South Island Index heats up after winter decline
South Island listed firms regain losses from preceding two quarters to end 2014 at record high
The Deloitte South Island Index achieved strong growth during the last quarter of the calendar year, a welcome turnaround after experiencing two consecutive quarterly declines for the first time in five years last winter.
South Island listed firms increased their market capitalisation by $691.2 million (6.2%) in the quarter ended 31 December with the Index ending the year at its highest recorded point since its inception in 2007.
Scott McClay, a corporate finance partner in Deloitte’s Christchurch office, says that the Index’ return to positive territory is a pleasing result and reflects the confidence of investors in the market.
“During the September 2014 quarter we saw the smaller companies stepping up and providing strength to the Deloitte South Island Index as the largest companies suffered from profit taking and global trends following a remarkable period of growth. In the latest quarter the four largest companies on the Index collectively grew 12.4%,” says Mr McClay.
“This positive investor sentiment hopefully positions the Index for continued growth as we move into 2015.”
The Deloitte South Island Index’ 6.2% quarterly gain outperformed international benchmark indices with the NZX 50 Capital Index up 5.0%, the Dow Jones up 4.6% and the ASX All Ords up 1.7% during the quarter to 31 December 2014.
The Deloitte South Island Index increased by $814.3 million (7.4%) during the year to 31 December 2014. This performance puts the Index in the middle of the pack compared to the yearly performance of benchmark indices in percentage terms. The NZX Capital Index gained 12.6%, the Dow Jones gained 7.5% and the ASX All Ords only gained 0.7% during the year to 31 December 2014.
The Index’ top performer for the quarter, in terms of the dollar value of their market capitalisation, was Meridian Energy. Meridian grew by $414.3 million (23.1%) during the quarter to 31 December 2014.
“No doubt some of this movement was due to residual post-election relief which reduced the risk of widespread wholesale market reform. And the graduation of the company from inclusion in the MSCI Small Cap index to the MSCI Global Standard Index in November, the Commerce Commission’s approval of the sale of subsidiary Arc Metering Services and the completion of the Mt Mercer wind farm in Australia all combined to boost investor confidence in Meridian during the quarter,” says Mr McClay.
Chatham Rock Phosphate had the largest percentage growth in market capitalisation during the quarter at 104.4%, in part due to raising an additional $3.5 million to support losses as they await marine consents to begin mining the Chatham Rise seabed.
The biggest decline for the quarter came from Kathmandu Holdings, which tumbled $201.0 million (31.6%) in market capitalisation, in part due to disappointing gross margins from the first part of their annual Christmas promotion and a pessimistic outlook for their current year results.
Four of seven sectors in the South Island Index posted positive movements in the quarter to 31 December 2014. The Energy & Mining sector was the leading performer with $421.1 million (22.4%) growth, while the Property sector gained a substantial $360.8 million (8.6%).
The Retail, Biotechnology and Primary sectors each lost value during the quarter to 31 December 2014. The Retail sector saw the largest decline, down 30.2% on the back of Kathmandu Holdings disappointing quarter.
To see the full Deloitte South Island Index quarterly report, go to www.deloitte.com/nz/southislandindex