Electricity stocks climb higher; Meridian jumps to top spot

Thursday, 21 January 2021

Electricity stocks are in demand as a result of the popularity of clean energy exchange traded funds.

Big electricity companies Meridian Energy and Contact Energy have resumed their upward climb, lifting the benchmark sharemarket index higher.

The S&P/NZX 50 Index rose 85.745 points, or 0.66 per cent, to 13,112.19 on Thursday.

Meridian jumped 4.4 per cent to $7.68. That pushed its market capitalisation to $19.68 billion, making it the most valuable company on the exchange, ahead of Fisher & Paykel Healthcare at $19.17b.

Contact gained 4.1 per cent to $8.83, taking its value to $6.34b.

Demand for the big electricity utility stocks is pushing the benchmark index higher.

* Sharemarket edges lower as investors await US developments

* Sharemarket falls as surging energy stocks come off the boil

The normally staid utility companies have hit new record highs this year on the back of hot demand for clean energy stocks from overseas exchange traded funds (ETFs). The high prices prompted a flurry of selling from local investors which temporarily pulled the gentailers back, however the buying has now picked up again.

“They’ve been very weak for the last several days,” said Matt Goodson, a portfolio manager at Salt Funds Management. “Their share prices at the moment are being driven by these massive clean energy ETFs that trade in the US and the UK, and today they are driving them up.”

Goodson said the gentailers accounted for the bulk of the market move in what was otherwise a quiet day.

He said the official inauguration of United States President Joe Biden had very little impact on the New Zealand market.

On Wall Street, the S&P 500 rose 1.4 per cent, topping its previous all-time high set earlier this month. The Dow Jones Industrial Average, Nasdaq composite and Russell 2000 index of smaller companies also notched record highs, powered by gains in technology, communications, health care and most other sectors.

A better-than-expected start to earnings reporting season also helped lift the US market. Netflix jumped 16.9 per cent for the S&P 500's biggest gain after it said it ended last year with more than 200 million subscribers and made more revenue than analysts expected.

Biden took a flurry of executive actions in his first hours as President. He pitched a plan to pump US$1.9 trillion more into the struggling economy, hoping to act quickly as his Democratic party now controls the White House and both houses of Congress.

Investors hope such stimulus will help carry the economy until later this year, when more widespread Covid-19 vaccinations get daily life closer to normal.

Goodson said over the longer term, greater stimulus of the economy was helpful for the US and other world economies, which would indirectly benefit New Zealand. Biden’s greater openness to trade would also be helpful for New Zealand.

The prospect of easier fiscal policy means a slightly higher track for longer term bond yields which would weigh on more interest-sensitive stocks and buoy cyclical stocks, he said.

Church technology service company PushPay Holdings was the most active stock on the market, with close to 22 million shares changing hands. The shares rose 5.3 per cent to $1.60.

Goodson said software and technology companies often trade in very large volumes relative to their size.

– With AP