Sharemarket closed in the red as investors await details on Tiwai Point deal
Thursday, 14 January 2021
The sharemarket fell on declines in energy stocks as investors await more details of an agreement for Meridian Energy and Contact Energy to continue to supply big power user Tiwai Point aluminium smelter for a few more years.
The benchmark S&P/NZX 50 Index slipped 4.405 points, or 0.03 per cent, to 13,115.87 on Thursday.
Contact fell 2.61 per cent to $9.69. Mercury Energy slid 2.74 per cent to $7.10. Genesis Energy bucked the trend up 1.08 per cent to $3.74.
Meridian spent most of the day in the red but closed up 0.57 per cent to $7.94.
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The smelter, majority owned by Rio Tinto, had previously said it would wind down its operations this year, protesting high costs.
However, as expected, it announced on Thursday morning that it reached a new agreement on power prices allowing it to keep operating until the end of 2024.
“That news seems to have taken a little bit off some of the electricity businesses,” said Greg Main, an investment adviser at Jarden.
“The Government had signalled that they were going to do a deal, so I guess now we are waiting to see what the financial implications are out of the deal.”
Meridian chief executive Neal Barclay is scheduled to host a conference call about the new deal on Monday.
Main said while details were scant everyone was just speculating about what the price could be at the moment.
“It gives the whole sector a bit more time to adjust. It kicks the can down the road a little bit more.”
Electricity stocks had surged higher over the holiday period on buying from overseas clean energy funds, so some local investors may be in the market selling down their holdings for a profit, he said.
Optimism about economic recovery from Covid-19, and a reduced chance of negative interest rates has boosted investor demand for financial companies.
Westpac rose 2.25 per cent to $22.68, ANZ advanced 2.04 per cent to $26.55, and Heartland jumped 2.96 per cent to $1.74.
Main said as the economy was doing better than initial projections expected, banks may write back some provisions, and restrictions that were put on them around capital flows. He said dividend payouts would also likely be eased.
“If there is higher inflation coming through then interest rates over time will start to trend back up which is generally positive for financials.
“The financial companies have done well. That sector is doing a little bit better,” he said.
Stockmarket operator NZX touched a record high of $2.18, closing up 3.35 per cent at $2.16 on optimism a surge in market activity and in its funds management business would flow through to earnings.
Brokerage Forsyth Barr this week raised its forecast for NZX’s full-year pre-tax profit to $33.6 million, from $33.3m. That’s ahead of NZX’s own guidance for pre-tax profit at the top end of its $33m to $33.5m range. NZX is due to report its profit on February 17.
Main said company announcements are normally quiet following the Christmas and New Year holiday break, and ahead of the February profit reporting season.
Shares were mostly higher in Asia after a lackluster day on Wall Street, where major indexes spent the day drifting up and down near their record highs
Benchmarks rose in Hong Kong, Tokyo and Sydney but fell in Shanghai.
In the United States on Wednesday, the S&P 500 inched up 0.2 per cent to 3809.84 after flipping between small gains and losses early on. The Dow Jones Industrial Average fell less than 0.1 per cent to 31,060.47. The tech-heavy Nasdaq composite added 0.4 per cent to 13,128.95.
– With AP