New Zealand shares fell, joining a sell-off across Asia, as investors fret over the future track of US interest rates ahead of this week's Federal Reserve policy review. Heartland Group sank on concerns over stricter banking capital requirements.
The S&P/NZX 50 index dropped 57.22 points, or 0.7 per cent, to 8,688.37. Within the index 29 stocks fell, 14 gained and seven were unchanged. Turnover was $160.1 million.
Stocks across Asia fell ahead of this week's Federal Reserve policy review, with Singapore's FTSE Straits Times index down 1.8 per cent in afternoon trading and Australia's S&P/ASX falling 1 per cent.
The Fed is expected to raise the federal funds rate a quarter point at the meeting, but investors are weighing up whether the track for future increases will be pared back. The prospect of rising interest rates has dimmed the lustre of equities globally.
"If you're punching into an analyst's model with regards to valuation, interests rates are quite key," said Peter McIntyre, investment adviser at Craigs Investment Partners. "The market's a little bit on edge."
Heartland led the market lower, falling 6.9 per cent to $1.35, its lowest close since August 2016. The local lender has dropped 11 per cent since the Reserve Bank unveiled plans that would require a significant increase in the capital held by banks. Macquarie analysts estimate Heartland would need to lift its high-quality capital by $90 million, and that New Zealand's smaller banks would need an additional $1 billion in capital.
Dual-listed Australia & New Zealand Banking Group fell 3 per cent to $25 and Westpac Banking Corp was down 1.7 per cent at $25.55. McIntyre said the proposals have injected uncertainty into banking stocks
"Heartland's down nearly 7 percent, and that's just a reaction to them having to hold greater amounts of capital," he said.
"There's been a whole lot of theories running around in the markets at the moment about whether the Australian parents sell off their New Zealand cousins."
Synlait Milk sank 5.9 per cent to $8.35 and Kathmandu Holdings dropped 4.3 per cent to $2.65, both in light trading. A2 Milk fell 2.1 per cent to $10.72 in modest trading.
Spark New Zealand was the most traded stock with almost 6 million shares changing hands, compared to its 90-day average of 3 million. The shares decreased 0.7 per cent to $4.17 after the company noted Australia's Telstra will join the Southern Cross Cable Network as a customer and shareholder.
Trade Me was unchanged at $6.32 on a volume of 4.7 million and Meridian Energy slipped 0.2 per cent to $3.42 on 3.8 million shares traded.
Of the other companies traded on volumes of more than 1 million shares, SkyCity Entertainment Group fell 3.1 per cent to $3.43, Auckland International Airport was up 0.8 per cent at $7, and Z Energy rose 0.8 per cent to $5.75.
Fletcher Building rose 2.1 per cent to $4.93 in heavier trading of 3.4 million shares. The construction company today announced the sale of its Formica unit for US$840 million, in line with analysts' expectations, and said it will resume paying dividends.
Mercury NZ rose 2 per cent to $3.60 and Genesis Energy was up 1.2 per cent at $2.56 in relatively light trading. Sky Network Television increased 1 per cent to $1.99 on a small volume.
Air New Zealand edged up 0.2 per cent to $3.095 after reporting strong domestic and trans-Tasman passenger numbers in November, although its long-haul factor was weaker.
Investore Property increased 0.7 per cent to $1.53 in light trading. After trading closed, the large format property investor raised its dividend guidance to 7.6 cents per share for the year ending March 31, from 7.46 cents per share.
Kiwi Property Group fell 3.3 per cent to $1.34 on almost half its average trading volume. Anchor tenant Bell Gully will move from its Vero Centre in Auckland between 2023 and 2025. The law firm will take on a lease at Precinct Properties New Zealand's One Queen Street building at Commercial Bay. Precinct shares were unchanged at $1.43.
Outside the benchmark index, PGG Wrightson rose 4 per cent to 52 cents. After the close of trading, the rural services firm said difficult trading conditions in South America were impacting on its seed and grain division.