Market Close: Sharemarket edges closer to correction territory as Covid lockdown bites again

Local shares fell again as Auckland goes back into Level 3 lockdown

The latest Auckland lockdown put a dampener on the New Zealand sharemarket and those stocks most affected by the Covid pandemic as the leading index fell another half per cent and moved closer to a real correction.

The S&P/NZX 50 Index was down 79.08 points or 0.63 per cent to 12,510.56, after reaching an intraday low of 12,469.12. With only one gain in 10 trading days this month, the index has fallen nearly 8 per cent from its all-time high of 13,558.19 on January 8.

A market correction is more than 10 per cent, and a bear market is called with a fall of more than 20 per cent. There were 57 gainers and 79 decliners over the whole market on light volume of 46.76 million shares worth $115.20m.

Dan Stratful, investment adviser with Forsyth Barr, said the latest market fall was unsurprising given the Auckland three-day lockdown and it may be longer. "The market has been on a slide lately driven by the energy companies and it's getting close to a correction."

The Covid-related stocks hoping for an improvement in their prices, with a vaccine just around the corner, had their hopes dashed following the outbreak of three new community cases. The retailers, enjoying a good run with improved trading and earnings, went down with them.

Auckland International Airport was down 11c to $6.79; business travel provider Serko fell 13c or 2.36 per cent to $5.37; Vista Group decreased 3c or 2.03 per cent to $1.45; and SkyCity Entertainment, which closed its Auckland casino, declined 3c to $2.94.

Retailers Briscoe Group fell 8c to $5.62; Hallenstein Glasson was down 6c to $7.60, and The Warehouse Group lost 4c to $3.26. Fast food operator Restaurant Brands fell 8c to $12.12.

Contact Energy kicked off the latest reporting season by striking a 32 per cent or $19m increase in net profit to $78m for the six months ending December on steady revenue of $1.14 billion compared with the previous corresponding period. Contact's operating earnings (ebitdaf) rose 11 per cent to $246m and it is paying an interim dividend of 14c a share on March 30.

Contact, however, went into a trading halt probably till Wednesday's market opening after announcing a $400m equity capital raising at $7 a share to help fund the new 152-megawatt geothermal power station at Tauhara near Taupo. Contact's price remained at $7.20.

Stratful said the equity raising surprised the market. "We knew they were going to build a geothermal station but whether they would do it with debt or equity that was unclear. Now we know. Contact could have made a debt placement or bond offer."

He expected further volatility in the energy stocks, after the S&P Global Clean Energy Index reduces its weighting in Contact and Meridian in April. "There's tens of millions shares to be sold and those stocks will continue to be under pressure. It's been a wild ride for them, and they are expected to be steady shares for the retirees."

Meridian fell 14c or 2.41 per cent to $5.67; Mercury declined 37c or 5.44 per cent to $6.43; Genesis was down 10.5c or 2.76 per cent to $3.70, and Trustpower shed 30c or 3.47 per cent to $8.35.

Fletcher Building which is expect to report a solid result on Wednesday, increased 10c to $6.444; Ryman Healthcare climbed 15c to $14.80; and Freightways gained 9c to $11.04. New listing Third Age Health Services rose 7c or 3.26 per cent to $2.22, and NZME was up 2c or 2.35 per cent to 87c.

Summerset Group Holdings fell 21c or 1.62 per cent to $12.76; Ebos Group decreased 15c to $29.55; a2 Milk slipped 11c to $10.55; Synlait shed 9c or 2.06 per cent to $4.28; and Port of Tauranga was down 6c to $7.22. Sanford fell 15c or 3.22 per cent to $4.51, and Comvita fell 9c or 2.74 per cent to $3.20.

Kiwifruit grower and packer Seeka was part of the class action against the Crown in relation to the 2010 PSA outbreak. The plaintiffs were awarded $40m, and Seeka's share price gained 2c to $4.74.