Sharemarket weakens as investors eye recovery, ditch utility stocks

Wednesday, 24 February 2021

Utility stocks are falling out of favour as investors anticipate an economic recovery from Covid-19.

The sharemarket fell as investors turn their focus to economic recovery from Covid-19, hurting stocks that have benefited from the pandemic and the low interest rate environment that ensued.

The NZX 50 Index fell 0.9 per cent, or 106.423 points, to 12,282.42 on Wednesday.

As investors start to see a light at the end of the Covid-19 tunnel with the global roll-out of vaccines, money is flowing out of utility stocks like energy and telecommunications companies and towards the higher, steadier stream of income that bonds provide and into growth stocks.

“We are still seeing that booming underlying macro thematic,” said Sam Dickie, a senior portfolio manager at Fisher Funds. “We are seeing inflation and interest rates going up globally and companies that are affected by that are down and companies that are beneficiaries of that are typically up.”

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The prospect of theatres re-opening buoyed the shares of Vista Group, whose software is used by major global cinema chains.

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Contact Energy fell 2.7 per cent to $6.77, Meridian Energy dropped 2.1 per cent to $5.50, Mercury slid 0.2 per cent to $6.14, TrustPower weakened 0.7 per cent to $8.21, Genesis Energy edged down 0.6 per cent to $3.42, and Spark shed 0.4 per cent to $4.66.

Delegat Group executive chairman Jim Delegat said the winemaker had an outstanding first half, lifting profit by 25 per cent.

Dickie said there were opportunities in the market for investors who focused on long-term fundamentals, as macro trends can distort values.

He cited Auckland International Airport, typically an interest-rate sensitive stock, which rose 2.2 per cent to $7.30 as investors bet its decline was overdone.

Dickie said investors were selling shares in companies that have benefited from Covid-19 and buying those that benefited from re-opening.

Fisher & Paykel Healthcare, which has seen huge growth in sales of its medical devices during the pandemic, fell 3.5 per cent to $29.50.

Vista Group, whose software is used to operate major international cinema chains, jumped 7.1 per cent to $1.66, after New York City Governor Andrew Cuomo announced the city’s theatres, which have been shut down for nearly a year because of Covid-19, would be able to re-open on March 5, albeit with strict restrictions. New York is the second-largest movie-going market in the United States after Los Angeles.

Among companies reporting their results, winemaker Delegat Group jumped 5.9 per cent to $15.20 after posting a 25 per cent rise in first-half profit to $43 million.

Dickie said Delegat had a strong result, with its earnings between 15 and 20 per cent more than expectations and the guidance for full-year profit of $67m seen as conservative.

Michael Hill gained 1.3 per cent to 77 cents after the jewellery retailer said first-half profit surged 82 per cent A$39m (NZ$42m).

Dickie said there was little reaction in the sharemarket to the Reserve Bank keeping the benchmark interest rate at a record low 0.25 per cent.

Shares fell in Asia on Wednesday as investors weighed the possibility that inflation might prompt central banks to adjust their ultra-low interest rate policies.

Hong Kong led the decline, losing 2 per cent to 30,015.49. Tokyo's Nikkei 225 shed 0.8 per cent to 29,923.82, In Seoul, the Kospi edged 0.2 per cent lower, to 3,065.56. Australia's S&P/ASX 200 lost 0.9 per cent to 6,778.40. The Shanghai Composite index gave up 1.1 per cent to 3,596.04.

– With AP