Sharemarket falls as heavyweight Fisher & Paykel Healthcare weakens

Tuesday, 23 February 2021

Border workers were the first people in New Zealand to be vaccinated against Covid-19, in Auckland on February 20, 2021.

The sharemarket fell as optimism about the rollout of Covid-19 vaccines globally weighs on Fisher & Paykel Healthcare which has seen huge growth in sales of its medical devices during the pandemic.

The benchmark NZX 50 Index fell 0.3 per cent, or 37.399 points, to 12,388.84 on Tuesday.

Fisher & Paykel Healthcare, the largest stock on the market, fell 4.1 per cent to $30.57.

“It’s been a weak day with Fisher & Paykel Healthcare, which is a major part of the index weighting,” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

Fisher & Paykel Healthcare has benefited from the Covid-19 pandemic but its sales growth may soften as vaccines become widespread.

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“The vaccine rollout throughout the world is happening and countries may be opening up, not immediately obviously, but there is light at the end of the tunnel and I think that is what showing through with Fisher & Paykel Healthcare because it has obviously been a beneficiary of Covid.”

Investors are also eyeing an increase in bond yields and the prospect of rising inflation, which is prompting them to reduce their holdings of utility stocks, McIntyre said.

New Zealand’s 10-year swap rate, which determines what companies pay for their debt, has risen “dramatically” to 1.72 per cent, from 0.5 per cent in October, he said.

“The New Zealand market is chokka full of infrastructure-related companies which do tend to have longer dated debt and are vulnerable to movements in that longer end of the bond market,” he said.

Electricity retailers were weaker, including Mercury, down 3.6 per cent to $6.15, Genesis Energy down 2.3 per cent to $3.44, and Meridian Energy down 0.2 per cent to $5.62.

“Rates have been so low, and inflation is going to come back at some stage, it will be interesting to see how the Reserve Bank talks about that this week,” he said.

The Reserve Bank reviews the official cash rate on Wednesday.

Several companies reported their profit results, including retirement village operator Summerset Group, which posted a bumper profit in the 2020 year of the pandemic of $230.8 million boosted by a rebound in the value of its retirement village units.

PGG Wrightson increased its first-half profit 41 per cent and paid a 12 cent dividend to shareholders.

Its underlying profit, excluding property revaluations, was $98.3m, just ahead of guidance, and 7 per cent lower than in 2019.

Summerset rose 1.8 per cent to $12.79.

Auckland electricity lines company Vector posted a 26.8 per cent rise in first-half net profit to $102.1m and maintained its dividend of 8.25 cents.

Vector shares fell 3.6 to $4.07 although McIntyre said there was only very light volume traded.

“They announced some good growth in that first half of their result so that was encouraging, and they maintained their dividend which I think is a real key for investors in this market currently, which is income hungry,” he said.

PGG Wrightson rose 6 per cent to $3.56 after the farm supplies business posted a 41 per cent rise in first-half profit to $18m and said it was well-placed to deliver on its 2021 full-year profit guidance of around $57m. It will pay shareholders a 12 cent dividend.

Sky Network Television fell 4.4 per cent to 17.4 cents after the pay-TV company reported that it had more than trebled its net profit to just under $40m for the six months to the end of December, in line with an earnings upgrade it posted in February.

Fishing company Sanford fell 4.7 per cent to $4.30 following a court ruling that it had to forfeit a $20m fishing vessel after it admitted trawling in a protected fishing area off the coast of Stewart Island.

The Christchurch District Court ordered the company to forfeit the San Waitaki – a 64m deep water stern trawler with a processing factory and freezer facilities on board – to the Crown. The company has also been fined $36,000.

Elsewhere, Asian shares were mostly higher on Tuesday despite a sell-off of shares in technology companies on Wall Street.

Japanese markets were closed for a national holiday. South Korea's Kospi slipped 0.4 per cent in morning trading to 3,066.60. Australia's S&P/ASX 200 gained 0.6 per cent to 6,821.70. Hong Kong's Hang Seng jumped 1.2 per cent to 30,681.83, while the Shanghai Composite rose 0.3 per cent to 3,653.62.

“Thankfully, for society at large, there is more optimism than fear today, with vaccines showing scientific results on the ground that validate efficacy and effectiveness over transmission, leading the world back to normality starting soon,'' said Stephen Innes, chief global markets strategist at Axi.

Although the world's economies have been battered by the coronavirus pandemic, the deployment of Covid-19 vaccines is raising hopes for a recovery from the pandemic.

– With AP