Sharemarket gains as investors buoyed by positive earnings season

Friday, 26 February 2021

Investors say the earnings season has been quite positive.

The sharemarket rose as investors felt upbeat about the outlook following a better-than-expected earnings season.

The benchmark S&P/NZX 50 Index closed up 0.7 per cent, or 86.63 points, to 12,227.29 on Friday, after spending most of the day, and the week, in the red.

Investors and analysts are coming up for breath after trawling through a flurry of results over the past two weeks from companies with a December balance date.

“We’re at the end of the earnings season for the December reporters, bar a few, and generally speaking, the reporting season has been good – that’s quite positive,” said Stuart Williams, head of equities at Nikko Asset Management.

* Despite global uncertainty, NZ should have a positive economic outlook for 2021

* Electricity stocks climb higher; Meridian jumps to top spot

Tourism Holdings is selling more campervans to counter the downturn in rentals as a result of Covid-19.

That could reflect that many of the industries hardest hit by Covid-19, such as hospitality and tourism, aren’t well represented on the NZX, he said.

While the earnings season has been mostly positive, the sharemarket has spent much of the period in the red as optimism about the outlook for economic growth pushed up bond yields, reducing the relative attractiveness of equities. New Zealand 10-year bond yields traded through 2 per cent on Friday, after starting the year below 1 per cent.

Among companies reporting their results on Friday, Tourism Holdings rose 2.7 per cent to $2.25 even though the campervan operator posted a first-half loss of $1.8 million.

Tourism Holdings managed to keep its revenue stable by selling down its fleet as cash from rentals slumped after Covid-19 wiped out the international travel market that underpins the business. The company has paid down debt but expects it to rise again as it re-invests in new fleet.

“We have confidence that we can sell vehicles to generate a profit, based on the sales performance over the last 12 months,” chief executive Grant Webster said.

Vista Group, whose software is used to operate major international cinema chains, is due to report its full-year earnings on Monday. Investors have been piling in to the stock this week on optimism about the re-opening of cinemas due to the global rollout of vaccines. Its shares fell 1.7 per cent to $1.70, crimping its gain this week to 13 per cent.

Fisher & Paykel Healthcare, which has been heavily sold down on the expectation sales of its medical devices may slow as vaccines curb the virus, advanced 1.7 per cent to $29.25, bringing its loss this week to 11 per cent. As the largest stock on the market, Fisher & Paykel Healthcare’s movements can sway the index.

Elsewhere, Asian shares skidded Friday after rising bond yields triggered a broad sell-off on Wall Street that erased the markets gain for the week and handed the Nasdaq composite index its steepest loss since October.

Tokyo, Hong Kong and Sydney all fell 2 per cent or more in early trading on Friday.

The tech-heavy Nasdaq shed 3.5 per cent on Thursday while the S&P 500 dropped 2.4 per cent, led lower by heavy selling in technology and communications companies.

The sell-off gained momentum when the yield on the 10-year US Treasury note moved above 1.5 per cent, a level not seen in more than a year and far above the 0.92 per cent it was trading at only two months ago. That move raised the alarm on Wall Street that yields, and the interest rates they influence, will move higher from here.

– With AP