NZX stabilises as virus uncertainty triggers dramatic global market falls

Monday, 9 March 2020

The NZX 50 has clawed back most of its Tuesday losses to close down 1.75 per cent.

After opening down 3.86 per cent, the New Zealand stock exchange halted its slide in early Tuesday afternoon trading, down 1.5 per cent. It had fallen 4.85 per cent in the first half hour of trading as the market responded to US stocks tumbling overnight Monday.

While markets are expected to pick up on Wednesday, 'savage' European markets could see anything transpire overnight, says one expert.

In the current environment it would only take one negative headline for markets to react, says Forsyth Barr director of institutional equities David Price.

The stock exchange is down 7.5 per cent since February 22 when the turmoil over Covid-19 began on global markets.

The downside in New Zealand had been fairly muted in comparison with Australian and US stocks, he said.

'What's happening is that stocks are getting marked down on the open but there's not really a lot of volume trading for the size of the movement that we've seen,' Price said.

* US and Australian markets set scene for weak start to NZX trading on Monday

* Coronavirus: Govt to announce more economic help for businesses and workers**

Markets were not 'plumbing the depths of the Global Financial Crisis' just yet, said Price.

Finance Minister Grant Robertson announced this week the Government will introduce a targeted wage subsidy for businesses hurt by coronavirus.

While the Australian stock market opened to a 0.6 per cent drop, it was helped by the US futures turning positive, which helped the NZX lift about lunchtime, Price said.

On Monday the AUX dropped 7.32 per cent on opening.

The day of international trading has been dubbed by some as 'black Monday', amid growing coronavirus concerns.

Fisher Funds chief investment officer Frank Jasper said a combination of increased cases of coronavirus, including the lockdown in Italy, and news over the weekend about an oil spat between Saudi Arabia and Russia led to the global tumble in stocks overnight.

Price said the oil price was unlikely to stabilise anytime soon.

The S&P 500 plunged 7 per cent triggering the first automatic halt in trading in the US in 20 years. After trading resumed, the index dipped a bit more, then quickly recovered some losses to trade about 5.5 per cent lower as of mid-morning in New York.

The companies that performed the worst overnight were financial institutions and oil companies.

But Jasper said a small decrease in the New Zealand's market was expected because it was insulated from global tensions as most of our listed companies were not exposed to oil markets and overseas financial institutions.

'We have lots of companies that do well when interest rates fall. One of the things we've seen with the coronavirus and oil price mood is a big reduction in interest price rates makes our companies more attractive.'

On the NZX, the A2 Milk Company's share price dropped 1.53 per cent to $16.13 and Air New Zealand dropped 1.79 per cent to $1.90 by market close.

Fletcher Building's share price also fell 1.91 per cent to $4.60 at market close. Fonterra Shareholders' Fund units dipped 1.32 per cent to $3.75.

However, the share price for NZ drug company AFT Pharmaceuticals rose 5.56 per cent to $3.83. The company reported its first profit since being listed on the NZX and ASX in May last year.

On Monday BNZ's economists said it was now probable – not just plausible – that New Zealand's economy would enter a recessio n, and we shouldn't expect the Government to be able to do anything to turn it around.

Hamilton Hindin Greene director Grant Williamson said the New Zealand market was tracking the reaction to the international markets, but there was also indication of panic selling that contributed to the stock market dropping by almost 1 per cent within half an hour.

Williamson said investors would be keeping a close eye on the Australian and Asian markets to get an indication of how the day will play out.

Finance Minister Grant Robertson also announced the Government would introduce a targeted wage subsidy for businesses hurt by coronavirus, allowing them to keep employees they otherwise couldn't afford.

Business NZ chief executive Kirk Hope said it was encouraging to know the Government was considering a longer-term package if required.

'We are glad the Government has recognised the gravity of the situation for businesses and has offered relevant support, similar to that offered to businesses affected by the Christchurch and Kaikoura earthquakes,' Hope said.

Air New Zealand shares shed 3.6 per cent to $1.985 a share in the first day of trading this week, after the airline withdrew its full-year profit guidance due to uncertainty about the duration of the coronavirus. Chief executive Greg Foran announced a cut to his own payas bookings tumble.

ANZ released a preliminary business confidence survey on Tuesday of about 240 business owners.

ANZ chief economist Sharon Zollner said economic activity was at its lowest since March 2009, the year following the Global Financial Crisis.

Jasper said the Australian stock exchange would react more strongly to the fall on Wall Street.

This week the Australian federal government is expected to finalise an economic stimulus package worth more than A$5 billion (NZ$5.2b) to offset the impact of the virus outbreak in Australia.

The package is expected to be issued later this week.

Jasper said in the long term if the coronavirus outbreak worsened, governments would be expected to offer financial help to prop up the economy.

Latest WHO figures show 109,578 cases had been confirmed, with 45 new cases in China and 3949 new cases outside China.

Italy has 9,172 cases of the new virus.