate found widespread breaches in the first phase of an inquiry into cabling companies.

Smith said the stock has been trading near record levels as investors focus on the strong outlook for broadband uptake. Spark New Zealand was unchanged at $3.97.

Among blue-chip stocks, Meridian Energy increased 0.5 percent to $3.23, Fletcher Building gained 0.2 percent to $6.30, Ryman Healthcare decreased 0.4 percent to $13.16 and Mainfreight declined 0.9 percent to $29.25.

Outside the benchmark index, Abano Healthcare slipped 1.5 percent to $8.47 after the company said annual earnings will get squeezed as increased investment is coinciding with weaker trading activity in Australia.

(BusinessDesk)

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