Leading stock a2 Milk, caught with an earnings downgrade, hogged the limelight again and dragged the New Zealand sharemarket down for the second day running.
The S&P/NZX 50 Index fell 60.19 points or 0.51 per cent to 11,742.09, after reaching an intraday high of 11,876.67. There were 80 gainers and 60 decliners over the whole market, with trade reaching 48.75 million shares worth $192.83 million.
After falling nearly 10 per cent the day before, a2 Milk lost another 81c or 4.86 per cent to $15.84 on trade worth $37.7m – and the move made up a third of the index's decline. Synlait Milk, which supplies a2 Milk, was down 19c or 3.39 per cent to $5.41.
The milk marketer has now fallen nearly 35 per cent from its high of $21.50 posted on August 18. It's not how a2 Milk would like to be seen on the centre stage – it was also the leading decliner on the steady S&P/ASX 50 Index.
Before mid-August, a2 Milk was on a magnificent 50 per cent gain after starting its rise at $14.56 on January 15 and had reached $20.33 by April 28. It is still more than 28 per cent up over the last 12 months.
It all came unstuck when a2 Milk reported that first half revenue for the 2021 financial year will drop because of lower demand from Chinese resellers in Australia. The Melbourne lockdown had affected the daigou sales, which represent a significant proportion of its infant formula business.
Analysts said the new forecast for first half revenue was 11 per cent lower than expectations, even though the full year outlook was still better than last year's result.
Jeremy Sullivan, investment advisor with Hamilton Hindin Greene, said there had been some broker downgrades in Australia and when their market opened the selling in a2 Milk continued.
"When you get a stock that has risen so quickly, investors will look for any reason to sell it. The daigou sales channel was more profitable for a2 Milk but it was not without risk. However, I'm sure the demand will come back post-Covid," Sullivan said.
While a2 Milk dominated proceedings, the rest of the market was more or less in a holding pattern with very few big movers. The other heavyweight Fisher and Paykel Healthcare lent a hand in pulling the market down, falling 19c to $33.50.
Network operator Chorus recovered some ground, rising 21c or 2.47 per cent to $8.72, and retailer Briscoe Group gained 8c or 2.04 per cent to $4.01. Software firm Gentrack fell 7c or 5.11 per cent to $1.30.
The retirement village stocks are having a bit of a revival, with Ryman Healthcare gaining 27c to $14.09 and Oceania Healthcare increasing 1c to $1.12, having increased nearly 10 per cent in the past week.
After all the excitement and rises of the day before – with the Tiwai Point aluminium smelter likely to extend its stay in Southland – the energy stocks settled and then most of them fell a cent or two, except Meridian which was up 2.2c to $4.865. Mercury was down 6c to $5.03.
At its annual meeting, Air New Zealand told shareholders it has tapped into $110m of the $900m government loan, and given the uncertainty surrounding travel restrictions it is not able to provide specific 2021 earnings guidance.
Air New Zealand's available liquidity is about $1 billion, comprising $215m of cash on hand and $790m remaining on the Crown standby loan facility. The airline's share price was up 1.5c to $1.38 with investors looking forward to a transtasman travel bubble.
Auckland International Airport gained 5c to $7.23 and SkyCity was up 1c to $2.89 – two other stocks that would benefit from the resumption of travel between New Zealand and selected Australian states.