Market close: NZ shares fall as Covid fears cast pall

Air NZ dropped 7.9 per cent to $1.29. Photo / Brett Phibbs

New Zealand shares joined a global sell-off as fears the Covid-19 pandemic has a new lease of life weighed on the outlook for company earnings. Air New Zealand dropped as trans-Tasman rival Qantas Airways announced a major restructuring.

The S&P/NZX 50 Index fell 155.05 points, or 1.2 per cent, to 11,124.36. Within the index, 40 stocks declined, nine rose, and one was unchanged. Turnover was $184.7 million, of which Fisher & Paykel Healthcare accounted for $55.4m.

Stock markets across Asia followed Wall Street lower as the growing number of new Covid cases has investors on edge that the global economic pain will be longer than they had hoped, keeping a lid on company earnings.

Those concerns are becoming more acute domestically with the Australian state of Victoria recording 33 new cases today, its biggest increase in more than two months. Australia's S&P/ASX 200 Index was down 2.2 per cent in late trading.

"Increasing cases on the international scene have given rise to fears of an increase in lockdowns and future lockdowns, and that doesn't help businesses one little bit," said Grant Williamson, a director at Hamilton Hindin Greene.

Companies with exposure to Australia led the market lower, with Kathmandu Holdings down 8.1 per cent at $1.14, Fletcher Building falling 7.1 per cent to $3.56, and Heartland Group declining 2.4 per cent to $1.23.

Ryman Healthcare, which has properties in Melbourne, dropped 3.2 per cent to $12.96.

Qantas unveiled its response to the situation in Australia, announcing plans to lay off at least 6,000 staff in a plan to cut costs by A$15 billion ($16b) over three years. Australia's national carrier is also raising up to A$1.9b to strengthen its balance sheet.

Air NZ dropped 7.9 per cent to $1.29 and was the day's most traded stock with 7.6 million shares changing hands. NZ's national carrier has already laid off 4,000 staff and plans to keep shrinking its workforce as it rebuilds towards profitability by 2022.

Williamson said the moves by Qantas aren't unexpected given the issues facing aviation.

The dual-listed lenders were also off the pace, with Australia & New Zealand Banking Group down 3.7 per cent at $19.60 and Westpac Banking Corp falling 3.6 per cent to $18.75.

Tourism Holdings fell 3.7 per cent to $1.85. After trading closed, the campervan rental operator said it didn't need to raise new equity after reaching an agreement with its lenders for debt funding of up to $225m. The company said it expects to report an underlying profit of between $17.5m and $19m, excluding impairments of its Togo exit, in the year ending June 30.

Refining NZ decreased 2.6 per cent to 76 cents after saying it plans to simplify its operations and focus on supplying fuel into Northland and Auckland. It's also weighing up a staged transition to an import terminal, something shareholder Z Energy is in favour of. Z shares fell 1.4 per cent to $2.75.

Spark New Zealand fell 3.3 per cent to $4.42, F&P Healthcare declined 0.5 per cent to $30.91 and A2 Milk was up 0.2 per cent at $19.43.

Skellerup Holdings posted the day's biggest increase, up 2.4 per cent at $2.17, after saying it expects to report an annual profit of more than $28m in the 12 months ending June 30. The rubber goods maker said customer demand was recovering, and that it has repaid the NZ government's wage subsidy after its sales decline wasn't as severe as feared.

Genesis Energy rose 2.3 per cent $3.08 and Meridian Energy edged up 0.3 per cent to $4.90.

Outside the benchmark index, Green Cross Health fell 3.8 per cent to $1.02 after the company said it won't pay a final dividend. Weaker earnings were due to impairment charges and accounting rule changes.

Williamson said investors had low expectations for company earnings, but were watching balance sheets to ensure firms can withstand the downturn.