Thursday 03 November 2016 12:39 PM
NZ shares fall in correction from September high, on Trump jitters, stronger kiwi
By Jonathan Underhill
Nov. 3 (BusinessDesk) - New Zealand shares dropped, bringing the S&P/NZX 50 Index's decline from its September high to 11 percent, as equity markets suffer from a drop in risk appetite ahead of the US election.
The NZX 50 fell 1.5 percent to 6,746.97, the lowest level in four months, after warnings about the potential economic risks of a win next week by Republican candidate Donald Trump rattled markets. Yesterday the New Zealand Institute of Economic Research put out analysis that a Trump win would be bad for New Zealand business and destabilise global trade. The index reached a record high on Sept. 7 and its decline since then constitutes a correction.
"Investors are using it as an excuse to take profits," said Grant Williamson, a director at Hamilton Hindin Greene. "The US election is tightening up. There's been commentary on what a Trump presidency would mean for New Zealand."
Air New Zealand fell 2.6 percent to $1.87, leading decliners on the index. Metlifecare fell 2.7 percent to $5.46 and A2 Milk fell 1.6 percent to $1.80.
Williamson said the strength of the New Zealand dollar has also been counting against the local market. The kiwi dollar rose above 73 US cents for the first time in a month overnight and on a trade-weighted basis it reached an eight-week high.
"The one thing playing against a strong economy is a strong dollar," he said.
Fisher & Paykel Healthcare, which counts the US dollar as its most important revenue currency, fell 2.6 percent to $8.47. SkyCity Entertainment Group, which has casinos and hotels in Adelaide and Darwin, fell 2.6 percent to $3.71.
In the past three months, Orion Health Group has been the biggest decliner, falling 37 percent, while insurer Tower has dropped 35 percent and SkyCity is down 27 percent.
Investors drove the local bourse to record highs this year as a global search for yield made dividends on New Zealand stocks more-than-usually attractive. More traders are picking a rate cut expected from the Reserve Bank next week to be the last in an easing cycle while a global selloff in bonds has pushed up rates available from some fixed income investments.
The yield on Bank of New Zealand's 2025 reset bonds, which have a coupon of 5.314 percent, has risen to 5.20 percent, according to NZX data, the highest since April. The yield on 10-year New Zealand government bonds has climbed to about 2.76 percent, according to Reuters data, the highest since at least May.
Trump and Democrat Hillary Clinton are fighting neck and neck in key states, the latest polls show. A CNN poll gave Clinton a four-point lead in Pennsylvania, while Trump led by five in Arizona.