Sharemarket falls as surging energy stocks come off the boil

Tuesday, 12 January 2021

Demand for energy stocks waned, pulling down the benchmark index.

The New Zealand sharemarket fell as a surge in demand for clean energy stocks petered out, pushing down market heavyweights Meridian Energy and Contact Energy.

The benchmark S&P/NZX 50 Index slid 106.405 points, or 0.8 per cent, to 13,183.69 on Tuesday.

Global demand for clean energy stocks through exchange traded funds has surged recently as investors bet the companies would do well following the election of Joe Biden in the United States.

“Over the last few weeks we have had a real pressure point from the iShares Global Clean Energy ETF pushing along the gentailer stocks, particularly Meridian and Contact,” said Shane Solly, a portfolio manager at Harbour Asset Management. “In the last few days, the support for that index has slowed and we’re seeing the demand for Meridian and Contact come off.”

Investor demand for clean energy stocks has surged. Pictured is Meridian’s hydroelectric power station at Lake Manapouri, the country’s largest hydro station.

* Meridian and Contact spill some of their sharemarket gains

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Pushpay announced Molly Matthews would take over as chief executive in March.

Meridian, which hit a record high of $9.94 last week, fell 2.7 per cent to $8.19, extending its decline this week to 10 per cent. Contact, which also touched a new record of $11.16 last week, dropped 0.5 per cent to $9.99, taking its slide so far this week to 7.1 per cent.

While the energy stocks have peaked in the near term, prices were still elevated and demand for those stocks may continue in the medium term, Solly said.

Outside of the big energy companies, trading volumes were still relatively low coming out of the holiday period.

Stocks closed lower on Wall Street, giving up recent gains after a record-setting run.

Film software company Vista Group fell 0.6 per cent to $1.59 amid continued concern about the health of the global movie theatre industry as a result of Covid-19. The stock is down 52 per cent over the past year.

“That continued hard slog of Covid is capping enthusiasm there a little bit,” Solly said.

Seafood company Sanford, whose earnings have also been under pressure as a result of Covid, slid 2 per cent to $5, taking its fall over the past year to 38 per cent.

Pushpay, a digital payment platform for religious services, rose 2.5 per cent to $1.64 after upgrading its outlook for full-year profit and announcing its chief customer officer Molly Matthews would take over as chief executive, replacing Bruce Gordon who has been in the role in an interim capacity since June 2019.

“Molly Matthews looks incredibly well qualified,“ Solly said. “She’s been within the group for four years and it looks like she’s got a pretty solid operational and strategic background so it’s encouraging. There’s been a little bit of a question mark about that for some time.”

Cervical cancer company Truscreen Group slumped 20 per cent to 14 cents following a rally last week when it listed on Australia’s ASX.

New Talisman Gold Mines, which is listed in Australia and New Zealand, told the ASX in response to an enquiry that it was unaware of any information which explained recent trading in its securities. The stock was unchanged at 0.006 cents, after surging 20 per cent on a significant increase in volume on Monday.

Rising bond yields were also weighing on stocks, prompting some investors to switch out of equities, Solly said.

Stocks closed lower on Wall Street on Monday, giving up recent gains after a record-setting run.

Treasury yields continued to rise, reflecting expectations of increased federal borrowing, more stimulus for the economy and the possibility of higher inflation.

The S&P 500 dropped 25.07 points, or 0.7 per cent, to 3,799.61. The Dow Jones Industrial Average fell 89.28 points, or 0.3 per cent, to 31,008.69. The Nasdaq composite slid 165.54 points, or 1.3 per cent, to 13,036.43.

– With AP