A2 Milk intrigue fails to dampen investor mood after strong GDP results

Thursday, 17 December 2020

The New Zealand sharemarket has been buoyed by strong local economic data and some certainty out of the United States.

The benchmark NZX 50 index ended Thursday on 12,888 points, up 0.47 per cent.

Greg Main, a director of wealth management at investment advisory firm Jarden, said the increasing likelihood of an economic stimulus package in the US and ongoing support from the US Federal Reserve had lifted the global markets, with a flow-on effect in New Zealand.

But it was Thursday’s GDP announcement that really helped investors’ moods, Main said.

* NZX weighed down by more weakness in market heavyweight A2 Milk

The a2 Milk Company entered a trading halt on Thursday morning.

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Economic activity has bounced back to pre-Covid levels, with gross domestic product rising a record 14 per cent in the three months ended on September 30, Stats NZ reported.

However, the big intrigue in the market was the announcement by The a2 Milk Company, Main said.

A2 Milk was placed in a trading halt on Thursday morning pending an announcement from the milk company.

The company told the NZX that the halt would be lifted when the announcement was made or when the market opened on Monday.

Shares in a2 Milk were trading at $14.12 each before the trading halt.

“We will have to wait and see what exactly that comes out with. There will be a lot of speculation over the wording of that statement and the timing of it,” he said.

Synlait Milk, which supplies a2 Milk, was also affected by the trading halt.

Synlait's share price ended the day at $5, down 7.41 per cent.

Outside of the intrigue around a2 Milk, the market was fairly stable, he said.

“The market was waiting to hear what was happening with the US fiscal situation,” Main said.

However, investors were also keeping an eye on what was happening regarding Brexit. That could throw a spanner in the works, he said.

The NZX was always quite highly correlated with the US and Australia.

“We have a lot of international investors and marginal buyers from the US. So whatever happens with them flows through to us.”