Market close: Power companies short circuit rally, take stocks lower

Meridian's share price fell sharply on the sharemarket.

Weakness in the big power companies helped drive the sharemarket lower while investors took to the sidelines in the leadup to the release of key US labour data for September.

The S&P/NZX50 index ended down 22.07 points, or 0.2 per cent - well off its low for the day but still failing to build on Thursday’s 74-point rally.

Turnover was worth $65.4 million and there were 58 gains and 68 falls on the main board.

Harbour Asset Management portfolio manager Shane Solly said the market over the week had been on the receiving end of “choppy” data out of the US, which had made for volatile trading.

“Some data supports an ‘on hold’ stance from the Fed, while others have backed the case for rate hikes,” he said.

“For the markets, it’s very much the old adage: No fun until the Fed is done.

“Until central bank rates have peaked, the capital markets are going to be choppy, and people have been quite wary,” he said.

The Fed’s next decision is due in early November.

Among power companies, Contact Energy fell 9 cents to $7.98 - a five-month low - while Meridian dropped 6.5 cents to $5.17.

Contact has had a run of bad news in recent weeks. First, it announced that one of its fast-start gas peakers would be out of action for about 18 months.

Contact then said the start-up of its Tauhara geothermal plant had been delayed by three months to the March 2024 quarter due to commissioning issues.

In addition, Solly said the power sector had been under pressure.

“There is a bit of speculation out there as to whether wholesale prices will hold as well as they have, given the increase in electricity generation that is coming online and as we face the possibility of lower demand resulting from a softening economy,” Solly said.

Some retirement village stocks were also weak.

Market leader Ryman fell by 5 cents to $6.04 while Summerset lost 4 cents to $9.71, despite Auckland’s house prices showing signs of recovery after a one-and-a-half-year slump.

The CoreLogic house price index published this week showed a 0.4 per cent increase in Auckland property values in September - the first growth since March 2022.

Retirement village stocks have been under downward pressure as the sector normally has close ties with house price trends.

Vista Group, which specialises in providing software solutions for the cinema industry, gained 1 cent to $1.43 but is still down by 11.7 per cent over the last 12 months.

The tech company has been a beneficiary of the “Barbenheimer” effect - blockbusters Barbie and Oppenheimer, but box office success has so far eluded its share price.

Port of Tauranga dropped by 3 cents to $5.79 while steel distributor Vulcan recovered from early weakness to end steady at $8.25.

Briscoe Group continued to feel the impact of a depressed retail sector, falling 6 cents to $4.51.

On the plus side, Skellerup gained 5 cents to $4.80 and kiwifruit company Seeka gained 11 cents to $2.51.

Air New Zealand, which announced that it had extended its Covid-19 credit expiry by two years, ended steady at 72 cents.

Solly said the airline’s decision highlighted that it was in a “reasonable” financial state.

Under-pressure stock Synlait gained 2 cents to $1.39 while its 20 per cent owner, a2 Milk, fell 9 cents to $4.41.

Solly said a2 Milk’s fall looked to be on the back of talk that the stock may be about to fall out of a major international share index.

Looking to next week, Summerset is due to issue a sales update and some Kiwi companies will be making presentations at a Citibank investment conference in Sydney, which may yield earnings updates.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.