Trading halt didn't stop NZX creeping closer to all-time high

Wednesday, 26 August 2020

Investors are “chasing yield” in the stock market as interest rates are hammered, says Forsyth Barr’s David Price.

A tumultuous two days on the NZX saw the stock exchange halt trading twice, before resuming again on Wednesday afternoon around 3pm, still closing up 38 points at 12,031.

Trading on the NZX ground to a halt for the second time on Wednesday morning, less than 24 hours after a DDOS attack on Tuesday afternoon, just before 4pm.

Forsyth Barr director of institutional equities David Price said the trading halt was like “trying to play rugby without a ball”. It was an irritation but there was little to be done but wait.

Despite the disruption, the all-time high reached in February of 12,107 was in sight again, he said.

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The index had been drifting higher as interest rates had “been smashed” and people were looking for yield outside of the banks, he said.

“The catchphrase is TINA, there is no alternative. People are chasing any kind of yield pretty hard.”

The driver for the market lifting was the heavyweight healthcare stocks and A2, which claimed 30 per cent of the index and often traded in unison, dictating the direction the index, he said.

Their success was masking other stocks that had not fully recovered from big losses in March and April.

“At the end of June there were only eight stocks for the year that were up. We had the smelter decision and a lot of gentailers got belted after that as well,” Price said.

A2 closed up 0.15 per cent at nearly $5.80 a share, while Fisher and Paykel Healthcare closed up just shy of 2 per cent.

Several companies filed results, including Metlifecare, which posted a $33.7 million after tax loss due to a fall in the value of its residential units and reduced sales caused by the Covid-19 pandemic.

The loss for the year to June 2020 compares with a profit of $51.2m the previous year. Metlifecare joins other retirement villages who have marked down the value of their retirement units as a result of the expected effect of Covid-19.

Meridan Energy reported net profit after tax had decreased by 48 per cent and said it may need to write down the value of its power stations by between $690m and $1.3 billion if the Tiwai Point aluminium smelter closes in August next year, the company has warned.

Spark reported a 4.4 per cent rise in its profit to $427 million for the year to the end of June.

The company’s revenues rose 2.5 per cent to just over $3.6 billion.

Chief executive Spark Jolie Hodson forecast the impact of Covid-19 on the business would be more material in the current financial year saying “we are now entering a more challenging period as a country”.

“The recent return to alert level 3 in Auckland and alert level 2 more broadly has reminded us that this challenge is not behind us.”