NZ market dives on escalating US-China trade war

Cinema software provider Vista Group led the declines, down 5.4 per cent at $5.65. Photo / 123RF

The New Zealand share market took a hit in a day of red on signs China may use its currency to stand up to the US in the two countries' escalating trade war.

The S&P/NZX 50 Index fell 178.86 points, or 1.7 per cent, to 10,587.17. Within the index, 47 stocks fell, one rose and two were unchanged. Turnover was solid at $133.2 million.

Cinema software provider Vista Group led the declines, down 5.4 per cent at $5.65. The 258,500 shares traded were down on its 334,000 average the past three months.

Index heavy-weight A2 Milk fell 2.9 per cent to $16.56. About 1.05 million shares changed hands, up from its 710,000 average. Supplier Synlait Milk, another firm tied closely to China, fell 3.9 per cent to $9.32. Units in the Fonterra Shareholders' Fund were unchanged at $3.75.

"Obviously tension between China and the US is continuing with currency wars developing, and the yuan down to levels not seen since 2008," said Peter McIntyre, an investment advisor at Craigs Investment Partners.

Asian markets were weaker across the board, with the Hang Seng down 1 per cent, the Straits Times Index down 0.7 per cent and the S&P/ASX200 down 2.2 per cent in early afternoon trading.

"I don't see an immediate end to it," McIntyre said. "This tension is going to continue and I think that August is a difficult month and it will carry on at least in the short to medium term. Tomorrow the focus will be on the New Zealand market and the Reserve Bank cut."

A report today showing the country's unemployment rate unexpectedly fell to an 11-year low of 3.9 per cent in the June quarter won't be enough to put off a rate cut by the Reserve Bank tomorrow, economists said. The deteriorating global situation and rate cuts by other central banks have most investors expecting a 25 basis-point cut tomorrow.

Fishing company Sanford was the only gainer in the benchmark index today, rising 0.5 per cent to $6.74.

Spark New Zealand was the heaviest traded stock, with just over 4.6 million shares changing hands, 50 per cent more than usual. The stock fell 1.4 per cent to $3.98.

Among other stocks trading on volumes of more than a million shares, Argosy Property fell 1.4 per cent to $1.395, Oceania Healthcare fell 1 per cent to $1.02, Precinct Properties NZ fell 1.7 per cent to $1.755 and Goodman Property fell 1.4 per cent to $2.06.

"Infrastructure related sectors will be able to weather this a little bit better and those property-related New Zealand-centric companies are likely to escape this," McIntyre said.

Power generators Meridian Energy and Mercury NZ both closed at $4.68, down 1.3 per cent and 1.9 per cent respectively. Air New Zealand fell 2.2 per cent to $2.67.

McIntyre said Fisher & Paykel Healthcare would be one to watch for impacts of the US-China trade war. Shares in the company were down 0.9 per cent at $15.80. Volume of 1.1 million was almost twice its average the past three months.