Sharemarket falls as pessimism creeps into A2 Milk; tourism stocks decline

Monday, 26 July 2021

The sharemarket fell, led by A2 Milk amid concerns its sales may be impacted by Covid-19 lockdowns in Australia and increased regulation in China – its largest market.

The benchmark S&P/NZX 50 Index slid 63.086 points, or 0.5 per cent, to 12,673.23 on Monday.

Specialty milk marketing company The a2 Milk Company dropped 6.4 per cent to $6.68.

“The main story on the market today is A2,” said Hamilton Hindin Greene investment adviser Grant Davies. “There is some concern related to lockdowns in Australia and around potential regulation in China. Both of those are conspiring to see a little bit of pessimism creep into A2’s share price.”

Investors are concerned about the outlook for A2 Milk.

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Australia is struggling with an outbreak of the highly infectious Covid-19 delta variant and there was concern the lockdowns could damage informal cross-border sales of A2 Milk’s infant formula to China, Davies said.

Investors were also concerned about the potential for increased regulation in China, he said.

“Quite a few Chinese industries and sectors are coming under a bit of regulatory pressure and if that flows through to milk formula that is going to have a big impact on A2,” he said. “Fear around that is driving most of the selloff.

“The tech sector has been sold off over the past few months and education stocks also sold off as well. People can draw a bow that therefore the regulatory risk in China is a little bit elevated to where it was.”

Travel stocks declined after Prime Minister Jacinda Ardern announced on Friday that the trans-Tasman bubble would be paused for eight weeks in an effort to keep the delta variant out of New Zealand.

Air New Zealand fell 1.3 per cent to $1.485. Auckland International Airport dropped 1.4 per cent to $7.05. Campervan company Tourism Holdings slipped 0.4 per cent to $2.37. Corporate travel technology company Serko edged down 0.5 per cent to $7.51.

Asian shares were mixed on Monday after stocks rallied to records on Wall Street on Friday, with the Dow Jones Industrial Average closing above the 35,000 level for the first time.

Tokyo advanced after a four-day weekend as the Olympic Games began, a year late. Benchmarks fell in Hong Kong and Shanghai but rose in Sydney.

– With AP