NZ Herald
  • Home
  • Latest news
  • Herald NOW
  • Video
  • New Zealand
  • Sport
  • World
  • Business
  • Entertainment
  • Podcasts
  • Quizzes
  • Opinion
  • Lifestyle
  • Travel
  • Viva
  • Weather

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • New Zealand
    • All New Zealand
    • Crime
    • Politics
    • Education
    • Open Justice
    • Scam Update
  • Herald NOW
  • On The Up
  • World
    • All World
    • Australia
    • Asia
    • UK
    • United States
    • Middle East
    • Europe
    • Pacific
  • Business
    • All Business
    • MarketsSharesCurrencyCommoditiesStock TakesCrypto
    • Markets with Madison
    • Media Insider
    • Business analysis
    • Personal financeKiwiSaverInterest ratesTaxInvestment
    • EconomyInflationGDPOfficial cash rateEmployment
    • Small business
    • Business reportsMood of the BoardroomProject AucklandSustainable business and financeCapital markets reportAgribusiness reportInfrastructure reportDynamic business
    • Deloitte Top 200 Awards
    • CompaniesAged CareAgribusinessAirlinesBanking and financeConstructionEnergyFreight and logisticsHealthcareManufacturingMedia and MarketingRetailTelecommunicationsTourism
  • Opinion
    • All Opinion
    • Analysis
    • Editorials
    • Business analysis
    • Premium opinion
    • Letters to the editor
  • Politics
  • Sport
    • All Sport
    • OlympicsParalympics
    • RugbySuper RugbyNPCAll BlacksBlack FernsRugby sevensSchool rugby
    • CricketBlack CapsWhite Ferns
    • Racing
    • NetballSilver Ferns
    • LeagueWarriorsNRL
    • FootballWellington PhoenixAuckland FCAll WhitesFootball FernsEnglish Premier League
    • GolfNZ Open
    • MotorsportFormula 1
    • Boxing
    • UFC
    • BasketballNBABreakersTall BlacksTall Ferns
    • Tennis
    • Cycling
    • Athletics
    • SailingAmerica's CupSailGP
    • Rowing
  • Lifestyle
    • All Lifestyle
    • Viva - Food, fashion & beauty
    • Society Insider
    • Royals
    • Sex & relationships
    • Food & drinkRecipesRecipe collectionsRestaurant reviewsRestaurant bookings
    • Health & wellbeing
    • Fashion & beauty
    • Pets & animals
    • The Selection - Shop the trendsShop fashionShop beautyShop entertainmentShop giftsShop home & living
    • Milford's Investing Place
  • Entertainment
    • All Entertainment
    • TV
    • MoviesMovie reviews
    • MusicMusic reviews
    • BooksBook reviews
    • Culture
    • ReviewsBook reviewsMovie reviewsMusic reviewsRestaurant reviews
  • Travel
    • All Travel
    • News
    • New ZealandNorthlandAucklandWellingtonCanterburyOtago / QueenstownNelson-TasmanBest NZ beaches
    • International travelAustraliaPacific IslandsEuropeUKUSAAfricaAsia
    • Rail holidays
    • Cruise holidays
    • Ski holidays
    • Luxury travel
    • Adventure travel
  • Kāhu Māori news
  • Environment
    • All Environment
    • Our Green Future
  • Talanoa Pacific news
  • Property
    • All Property
    • Property Insider
    • Interest rates tracker
    • Residential property listings
    • Commercial property listings
  • Health
  • Technology
    • All Technology
    • AI
    • Social media
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
    • Opinion
    • Audio & podcasts
  • Weather forecasts
    • All Weather forecasts
    • Kaitaia
    • Whangārei
    • Dargaville
    • Auckland
    • Thames
    • Tauranga
    • Hamilton
    • Whakatāne
    • Rotorua
    • Tokoroa
    • Te Kuiti
    • Taumaranui
    • Taupō
    • Gisborne
    • New Plymouth
    • Napier
    • Hastings
    • Dannevirke
    • Whanganui
    • Palmerston North
    • Levin
    • Paraparaumu
    • Masterton
    • Wellington
    • Motueka
    • Nelson
    • Blenheim
    • Westport
    • Reefton
    • Kaikōura
    • Greymouth
    • Hokitika
    • Christchurch
    • Ashburton
    • Timaru
    • Wānaka
    • Oamaru
    • Queenstown
    • Dunedin
    • Gore
    • Invercargill
  • Meet the journalists
  • Promotions & competitions
  • OneRoof property listings
  • Driven car news

Puzzles & Quizzes

  • Puzzles
    • All Puzzles
    • Sudoku
    • Code Cracker
    • Crosswords
    • Cryptic crossword
    • Wordsearch
  • Quizzes
    • All Quizzes
    • Morning quiz
    • Afternoon quiz
    • Sports quiz

Regions

  • Northland
    • All Northland
    • Far North
    • Kaitaia
    • Kerikeri
    • Kaikohe
    • Bay of Islands
    • Whangarei
    • Dargaville
    • Kaipara
    • Mangawhai
  • Auckland
  • Waikato
    • All Waikato
    • Hamilton
    • Coromandel & Hauraki
    • Matamata & Piako
    • Cambridge
    • Te Awamutu
    • Tokoroa & South Waikato
    • Taupō & Tūrangi
  • Bay of Plenty
    • All Bay of Plenty
    • Katikati
    • Tauranga
    • Mount Maunganui
    • Pāpāmoa
    • Te Puke
    • Whakatāne
  • Rotorua
  • Hawke's Bay
    • All Hawke's Bay
    • Napier
    • Hastings
    • Havelock North
    • Central Hawke's Bay
    • Wairoa
  • Taranaki
    • All Taranaki
    • Stratford
    • New Plymouth
    • Hāwera
  • Manawatū - Whanganui
    • All Manawatū - Whanganui
    • Whanganui
    • Palmerston North
    • Manawatū
    • Tararua
    • Horowhenua
  • Wellington
    • All Wellington
    • Kapiti
    • Wairarapa
    • Upper Hutt
    • Lower Hutt
  • Nelson & Tasman
    • All Nelson & Tasman
    • Motueka
    • Nelson
    • Tasman
  • Marlborough
  • West Coast
  • Canterbury
    • All Canterbury
    • Kaikōura
    • Christchurch
    • Ashburton
    • Timaru
  • Otago
    • All Otago
    • Oamaru
    • Dunedin
    • Balclutha
    • Alexandra
    • Queenstown
    • Wanaka
  • Southland
    • All Southland
    • Invercargill
    • Gore
    • Stewart Island
  • Gisborne

Media

  • Video
    • All Video
    • NZ news video
    • Herald NOW
    • Business news video
    • Politics news video
    • Sport video
    • World news video
    • Lifestyle video
    • Entertainment video
    • Travel video
    • Markets with Madison
    • Kea Kids news
  • Podcasts
    • All Podcasts
    • The Front Page
    • On the Tiles
    • Ask me Anything
    • The Little Things
  • Cartoons
  • Photo galleries
  • Today's Paper - E-editions
  • Photo sales
  • Classifieds

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Business / Business Reports / Capital markets report

Continuous Disclosure: Why the market has bounced back despite economic fallout still to come

Tamsyn Parker
By Tamsyn Parker
Business Editor·NZ Herald·
1 May, 2020 05:46 AM6 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

The NZX50 has bounced back quickly despite signs the economy is in for a rough ride ahead. Photo / Supplied

The NZX50 has bounced back quickly despite signs the economy is in for a rough ride ahead. Photo / Supplied

Sharemarket watchers are scratching their heads over the disconnect between the real economy and the recent bounce in share prices.

Economists are predicting the worst is yet to come, with New Zealand's unemployment level expected to rise to 9 or 10 per cent from record lows of 4 per cent, and business failures aplenty.

But the NZX/S&P50 is now just under 8 per cent down from where it started trading in January, around the same point it was in September/October last year.

After losing 14.8 per cent in the March quarter the market has bounced back strongly since its March 23 low point - hit just before New Zealand entered its strict level 4 lockdown.

READ MORE:
• Premium - Continuous Disclosure: Amid the gloom, NZ's biggest company keeps outperforming
• Premium - Continuous Disclosure: The biggest challenge facing the NZX
• Continuous Disclosure: Why investors are flocking to take up NZ recapitalisation plans
• Premium - Continuous Disclosure: How to coronavirus proof your portfolio and why volatility is here to stay

Advertisement
Advertise with NZME.

In the US, The S&P500 likewise is now down less than 10 per cent since the start of the year and has also been on a strong rally since March 23.

Mark Brown, chief investment officer at Devon Funds Management, says it's a real conundrum.

"We are looking post Covid-19 and globally it is a very different economic climate, yet the market is back to levels seen in October last year."

Advertisement
Advertise with NZME.

Central banks lowering cash rates and "printing money" through quantitative easing is being seen as a backstop for the market. Brown said another reason was the lack of alternatives for investors looking for a return on their money.

"If you think of cash rates globally, there is just no attraction, at the end of the day people need a return of some form."

The problem is that company earnings forecasts are likely to be out of date or unknown in many cases, and dividend payouts are likely to be cut or suspended.

"There is a great level of uncertainty. But for certain, I think the trajectory for earnings and dividends has to be lower."

Kathmandu's share price has risen above its capital raise issue price. Photo / File
Kathmandu's share price has risen above its capital raise issue price. Photo / File

Sam Dickie, senior portfolio manager at Fisher Funds, says the S&P500 fell 36 per cent from its all-time high to its recent low point on March 23 but is now just 13 per cent below that high point.

Dickie says that until recently the rally was led by big high-growth tech companies Apple, Alphabet, Facebook, Microsoft and Amazon, and defensive stocks such as Berkshire Hathaway and Johnson & Johnson.

"From the 23 March bottom until 21 April, that rally was led by high-quality growth companies and defensives. In other words, some of the largest companies in the S&P500 and the world.

"So up until that date, the S&P500 was not telling us that the economy is fine and that corporate earnings will be fine. Rather, it was telling us that the largest companies in the world will trade through this crisis just fine and in fact will likely take market share off smaller, weaker competitors."

Advertisement
Advertise with NZME.

But from April 21, said Dickie, the rally had started to broaden out with cyclical stocks starting to outperform others.

"That coincided with the bottoming in oil, the ultimate cyclical indicator."

TAKING FLIGHT

One stock which has really surprised on the upside has been Air New Zealand, jumping from an 80c low to $1.305 (at Wednesday's close), putting it on track to be the best performer this month in the NZX50.

That's despite no confirmation yet on when the wider public will be allowed to travel domestically again, nor when international markets will open again.

Market players point to a lot of small trades in the stock, and say retail investors appear to be having a punt on it.

Apart from the lack of potential for revenue, also weighing on Air New Zealand is a $900 million loan to Government which it must pay back. Investors face the risk that it could be converted to equity in the future, diluting any shareholding outside of the Government's stake.

New chief executive Greg Foran is said to be handling the challenging situation at the airline well, but one can only imagine he is looking back wistfully at the share price of his former employer Walmart, which was trading at US$118 a share before the Covid-19 crisis and has since hit an all-time high of US$125.

Air New Zealand shares have bounced up a lot since hitting a recent low of 80c per share. Photo / File
Air New Zealand shares have bounced up a lot since hitting a recent low of 80c per share. Photo / File

CAPITAL RAISING

With markets on the rise again, investment bankers will be sure to encourage companies thinking of a capital raising to seize the moment.

One market player even suggested Air New Zealand would do better to replace its Government loan with a capital raising, given the high interest rate on the loan.

Milford Asset Management portfolio manager Sam Trethewey says a number of companies will be monitoring things very closely as the country moves into level 3, to see how revenue streams pick up.

Trethewey said investors had been trying to anticipate which companies were going to raise capital, leading to share price underperformance before a raising. Auckland Airport, Kathmandu and Vista's share prices had all bounced back since raising capital.

"All three are trading at premiums to where their capital raise was."

But that had also resulted in heavy dilution for shareholders who did not take part.

Names that are being talked about as potential contenders for capital raising include SkyCity, Z Energy, Fletcher Building, Metro Glass and Steel & Tube.

Casino operator SkyCity remains largely closed, which means it will be burning through cash quickly although it does have a good stockpile.

One analyst suggested this week that the company may be more likely to turn to its bankers for help rather than raising new equity.

While Z Energy has been operating as an essential service, its revenue has been very low, with most Kiwis ordered to stay home and aviation fuel demand greatly decreased.

Investors will be keen to know how much fuel revenue will pick up under level 3 as people potentially fill their tanks for the first time in five weeks.

Analysts are watching to see how Z Energy's revenues pick up under alert level 3. Photo / File
Analysts are watching to see how Z Energy's revenues pick up under alert level 3. Photo / File
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Latest from Capital markets report

Premium
Opinion

Liam Dann: After Orr – is it time for a Reserve Bank reset?

13 May 05:02 PM
Premium
Opinion

Beyond the Budget: Brutal truths

13 May 05:01 PM
Premium
Capital markets report

The hunt for equity: Kiwi expats wanted

13 May 05:01 PM

From early mornings to easy living

sponsored
Advertisement
Advertise with NZME.

Latest from Capital markets report

Premium
Liam Dann: After Orr – is it time for a Reserve Bank reset?

Liam Dann: After Orr – is it time for a Reserve Bank reset?

13 May 05:02 PM

OPINION: The challenges facing the Reserve Bank.

Premium
Beyond the Budget: Brutal truths

Beyond the Budget: Brutal truths

13 May 05:01 PM
Premium
The hunt for equity: Kiwi expats wanted

The hunt for equity: Kiwi expats wanted

13 May 05:01 PM
Premium
Tim McCready: AI levelling the investment field

Tim McCready: AI levelling the investment field

13 May 05:00 PM
Solar bat monitors uncover secrets of Auckland’s night sky
sponsored

Solar bat monitors uncover secrets of Auckland’s night sky

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • NZ Herald e-editions
  • Daily puzzles & quizzes
  • Manage your digital subscription
  • Manage your print subscription
  • Subscribe to the NZ Herald newspaper
  • Subscribe to Herald Premium
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Bay of Plenty Times
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP