Air New Zealand shares slide, coronavirus continues to weigh heavily on NZX

The New Zealand sharemarket dived again on Monday, as jitters about the depth of the coronavirus' impact continue to cause concern across economic markets.

By market close the NZX was down 2.2 per cent, recovering some ground from an earlier 3 per cent dip. The market looked set to extend last week's near 7 per cent drop.

The Australian sharemarket was also not immune, with the S&P/ASX-200 index down 0.7 per cent after an earlier decline of more than 2 per cent.

Both currencies were weaker, with the New Zealand dollar slipping briefly to US61.80c earlier this morning before recovering to US62.46c.

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Air New Zealand saw $213 million wiped from its value as its shares fell to $2.08, from $2.27 on Friday. The airline quickly sold 1000 domestic airfares it had on sale on Monday morning at $9 each to try address softening demand as a result of coronavirus. 

Worldwide, more than 86,000 people have contracted the coronavirus strain Covid-19, including one person in New Zealand. There have been more than 2900 deaths.

Shane Solly of Harbour Asset Management said world markets were largely focused on Covid-19 but there were other factors also at play.

These included uncertainty about the Democratic presidential nomination, a sell-off by several global funds who had gotten into shares to raise their returns, and a hangover from US-China trade wars late last year.

"And I think the other thing domestically, we just come through a reporting season which was a bit soft around the edges, hasn't delivered a fantastic positive beat in terms of expectations". 

Sharemarkets around the world lost over $5 trillion in value last week as hopes were dashed that the virus could be contained to China.

The MSCI, an index of global stocks, suffered its biggest weekly fall since the 2008 global financial crisis, and Wall St has been down for seven days straight, with the Dow Jones industrial average losing nearly 3,600 points over the week.

Solly noted that China's infection rate was slowing but until the same happened in the West, markets would be volatile.

As to when profit-hunters might start swooping on cheaper shares, Solly said there were some people actively investing selectively at the moment, including his company, but he advised most investors to take advice.

"We've got a roadmap in the form of what's happened with SARS [Severe Acute Respiratory Syndrome] and H1N1 [swine flu], but as with all road maps, things change and this is a different environment. This will be different in how it evolves. 

"But capital markets do recover, there's stimulus that's starting to come through, providing a cushion, so I think for a longer term, patient investor, yeah, it's maybe an opportunity. But everyone has to think about their tolerance for risk."

Shares in blue-chip stock Fisher and Paykel Healthcare were down 1.5 per cent, or 39c, at $25.39. The company has cancelled its investor day on Tuesday, as it continues to focus on the virus.

The company, which makes respiratory devices, recently raised its its net profit guidance by $5 million, to $260m to $270m, partly because of increased demand from China.

Managing director Lewis Gradon also said recently that he did not anticipate "any significant impact on supply to our existing customers" at this stage.

"Many of our suppliers have expedited the supply of raw materials to us as a manufacturer of essential medical devices, and we are deeply grateful for that," he said.

In the US, moves by the Federal Reserve to calm the market appeared to initially fall on deaf ears. Chairman Jerome Powell vowed to "act as appropriate" to defend the US economy from the outbreak, a comment many analysts interpreted as a pledge to cut interest rates. 

The coronavirus has now spread to about 60 countries, including New Zealand as of Friday. 

One of the first New Zealand companies to report on Monday was logistics company TIL, which booked an interim loss of $2.2 million due to underperformance in its freight division.

TIL noted the start of its second half had been adversely affected by the impact of the virus on China's production, affecting imports and freight flows in a number of its sectors such as logging.

"Management will continue to monitor the situation closely," it said.