Sharemarket slips; F&P Healthcare continues to slide on uncertain outlook

Thursday, 26 May 2022

The benchmark S&P/NZX 50 Index slid 0.6%
F&P Healthcare shares fell to a 2 ½ year low
Investors ‘spooked’ by Reserve Bank

The sharemarket fell as investors remained cautious about the outlook for Fisher & Paykel Healthcare as demand for its breathing aids slowed.

The S&P/NZX 50 Index fell 0.6%, or 70.532 points, to 11,102.84. On the wider market, 88 stocks fell, while 55 gained.

Fisher & Paykel Healthcare was the biggest stock traded by value and its shares closed down 1.8% to $19.55, a fresh 2½ year low. The company on Wednesday reported a 28% drop in annual profit as demand for its breathing aids slowed from the unprecedented high levels during the earlier stages of the Covid-19 pandemic.

“The market is still digesting Fisher & Paykel Healthcare,” said Hobson Wealth Partners investment adviser Brad Gordon. “Results have probably been key. I suspect there’s not enough in the results to drive the market higher.”

**READ MORE:

Analysts said Fisher & Paykel shares are likely to remain weak until there is more certainty about future demand for its products.

* NZX50 Index loses a further 0.9%, Fisher & Paykel Healthcare slips 0.7%

* NZX50 Index down 0.1%, recovers after inflation hits 6.9%

* Sharemarket declines as Fisher & Paykel Healthcare hits 2-year low

The Reserve Bank’s aggressive outlook on interest rate hikes has ‘spooked’ investors.

Analysts said Fisher & Paykel shares are likely to remain weak until there is more certainty about future demand for its products for uses other than Covid-19.

Fisher & Paykel’s decline saw it lose its top spot on the benchmark, with its market capitalisation falling to $11.29 billion compared with Meridian Energy at $11.39b.

Transport and logistics company Mainfreight rose 1.3% to $76 after reporting its “best ever” annual result with net profit increasing 89% to $355 million.

The company said it was “another record result and a more than satisfactory improvement on the prior year” in what was a highly disrupted year in the world of logistics.

Despite inflation and recession concerns, Mainfreight remained confident of continued growth and improved performance, it said.

Gordon said it was a “very strong” result.

Eroad sank 8.7% to $2.72 after the transport software company reported an annual loss of $9.6m, after one-off costs following its acquisition of Coretex.

Semiconductor chipmaker Rakon fell 6.8% to $1.52. The company tripled its annual profit to $33.1m, but said it would reinvest surplus cash for growth instead of paying a dividend.

Gordon said investors may be switching to the relatively safety and attractive yields offered by bonds after the Reserve Bank on Wednesday forecast more aggressive interest rate hikes than expected as it focuses on getting inflation under control.

“There’s still a bit of a Reserve Bank hangover effect,” he said. “I think the Reserve Bank did really spook the market yesterday.”

Asian stock markets were mostly lower on Thursday after notes from the Federal Reserve's latest meeting confirmed expectations of more interest rate hikes but held no surprises to rattle investors.

Tokyo, Hong Kong and Sydney fell while Shanghai and Southeast Asian markets gained. Oil prices rose.

On Wall Street on Wednesday, the benchmark S&P 500 index rose 0.9%, the Dow Jones Industrial Average gained 0.6%, and the Nasdaq composite climbed 1.5%.

- With AP