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Jamie Gray is a business reporter for the NZ Herald

NZ stocks sidelined while Wall Street smashes records

Wall Street's venerable Dow Jones industrial average has broken through the 20,000-point barrier for the first time in its 120-year year history, taking some other markets with it. For the moment, the New Zealand sharemarket has been reduced to being a mere bystander.

The Dow may well be one of the world's best-known indices, but it has its limitations, being a solely price-weighted stock comprised of just 30 stocks.

Fund managers tend to take notice of the more comprehensive S&P500 but even by that measure, the US market hit new highs on the back of Donald Trump's success in the US Presidential election, and his promises to improve infrastructure, remove regulation, and to build a wall between the US and Mexico.

According to the Financial Times, Trump's November 8 victory ignited the steepest rally from election day to inauguration for a first-term president since John F.

Kennedy won the White House in 1960.

Interestingly, investment bank and Dow constituent, Goldman Sachs, from which the Trump administration has drawn many of its key personnel, has seen its share price rally by US$56, or 30 per cent, to US$237 since the election. Goldman's performance was cited as a key factor behind the index pushing through the 20,000 barrier first time.

Post-election, the local market has had a firmish tone, but last night's close of 7113.32 on the benchmark S&P/NZX 50 Index was well short of last September's record high of 7571.1.

THE BIG ROTATION
"Rotation" is fast becoming a familiar term for local investors. Up until last year, the market enjoyed a strong run thanks to its role as a kind of surrogate bond market while yields sank to abnormally low levels the world over.

"What you have seen globally is a rotation towards cyclical stocks - particularly the mining and building stocks - and especially in the United States," said Salt Funds managing director Matt Goodson.

"The market tends to be full of bond-proxy type securities - the power generator /retailers, Spark and the property stocks," he said. "So one would not expect our market to have performed as strongly [as the US], and that indeed has been the case."

COMVITA REBOUNDS
The summer, or more precisely the lack of one, has had its impact on some stocks.
It seems that bees, like people, prefer to stay indoors when the weather is wet, cold and windy.

Stay-at-home bees, and cooler weather affecting the nectar that plants produce, has had a big impact on honey production, so much so that Comvita - New Zealand's biggest manuka honey maker - has had to substantially lower its operating earnings forecasts for the current year.

A poor season would bring a 60 per cent shortfall in its manuka honey harvest which, together with slower sales through China's informal trading channels, would drag its June year operating earnings down to about $5 million to $7m from a previous forecast of $17.1m, it said.

The company expects a honey crop of 380 tonnes in the 2017 year, compared to an average harvest of 974 tonnes.

The stock quickly sank by $1.33 to $6.50 on the news but it has since clawed back some ground, closing last night at $7.20, having hit a record high last year of $12.87.

For the moment, the downtrade is being viewed as an industry-wide phenomenon and part and parcel of being an agriculture-based company with exposure to the differing weather patterns.

OCEANIA MISSES
Another honey maker, Oceania Natural, which trades on the alternative NXT market, has slashed its 2017 revenue forecast as deep discounts on rival honey products undermine sales into China.

The Auckland-based company lowered its revenue target to $2.2m for the year ending March 31 from $5.4m. Sales into China via distributors are expected to be $605,000, down from a previous forecast of $4m, while Oceania's direct sales are projected to be $1.6m, up from $1.4m.

China's crackdown on grey market traders is weighing on a variety of exporters relying on those distribution channels, such as infant formula makers.

CLASS ACTION
Missing earnings forecasts can be a messy business. The once-high flying ASX-listed infant formula maker Bellamy's now faces two class actions from disaffected shareholders over alleged breaches of its corporate disclosure responsibilities.

In the latest action, specialised litigation funder IMF Bentham said it proposed to fund claims of certain current and former shareholders of Bellamy's. The claims relate to alleged misleading or deceptive conduct and an alleged breach by Bellamy's of its continuous disclosure obligations in connection with its trading prospects and future earnings performance during the period between April and December last year.

Bellamy's shares were suspended from trade in mid-December after the company warned of weaker-than-expected sales. The stock remained under doward pressure when trade resumed on January 11. It traded at A$3.81 yesterday - down from A$12.13 at the start of last December.

- NZ Herald

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