New Zealand shares edged higher, lagging behind Wall Street's gains on the prospect of lower interest rates. A2 Milk recovered some of yesterday's sell-off as investors tried to gauge China's plan to boost domestic infant formula production.
The S&P/NZX 50 Index increased 4.13 points, or 0.04 per cent, to 9,956.06. Within the index, 21 stocks rose, 20 fell, and nine were unchanged. Turnover was $132.3 million.
Stocks across Asia were upbeat, following the lead of the S&P 500 Index, which climbed 2.1 per cent overnight on speculation the Federal Reserve may cut interest rates to preserve US economic growth in the face of a protracted trade dispute with China. China's Shanghai Composite was up 0.6 per cent in afternoon trading as was Singapore's Straits Times Index. Australia's S&P/ASX 200 index advanced 0.5 per cent.
"New Zealand hasn't followed the lead, and Australia's been a bit tepid as well," said Matt Goodson, managing director at Salt Funds. "It possibly reflects how extended our market has become."
Even after yesterday's 1.6 per cent slide, the NZX50 is trading at a forward price-to-earnings multiple of 22.1 times, the highest across the major equity benchmarks tracked by Refinitiv in the Asia Pacific region. India's Sensex Index is trading at a forward PE multiple of 20.5 times.
A2 rose 1.1 per cent to $14.25 on a volume of 2.3 million shares, more than twice its 90-day average of 803,000. The stock slumped 11 per cent yesterday on news that Chinese regulators are seeking to wean its burgeoning middle class off foreign infant formula, and aim to be 60 per cent self-sufficient within three years.
The stock traded in a 51 cent range today and Goodson said there was some debate as to what the Chinese target is and whether it's a change from existing policy.
Synlait Milk, which supplies A2, fell 1.3 per cent to $8.54 while Fonterra Shareholders' Fund units were down 0.3 per cent at $3.99. Dairy prices fell at the latest Global Dairy Trade auction, with buttermilk powder and anhydrous milk fat prices leading the decline.
Gentrack Group led the market higher, up 3.2 per cent at $5.24 on a volume of 216,000 shares, more than twice its 82,000 average, while Sanford rose 2.9 per cent to $7 on 48,000 shares, in line with its 90-day average. Sky Network Television rose from a record low, up 2.5 per cent at $1.21.
Spark New Zealand was the most active stock on a volume of 2.5 million, less than half its 5.5 million average. It fell 0.9 per cent to $3.705. Metlifecare declined 0.5 per cent to $4.41 on a volume of 1.4 million shares, compared to its usual volume of 228,000.
Among other companies trading on volumes of more than a million shares, Auckland International Airport fell 0.3 per cent to $8.82, Kiwi Property Group was unchanged at $1.56, and Z Energy decreased 0.5 per cent to $5.98.
Fletcher Building dropped 2.3 per cent to $5.20 on a volume of 1.3 million shares. Yesterday it said it completed the sale of its Formica business early, and trimmed its earnings outlook to account for the divestment and softer international trading.
Goodson said the Formica sale price was a touch ahead of expectations, but the lower earnings outlook and the chance of capital management initiatives attracted more interest from investors.
"They have clearly sold a very large business offshore and there could be some potential for reinvestment, but also at this peaking part of the property cycle having a very strong balance sheet would appear to make some sense as well," he said.
Goodman Property Trust decreased by 0.3 per cent, or 0.5 of a cent, to $1.83 having shed rights to a 1.66 cent dividend. Vital Healthcare Property Trust was unchanged at $2.32, having shed rights to a 2.19 cent dividend.
Outside the benchmark index, Turners Automotive Group declined 0.4 per cent to $2.45 and Colonial Motor Co was unchanged at $8.76 after Motor Industry Association figures showed new car sales dropped almost 14 per cent in May from the same month a year earlier.
New Zealand Refining's 2034 subordinated notes were the most active debt security on a volume of 319,000. The notes' annual interest of 5.1 per cent will be reset in 2024. They closed at a yield of 4.1 per cent, down 5 basis points. NZ Refining's shares rose 1 per cent to $2.07.