Leading energy stocks Contact and Meridian continued to plummet after unexpectedly finding themselves falling out of favour with the overseas exchange traded funds that bought them at high prices – and the New Zealand sharemarket was driven down more than one per cent.
The S&P/NZX 50 Index closed an eventful week down 171.49 points or 1.34 per cent to 12,589.64, falling to a level last seen in late November. The index retreated 3.6 per cent this week on the back of the sliding energy stocks.
There were 57 gainers and 84 decliners over the whole market on volume of 47.31 million shares worth $175.47 million. Contact and Meridian dominated the proceedings with $28.28m and $21.9m shares traded respectively.
Contact fell 39c or 5.14 per cent to $7.20, and Meridian plunged 43.5c or 6.97 per cent to $5.81, both stocks nearing their price levels of mid-October last year.
The iShares Global Clean Energy Exchange Traded Funds in United States and UK – which track the performance of the S&P Global Clean Energy Index - are reviewing their weightings and liquidity, and adding new companies. This means their exposure to Contract and Meridian will be reduced, and now Mercury seems unlikely to join the global index.
Matt Goodson, managing director of Salt Funds Management, said the index changes take place in April but people are obviously pre-positioning themselves.
"It's the madness of passive investment funds. They were forced to buy Contact at more than $10 and Meridian more than $9, and now they are forced sellers in the $7 and $6 regions. God bless them," he said.
"The lesson is that when the passive funds become too large relative to the underlying liquidity of their constituents, then it can have perverse price impacts. This doesn't change the fundamentals of stocks like Contact and Meridian, but it does make a mockery of what these funds are about and the duty of care owed to investors," said Goodson.
The other energy stocks caught the backflow of Contact and Meridian's movements. Mercury fell 29c or 4.09 per cent to $6.80; Genesis was down 9.5c or 2.44 per cent to $3.805; Trustpower shed 27c or 3.03 per cent to $8.65; and Vector lost 6c to $4.15.
Tilt Renewables decreased 13c or 1.91 per cent to $6.67, despite announcing it has installed all 31 turbines at its south Taranaki Waipipi Wind Farm, which will produce 455GWh a year, enough electricity to service 65,000 homes.
Other blue chips to fall were: Ebos Group down 10c to $29.70; Auckland International Airport declining 19c or 2.68 per cent to $6.925; a2 Milk decreasing 13c to $10.66; Ryman Healthcare losing 30c or 2.01 per cent to $14.65; Freightways shedding 13c to $10.95; ad Summerset Group Holdings down 18c to $12.97.
Bucking the trend were Fisher and Paykel Healthcare, up 11c to $32.25; Skellerup Holdings increasing 4c to $4.04; and Port of Tauranga gaining 3c to $7.28.
Kathmandu Holdings reported group sales for the six months ending January increased 12 per cent compared with the previous corresponding period, reflecting the successful integration of Rip Curl surf wear. The retailer said operating earnings (edbitda) is expected to be $47m-$49m, and Kathmandu's share price fell 4c or 3.03 per cent to $1.28.
Air New Zealand has been given an assurance by Finance Minister Grant Robertson that the Crown will participate in its equity capital to maintain the majority shareholding (presently at 51.9 per cent), given the critical role the airline plays in New Zealand's economy and society. Air New Zealand's raising, expected to be up to $1 billion, will take place before June 30, and its share price slipped 1.5c to $1.565.
Electronics manufacturer Rakon surged 7c or 9.09 per cent to 84c after telling the market it has secured significant orders from existing and new customers including a multi-national company. Rakon will be increasing its manufacturing capacity and testing capability at its Auckland plant to deliver the orders, which will add at least 20 per cent to the revenue for the 2022 financial year.