Modest returns signal end of golden run

  • 23/12/2015
Modest returns signal end of golden run

By Sophie Boot

New Zealand's benchmark stock index is heading for its smallest annual gain in four years, in a year led by low interest rates rather than strong company news.

The benchmark NZX 50 Index rose 11.1 percent so far this year, slowing from last year's 18 percent gain. In 2013, the market grew 16 percent; in 2012, 25 percent.

Late runs ensured A2 Milk Co and Chorus were among the top 10 performers on the benchmark index in 2015. Milk marketer A2 Milk soared 197 percent to trade recently at $1.72 as strong demand for infant formula in China and sales in Australian, some of which has funnelled into China via the 'grey market', drove up dairy related stocks across the Tasman.

Chorus is heading for a 43 percent annual gain, having surged this month after the Commerce Commission ruled that the network operator can raise the regulated price it charges for access to its copper lines, prompting the company to lift its earnings guidance. It last traded at $3.82.

The weaker New Zealand dollar, which has fallen about 12 percent in the past 12 months to trade recently at 68.05 US cents, has been lucrative for companies with international currency exposure, who have gained significantly when translating overseas income back into the local currency.

New Zealand Refining climbed 67 percent to trade recently at $3.69, having returned to profit in its first half as a weaker kiwi dollar and a sharp drop in oil prices helped widen the company's refining margin.

Nuplex Industries' shares have gained 58 percent this year and reached $4.71, the highest since early 2009.

Ebos Group, which gets 81 percent of income in Australia, climbed 48 percent.

The decline in the New Zealand dollar also helped make New Zealand a better priced holiday destination, helping drive up Auckland International Airport shares by 27 percent this year, and Air New Zealand by 18 percent.

The worst performer on the benchmark has been Orion Health Group, one of 2014's IPOs, which has fallen 46 percent this year to $3.13. Orion reported a wider first-half loss of $27 million in November, after a $60.8 million loss for the year to March 31.

Sky TV has dropped 26 percent to $4.47, as the company battles to retain customers against the rise of on-demand streaming services such as Netflix.

Across the S&P/NZX All Index, Trilogy International is likely to top the market, climbing 303 percent to $2.90. Manuka honey health products maker Comvita rose 123 percent to $8.25.

The stock market has seen four IPOs this year, compared to the 12 in 2014, and six new companies have listed, down from 16.

Of 2014's 12 IPOs, just four are trading above their IPO price - Vista Group International, Gentrack Group, Scales Corp, and Genesis Energy, though Genesis's stock is currently down 11.5 percent for the year.

The worst performer of 2014's IPOs has been Intueri Education Group, which has fallen 78 percent this year to 57 cents, making it the second-worst performer across the All Index.