Meridian and Contact spill some of their sharemarket gains

Monday, 11 January 2021

Meridian has still proved a good long-term investment despite Monday’s correction.

Shares in Meridian and Contact Energy have fallen sharply, ending a stellar run on the NZX.

Meridian’s share price dropped 9.4 per cent to $8.29 during Monday morning trading, while Contact shares were down 8.6 per cent at $9.83.

Shares in both companies are now down 16 per cent from the peaks they reached late last week, but are still trading at more than double their 2020 lows.

The extreme volatility appears to have been driven by international interest in “green energy” stocks generally and subsequent profit-taking, during the holiday period when trading volumes are usually light.

* Meridian shareholders end day $2 billion better off as shares surge 10pc

* Stock exchange regulator issues 'speeding ticket' to Meridian over spike in share price

Pathfinder Asset Management portfolio manager Hamesh Sharma said firms in the sector had benefitted from the election of Joe Biden as US president-elect.

Prior to Monday’s pullback, people who had invested in Meridian Energy’s 2013 initial public offering were up 1500 per cent on their investment, he noted.

Sharma said Monday morning’s pullback had been on low volumes and was probably driven by local investors.

The big money from exchange-traded funds tended to show through during trading later in the afternoon, he said.

Even though the companies “looked expensive” compared to fellow ‘gentailer’ Genesis, Sharma did not rule out Meridian and Contact’s bull run resuming at least until a possible re-rating of the companies' weighting in indices in April.