NZX50 slides as renewed Middle East tensions lift oil prices

New Zealand’s S&P/NZX 50 index dropped from its record close as local investors returned from the long Matariki weekend to heightened tensions in the Middle East pushing up oil prices and weighing on the likes of Air New Zealand.

Across the Tasman, Australia’s S&P/ASX 200 index also declined as more expensive energy costs weighed across Asian markets, with Xero sinking on news that chief executive Sukhinder Singh Cassidy sold a chunk of shares to pay a personal tax bill.

The a2 Milk Co declined as Fonterra Cooperative Group cut its forecast farmgate milk price amid soft demand for dairy products.

And among small-cap players, Rua Bioscience surged on a new distribution deal to enter the UK, while 2 Cheap Cars Group rallied on majority shareholder David Sena’s takeover offer for the 24% of the used car group that it doesn’t own.

Back to the start

The NZX 50 fell 62.47 points, or 0.5%, to 13,723.2, with 32 stocks falling, 13 gaining, and five unchanged. The S&P/NZX 20 index futures contract for September fell 0.4% to 7,751, with one lot traded for a value of $7,751, while the NZX 20 slipped 0.5% to 7,773.86.

Turnover across the main board was $156.6 million, of which Auckland International Airport accounted for $37.6 million as it decreased 0.3% to $8.82. The country’s major gateway was the most heavily traded stock on the day with a volume of almost 4.3 million shares changing hands.

Asian markets were broadly weaker as renewed tensions between the US and Iran sent oil prices higher, while South Korean memory chipmaker SK Hynix slumped following its strong debut in New York on Friday. Australia’s ASX 200 was down 0.1% in late trading, while Japan’s Nikkei dropped 2.3% and South Korea’s Kospi tumbled 7.4%.

“The hostilities in the Middle East are hampering investor sentiment and that’s flowed through to the Korean market,” said Jeremy Sullivan, an investment adviser at Hamilton Hindin Greene. “It looks like that’s going to continue for the foreseeable future.”

Air New Zealand was among the day’s bigger decliners, falling 2.3% to 42.5 cents as Brent crude oil futures climbed 4.2% to US$79.22 a barrel at 5pm in Auckland. SkyCity Entertainment Group dropped 4.7% to 51 cents, leading the NZX 50 lower.

The a2 Milk Co slipped 2.3% to $8.55 after Fonterra cut its forecast farmgate milk price by 50 cents to a midpoint of $9.25 per kilogram of milk solids on softer-than-expected demand for dairy products. Fonterra Shareholders’ Fund units declined 1% to $7.11.

“Fonterra’s update reduced the payout for farmers and a2’s caught up in that a little bit, with the kiwi lifting slightly as well,” Sullivan said.

Foreign exchange

The kiwi dollar traded at 57.58 US cents at 5pm from 57.26 cents on Thursday, before the long weekend.

Among other exporters on the red side of the ledger, Fisher & Paykel Healthcare fell 0.8% to $39.92 and Sanford decreased 0.7% to $6.80.

Freightways, often seen as an economic bellwether, fell 1.4% to $13.85 after the BusinessNZ-BNZ performance of services index showed activity was back in expansion territory last month, following a strong recovery in its sister manufacturing survey last week.

Vista Group International declined 1.7% to $2.35 after Walt Disney Co’s live-action remake of Moana struggled at the box office in its opening weekend, grossing US$95 million globally and US$43 million in the US.

Tech companies were broadly weaker in the subdued environment, with Gentrack down 0.8% at $3.65 and Serko unchanged at $1.45.

Across the Tasman, Xero sank 4.4% to A$70.20 in late trading amid news that CEO Singh Cassidy sold her remaining shareholding for A$2.2 million to meet a personal tax obligation, having sold A$5.4 million for tax reasons at the end of May and start of June.

Back in New Zealand, stock market operator NZX posted the biggest gain on the day, up 2.8% at $1.49, while ANZ Group Holdings advanced 2% to $43.98 and rubber goods maker Skellerup Holdings increased 1.1% to $6.52.

Channel Infrastructure, a beneficiary of rising energy costs given its prices are linked to producer price inflation, rose 0.3% to $3.24 after the import terminal said it confirmed the sale of decommissioned refinery equipment for almost US$6 million. Separately, it said the consortium to develop a biorefinery at Marsden Point expanded its scope to include making fertilisers from byproducts.

Outside the benchmark index, Rua Bioscience soared almost 45%, or 1.3 cents, to 4.2 cents after the medicinal cannabis company signed a sales and distribution agreement with a UK clinic which was expected to deliver $10 million of revenue in the initial two-year term.

And 2 Cheap Cars jumped 18% to 78 cents after controlling shareholder David Sena’s Sena & Co said it intended to make a takeover bid for 24% of the used car group that it didn’t own, offering 80 cents, a 21% premium to last week’s closing price.

Reporting by Paul McBeth. Image from Curious News.