NZX 50 sinks as a2 Milk slides amid jitters over Chinese buyers

New Zealand’s S&P/NZX 50 index was one of the weakest markets across Asia, with a2 Milk Co’s disappointing Chinese sales pushing the milk marketing firm down to a two-month low, while Freightways failed to impress investors, even as it met analysts’ expectations.

Outside the benchmark index, Synlait Milk surged on reports that Fonterra Cooperative Group and a2 Milk were considering taking the milk processor private, while Bremworth advanced as David Ferrier’s interests lobbed in their notice of a partial takeover.

Retailers were broadly softer after Statistics New Zealand figures showed spending on credit and debit cards bounced back in July, while the kiwi dollar remained elevated as a partial inflation reading was softer than expected and a gauge services activity stayed just in expansion territory.

And retirement village operators and aged care providers were mixed after associate health minister Casey Costello released an independent report on reforming elder care.

Lagging behind

The NZX 50 dropped 132.4 points, or 1%, to 13,721.98, with 39 stocks declining, seven gaining and three unchanged. The S&P/NZX 20 index futures contract for September fell 0.7% to 7,690, with 40 lots traded for a value of $308,000, while the NZX 20 sank 1.1% to 7,713.19.

Turnover across the main board was $122 million, of which Contact Energy accounted for $13 million as it slid 2.8% to $8.90.

New Zealand was one of the laggards across Asia after Wall Street set a soft tone for stock markets on Friday. Japan’s Nikkei 225 index was up 0.4% in late trading after a softer-than-expected estimate of June quarter growth was seen as potentially delaying the Bank of Japan’s next interest rate hike, while Hong Kong’s Hang Seng gained 1.6%.

Australia’s S&P/ASX 200 index fell 0.4% in late trading, with National Australia Bank taking a more bearish view on residential property than its peers as its quarterly trading update fell short of analysts’ forecasts.

The a2 Milk Co led New Zealand’s NZX 50 lower, sliding 5.7% to $7.76, its lowest level since June. The milk marketing firm reported earnings in line with its July guidance, but investors were disappointed by the softness in its dominant Chinese business.

“The 2H-weighted FY27 guidance is the surprise. While we expected FY27 guidance to be cautious, the degree to which earnings are weighted to the second half was interesting,” Amova Asset Management portfolio manager Michael De Cesare said in a note. “Given the size of the out-of-stock position in China-label, there seemed to be scope for a stronger-than-guided 1H27, driven by ‘sell-in’ as a2 replenishes the stock position of distributors and stores.”

Outside the NZX 50, Synlait jumped 16% to 43 cents after The Australian’s DataRoom column reported that a2 Milk and Fonterra were weighing a plan to take the smaller processor private. Synlait said it wasn’t holding any discussions with either firm. Fonterra Shareholders’ Fund units slipped 0.5% to $6.956.

Freightways dropped 4.5% to $13.42, even as its annual earnings growth of 15% was in line with analysts’ forecasts.

Meanwhile, Mainfreight and Fisher & Paykel Healthcare were among the biggest weights on the benchmark, falling 2% to $68.41 and 1.2% to $42.19 respectively.

Gentrack was one of the few gainers on the NZX 50, as it climbed 2.3% to $3.94, while Mercury NZ advanced 2.2% to $6.64.

New aged care

Retirement village operators were mixed after the government released a ministerial advisory group report into overhauling aged care, which made 40 recommendations to develop an integrated system to address a predicted 90% jump in the cost of services over the next 20 years.

Summerset Group Holdings fell 2.1% to $7.80, paring a steeper decline earlier in the session, while Oceania Healthcare slipped 0.6% to 79.5 cents and Ryman Healthcare advanced 0.5% to $2.08. Radius Residential Care climbed 5.7% to 46.5 cents, while Promisia Healthcare dropped 4.1% to 71 cents.

Retailers were generally weaker, even after Stats NZ figures showed spending on electronic cards rose a seasonally adjusted 1% in July, unwinding weakness in June when fuel prices were spiking.

Yen Nguyen, an economist at ASB Bank, said the data continued to show consumers remained sensitive to fuel prices.

“We expect the worst of the fuel-price induced slowdown is now behind us,” she said in a note. “However, plenty of other headwinds remain and we don’t expect a meaningful recovery to materialise before 2027.”

Briscoe Group was unchanged at $4.50, while KMD Brands dropped 3.8% to $1.67 and Hallenstein Glasson Holdings slid 2.4% to $10.20. Warehouse Group was unchanged at 68 cents and Michael Hill International declined 1.2% to 41.5 cents.

Bremworth climbed 4.2% to 75 cents after shareholder David Ferrier filed a notice of takeover, indicating plans to make an offer of 90 cents a share to buy almost 44% of the company, adding to his existing 19% stake. Ferrier entered into lockup arrangements with shareholders owning about 32% last week.

And the kiwi dollar traded at 59.10 US cents at 5pm in Auckland from 58.66 cents on Friday, as Stats NZ figures showed selected prices didn’t rise by as much as predicted, providing a downside risk to economists’ inflation forecasts.

Meanwhile, the BusinessNZ-BNZ performance of services index showed activity grew at a slower pace in July, albeit still too slow to generate extra jobs.

Reporting by Paul McBeth. Image from Curious News.