MARKET CLOSE: NZ shares fall; Spark, Precinct, Meridian decline as yield hunt wanes
New Zealand shares fell from a record close paced by Meridian Energy, Precinct Properties New Zealand and Spark New Zealand, as the appetite for regular dividend paying stocks waned. Sky City Entertainment Group fell, ahead of reporting its earnings.
The NZX 50 Index fell 28.024 points, or 0.5 percent, to 5769.57. Within the index, 29 stocks fell, 15 rose and six were unchanged. Turnover was $118 million.
The local bourse has been pushed to record levels as investors hunt for yield paying investments in a globally low interest rate environment. As local earnings season gets underway this week shareholders are looking for growth to justify the gains in yielding stocks' share prices.
Stocks held for their regular dividends, such as property investors and energy generators and retailers, fell. Meridian dropped 1.5 percent to $1.92. Spark, the country's largest telecommunications provider, declined 1.7 percent to $3.43. Precinct Properties fell 1.2 percent to $1.23. Kiwi Property Group slipped 1.5 percent to $1.32.
"Those stocks which are interest rate sensitive, and have benefited from a reduction in interest rates, have had very strong performances and the market is taking a pause on those stocks at the moment," said Shane Solly, director at Harbour Asset Management. "There is risk that if some of these yield stocks that people have been chasing come out with a disappointing outlook or guidance, particularly if it involves lower dividends or dividends that are less than expected than some of them will get re-priced real quick."
Sky City, the casino operator, fell 1.3 percent to $3.77 and is the first benchmark index stock to kick of financial reporting season, reporting first half results on Wednesday. Outside the benchmark index, Opus International Consultants rose 0.7 percent to $1.37. The engineering firm is due to report tomorrow and has been on a cost savings mission, restructuring and cutting jobs.
"There's a bit of cautious optimism, certainly in some sectors of the market the companies will need to be at the top end of the range because of expectations," Solly said. "New Zealand has had a very strong performance as an economy and as a stock market, so we kind of need things to keep staying at the top of the game."
Investors would be looking at the impact of currency and commodity price movements have had on companies, as well as the effect Australia's slowing economy has had on trans-Tasman exposed stocks.
Pacific Edge, the biotech firm, led the benchmark index lower falling 2.6 percent to 75 cents. Air New Zealand, the national carrier, fell 2.5 percent to $2.525. Guinness Peat Group, which owns threadmaker Coats, dropped 2.2 percent to 45 cents.
A2 Milk Co was the best performer on the day, the milk marketing company advanced 8.7 percent to 50 cents. Kathmandu Holdings, the outdoor goods retailer, climbed 3.6 percent to $1.44. Both companies are exposed to the Australian retail sector, which has shown signs of pick up recently, while a falling New Zealand dollar against the Australian currency will also help earnings, Solly said.
NZX fell 0.8 percent to $1.18. The stock market operator has reached a settlement with the Inland Revenue Department after being audited by the tax collector. Its annual results, due next week, will include a provision of $1.2 million to account for the tax and estimated use of money interest payable related to the settlement.
Fletcher Building rose 0.2 percent to $8.49.
Methven fell 0.9 percent to $1.16. Salt Funds Management has emerged as a substantial investor of the tap and showerhead maker building a 7.8 percent stake.