MARKET CLOSE: NZ shares fall; Meridian, Genesis, Spark decline
By Suze Metherell
Oct. 2 (BusinessDesk) - New Zealand shares fell as offshore investors repatriated cash back home on the promise of yield. Meridian Energy, Genesis Energy, and Spark New Zealand fell.
The NZX 50 Index dropped 29.346 points, or 0.6 percent, to 5245.237. Within the index, 28 stocks fell, 15 rose and seven were unchanged. Turnover was $110 million.
The US Federal Reserve is winding down its bond buying programme, known as quantitative easing, at the end of this month. The programme has flooded markets with cash in a bid to stimulate US economic recovery. The benchmark index advanced some 2.2 percent in the September quarter, as investors were drawn to the New Zealand market for a relatively high dividend yield, but as data points to a recovery in the world's largest economy, speculation is the Fed may raise rates sooner than expected, causing US investors to repatriate funds home on the promise of a higher return.
High-yielding stocks fell. State-controlled energy company Meridian, which advanced some 18 percent in the quarter, dropped 2.4 percent to $1.405. Fellow partially privatised power companies Genesis and MightyRiverPower fell 1.8 percent to $1.925 and 0.2 percent to $2.515 respectively. Contact Energy was unchanged at $5.89.
Spark, formerly Telecom Corp and popular with offshore investors for its yield and liquidity, declined 1.8 percent to $2.975.
"New Zealand to a certain extent has been a yield market, so we've had people buying the electricity stocks and Spark for the yield," said Paul Harrison, who helps manage more than $700 million of equities for Salt Funds Management. "A lot of money has been flowing to the US markets because they view the economy as recovering and so they've been pulling money back from some of the peripheral markets, and also there is the perception that interest rates are going to go up. We've seen a little bit of that money go out of New Zealand."
Overnight, the Fonterra Cooperative Group's GlobalDairyTrade auction saw dairy product prices fall to a five year low. The value of New Zealand's largest export commodity has slumped nearly 50 percent from a peak in February amid increased supply as stocks build across the world because of Russia’s ban on dairy imports from the European Union and weak demand from China.
Skellerup Holdings, which makes rubberwear for the dairy industry, fell 1.3 percent to $1.51. A drop in dairy prices may weigh on future growth earnings of agriculture companies, Harrison said.
Units in Fonterra Shareholders' Fund rose 0.8 percent to $6.36. The units give holders access to the cooperative's dividend stream. A high dairy price is seen as an input cost to Fonterra, which constrains earnings on high margin manufactured products.
Fletcher Building, New Zealand's largest listed company, slipped 0.1 percent to $8.73.
Guiness Peat Group led the benchmark index lower, declining 3.3 percent to 58 cents.
Outside the benchmark index, Finzsoft Solutions soared 46 percent to a record $2.54 after the financial software developer said annual earnings would likely grow fourfold after the firm signed its biggest contract with Australian customer St George Bank.
Vista Group International advanced 1.7 percent to $3.00 after the cinema software and analytics company signed a supply agreement with an unidentified cinema chain in China, which will see its software installed across more than 200 sites in the world's most populous nation.
Serko climbed 5 percent to $1.05. The travel software company has been granted a three-year $4.2 million government grant from Callaghan Innovation to fast-track its research and development.
GeoOp climbed 5.9 percent to 54 cents. The task management app developer was also allocated $1.1 million in government funding over the next three years.
SLI Systems bounced 8.6 percent to $1.14. Yesterday, the search engine developer's co-founder, Geoff Brash, resigned as vice president from the company. Last week he was among initial shareholders who sold some 6.8 percent of the company, at $1.15 apiece, a 23 percent discount to last year's offer price, following the end its 16-month lock-up period. Brash halved his stake to 1.2 million shares, or about 2 percent of the company.
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