Ebos block trade rattles index; NZX 50 drops 0.7%

Share volumes amounting to $243.9 million changed hands across the main board on Tuesday as the S&P/NZX 50 fell 0.74% to 12,327.23 points.  

Just ahead of close, Salt Funds director and portfolio manager, Matthew Goodson, said to expect a lot of movement as nearly $1b was added to Ebos’ weighting in the NZX 50.

On Thursday last week, longtime-Ebos shareholder, Sybos, sold nearly 27m shares for $949m.

'Up-weighted'

Goodson said that because Sybos was viewed as a "strategic shareholder", the stock wasn't available to trade and thus did not contribute to the company's weight in indices.

“It will be up-weighted in the various FTSE and NZX indices and the MSCI index that it's in on the close because all the stock that was sold down by Sybos wasn't included previously in Ebos’ index weight.”

More than $68m of Ebos shares were traded as the firm's shares jumped 2.7% to $38.05.

Given Ebos’ size in the NZX 50, Goodson expected it to have a "reasonable impact" on the day’s trading.

“So the other side of it is that there'll be modest downgrades spread over all the other index constituents,” Goodson said. “Although generally, a lot of them will probably be too small to have a major impact.”

The largest index constituent, Fisher & Paykel Healthcare, rose 0.25% to $36.59 on volumes amounting to $35.2m.

The rest

The a2 Milk Company’s shares tumbled 5.41% to $8.40 during the day.

Goodson did not attribute the fall to anything beyond pointing out the dual-listed stock was down on the Australian Securities Exchange (ASX) on Monday, while trading was closed for the King's Birthday in NZ.

“There was no real news for the fall, but it did have a reasonable fall yesterday in Australia. So it's just a bit of catch-up."

The dairy company’s shares remain over 30% up in the year-to-date after they surged in February on an improved outlook.

Cancer diagnostics company Pacific Edge’s shares jumped 15.85% to 9.5 cents after the small-cap firm announced it had successfully raised $16m from institutional shareholders, exceeding its target by $1m.

The placement, priced at a premium of 10 cents per share (CPS), was completed on May 30.

“The fact that they were able to get their desired raise away at a premium suggests that there is optimism out there,” Goodson said.

The company now plans to launch a $5m share purchase plan (SPP) for eligible retail investors at the same price in July or early August, with potential for oversubscriptions. 

At its annual general meeting (AGM), media company NZME named former National Party minister Steven Joyce as the new chairman and Jim Grenon as a director.

Despite shares rising 1.69% to $1.20, Goodson said the trading update in the investor presentation was "a touch on the light side".

"They have reiterated earnings will be higher this year than last year, which is what the market expects. But it sounds like they're going to get there via cost-cutting rather than revenue growth because this economy of ours is struggling to get off the ground."

General trends

Having almost eked back this year's losses by mid-May, the NZX 50 is now down 4.3% since May 15 and nearly 6% so far this year.

“All markets around the world were strong last month despite a very sharp rise in bond yields," Goodson said. "Perhaps that overall market strength was a touch surprising.”

He added the economy is "going to be treating water" until we see some "firm signs" that the economy is improving.

"We've seen a reasonable amount of Reserve Bank of New Zealand [RBNZ] easing that will increasingly feed through," he said. "But it's certainly looking more like the end of the year rather than mid-year before it starts to have a noticeable impact."

RBNZ chief economist Paul Conway has said the Monetary Policy Committee supports lower cash rates despite debate about whether it has dropped its easing bias.