Heat comes out of sharemarket after record-setting run

Friday, 15 January 2021

The heat has come out of the market as investors take a breath following a strong run higher.

The sharemarket fell further on Friday, capping a week of daily losses, as investors took a breath after a record-setting run.

The benchmark S&P/NZX 50 Index slipped 91.184 points, or 0.7 per cent, to 13,024.69.

“A bit of heat has come out of our market after what was a pretty strong run leading into the New Year,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “As more market participants have come back into the market I think the market is readjusting.”

Stocks with large index weightings led the market down, he said.

Michael Hill expects a significant rise in profits as trading improved following Covid-19 lockdowns.

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Major indexes fell in the United States as technology stocks weakened.

Fisher & Paykel Healthcare slipped 2 per cent to $31.64, milk marketer The a2 Milk Company was down 1.7 per cent to $11.01, Meridian Energy slid 0.9 per cent to $7.87, Contact Energy dropped 1.4 per cent to $9.55, and Auckland International Airport fell 1.4 per cent to $7.57.

Bucking the trend, Michael Hill jumped 6.9 per cent to 78 cents after the jewellery retailer upgraded its profit expectations.

Michael Hill said it will post a pre-tax profit of between A$56 million (NZ$59m) and A$60m for the first half of its financial year to December 27, 2020. At the higher end of the range, that’s almost double the A$31.6m it reported in the same period a year earlier.

The significant lift in profit prompted the company to bring forward the payment of a A$5.8m dividend it suspended last year due to Covid-19. The dividend had been deferred until September this year, but Michael Hill will now pay it on January 29.

“Retail got aggressively sold off at the beginning of Covid, but the retail sector has been a shining light, not just in New Zealand, but internationally as well, as consumers, rather than spending money travelling, have decided to spend it domestically, and they have been a beneficiary of that,” said McIntyre.

One of the smaller stocks on the market, Wellington Drive Technologies, was asked by the market regulator to explain a 31 per cent jump in its share price between January 8 and 14. In response, the company said it was complying with continuous disclosure rules, and didn’t have any further updates to the market since its last release in October last year, although it noted there was market volatility due to Covid.

Wellington Drive may provide an update on the business later next week following a performance review.

The stock advanced 1 per cent to 10.1 cents.

McIntyre said smaller stocks could move significantly if investors wanted a reasonable volume.

Wall Street capped a day of listless trading on Thursday with a late-afternoon pullback led by technology companies that left the major stock indexes in the red.

The S&P 500 fell 0.4 per cent. The benchmark index, which had been up by 0.4 per cent, was weighed down by losses in Apple, Microsoft and other huge tech companies even though most of the stocks in the index rose. Those losses outweighed gains in banks, industrials and other sectors.

Small-company stocks bucked the trend and continued to rally, a sign that investors are feeling more optimistic about the economy.

– With AP