The New Zealand share market's ability to soldier on in the face extreme volatility has largely come down to just two companies - a2 Milk and Fisher and Paykel Healthcare.
The benchmark S&P/NZX50 is about 13 per cent short of its record high of 12,064 set on February 20 but is still well ahead of its March low of 8495 points.
As luck would have it, F&P Healthcare and a2 Milk - New Zealand's biggest and second biggest companies, stand to benefit from the Covid-19 pandemic and their share prices have performed accordingly.
In F&P Healthcare's case, the company specialises in respiratory products - which it can safely be assumed are in hot demand right now as the Covid-19 pandemic continues to spread in many parts of the world.
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It's not yet clear exactly what the Covid-19 impact will be on the company, but all will be revealed when it reports its annual result on June 29.
A2 Milk has been a little more upfront, saying in its latest earnings update that sales have been boosted by customers stocking up their pantries in response to the lockdowns.
F&P Healthcare last traded at $29.39 and a2 Milk at $19.74 - not far off their record highs.
"A lot of the future performance of the NZX now rides on the fortunes of two companies, F&P Healthcare and a2 Milk, which now constitute over 20 per cent of the index," Castle Point Funds co-founder Richard Stubbs said.
"They are undoubtedly very good companies but that is reflected in their prices which are at very high multiples to current earnings," he said.
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F&P Healthcare has a price earnings ratio of 70.9 while a2 Milk's ratio is 45.5.
Going on those two numbers, it was clear that a lot of earnings growth had been built into both companies.
For most companies, the long run price earnings ratio has been about 14 times - that's considered a base.
"A growth company, in the old days, would have been considered expensive at 20 times," he said.
"What you have found is that the so called Fang (technology-based) stocks that have been able to grow exponentially over a long time, people have been prepared to pay very high multiples," he said.
"But at some point you have got to earn a profit and as an investor you have to earn a big yield on that profit," he said. "These companies have to grow a lot more to justify their current prices.
"There is definitely exuberance in those prices," he said.
Stubbs said the fact that the two companies have such a big weighting on local market might come as news those invested in passive, index-based funds.
"It just means that if you are a passive investor in New Zealand, you must not be getting the diversification that you expect."
AMP deadline looms
The deadline is looming for AMP to get regulatory approval for the sale of its life insurance business and one analyst is warning if it doesn't get the go ahead the company may have to raise capital instead.
AMP has until June 30 to get approval for the sale which includes sign off from New Zealand's Reserve Bank. Last year it couldn't get a similar deal over the line because it failed to satisfy the RBNZ's capital requirements.
This year it could be Covid-19 which gets in the way of getting the sign off in time. Broker Jarden estimates A$1.2 billion (NZ$1.28b) of capital could be returned to shareholders if the June 30 deadline is met.
But if the life sale doesn't go ahead or is delayed shareholders could end up having to dip into their own pockets to shore up the financial services business.
"There is a scenario where the life sale doesn't go ahead and AMP doesn't raise equity, however with ongoing investment market volatility impacting both earnings and capital, it may be prudent for AMP to raise $200m to $500m," it noted this week.
That would be another blow for AMP's shareholders who have hung on for the rough ride over the last few years after the company's reputation took a major hit in Australia's Royal Commission into misconduct in the financial services industry and its former chief executive departed.
Jarden maintains an outperform rating on the stock with a target price of A$1.50 but that comes with a rider: "the key risk is that AMP is forced to renegotiate and accept a significantly lower sale price for its life business".
AMP last traded at $1.46 on the NZX, and is down more than 35 per cent over the last year.