NZX50 misses out on optimism over Iran conflict; a2 Milk extends decline

New Zealand’s S&P/NZX 50 index missed out on the improving mood across Asia, with the local benchmark edging lower as heavyweights Meridian Energy and Infratil dipped and a2 Milk Co extended its fall after its profit warning on Monday.

Australia’s stock market was among those gaining in late trading, shrugging off Westpac Banking Corp’s warning that the Middle East conflict knocked its markets division and Qantas Airways paring back its domestic capacity in the face of rising fuel costs.

The Accident Compensation Corp’s investment arm followed up yesterday’s notice of being a substantial investor in Michael Hill International with an increased holding of KMD Brands to almost 12% after taking part in the retailer’s steeply discounted capital raising.

Meanwhile, ASX-listed Cuscal halted trading of its shares across the Tasman to raise funds for its A$27 million purchase of New Zealand’s biggest electronic payments network Paymark, which has been trading as Worldline.  

Mixed messages

The NZX50 decreased 2.92 points to 13,017.26, with 14 stocks declining, 29 gaining, and seven unchanged. Turnover across the main board was $126.4 million, of which Auckland International Airport accounted for $14.1 million as it dipped 0.1% to $8.21.

It was a mixed day for the local bourse, waxing and waning between gains and losses through the session as optimism seemed to win out about the conflict in the Middle East when US President Donald Trump said Iran had contacted his administration about potential peace talks, even as his blockade of the Strait of Hormuz took effect.

Brent crude oil futures fell 1.5% to US$97.90 a barrel at 5.30pm in Auckland, while the Polymarket prediction market priced in a 56% chance of a permanent peace deal between the US and Iran by the end of June.

Stocks across Asia were broadly stronger, with the S&P/ASX 200 index up 0.7% in late trading, while Japan’s Nikkei 225 index jumped 2.3% and Hong Kong’s Hang Seng nudged up 0.1%.

That comes as investors turn their mind to the US corporate reporting season, which is expected to show another strong quarter of earnings in the world’s biggest economy. Goldman Sachs posted another record quarter overnight, although a weaker-than-expected result from its bond trading arm weighed on the investment bank.

“There’s a new game in town and it’s reporting season,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “That will have us going back to have a very close look at fundamentals, with the optimism around the fact that Iran is interested in talking.”

Local index heavyweights dragged on the local market, with Meridian falling 1% to $5.51, Infratil declining 0.8% to $11.97 and Mainfreight slipping 0.8% to $58.20.

Still sour

The a2 Milk Co dropped 2.8% to $9.55, adding to its 12% slump on Monday, as investors continued to digest the hit to earnings from the slow supply and customs clearance for its all-important Chinese customers.

KMD posted the steepest decline on the NZX50, falling 2.9%, or 0.2 of a cent, to 6.7 cents, still above the 6 cents offer price of its discounted capital raising.

Meanwhile, dual-listed Westpac fell 2.3% to $50.12 after the lender said interest rate volatility from the Middle East conflict reduced income from its markets arm, and that it would increase provisioning for bad loans as a result.

Precinct Properties NZ was the most heavily traded stock on the day with a volume of 2.7 million as the commercial landlord ended the session unchanged at $1.04.

Rate-sensitive property companies were broadly stronger with swap rates softer on the day after Kiwibank economists urged the Reserve Bank not to hike the official cash rate this year, saying an increase risked repeating past mistakes and that it could be reckless to potentially induce a recession.

Lower rates

The yield on the 10-year government bond fell 9 basis points to 4.67%, while Kiwi Property Group gained 3.3% to 94 cents, Argosy Property rose 1.8% to $1.14and Stride Property climbed 1.7% to $1.18.

Vista Group International posted the biggest gain on the day, up 6.8% at $1.885, while Oceania Healthcare rose 6.5% to 74 cents, Tourism Holdings gained 5.7% to $2.21 and Sky Network Television advanced 4.3% to $3.19.

Fonterra Shareholders’ Fund units climbed 3.7% to $6.38, with the dairy cooperative’s farmer shareholders receiving their capital return from the sale of the Mainland consumer business today.

Scales Corp increased 2.7% to $6 after reaffirming earnings guidance at today’s annual meeting.

Turners Automotive Group increased 0.6%, or 5 cents, to $8.80, even after shedding rights to a 9 cents per share dividend.

Outside the benchmark index, Green Cross Health hit a two-month high as it surged 21% to $1.50 after confirming reports across the Tasman that it’s in talks to sell its medical practice business.

Michael Hill climbed 6.8% to 47 cents after outlining its new strategy to investors, where it’s pursuing earnings before interest and tax margins of 10%.

And across the Tasman, payments firm Cuscal halted trading of its shares – last at A$4.21 – to raise A$30 million to buy the old Paymark eftpos business in New Zealand.

Reporting by Paul McBeth. Image from Curious News.