South Island companies overcame an anxious start to 2016, ending the first quarter of the year on another new record high.
Deloitte South Island Index reports that fears of a global equity market turndown impacted local markets in the initial weeks of the year, however, these fears waned over the quarter as South Island listed firms built on the strong growth of the 31 December 2015 quarter.
The 33rd edition of the Deloitte South Island Index, for the quarter to 31 March 2016, saw the Index grow by $1,124.6 million (6.8 percent) in terms of market capitalisation - this pushed the value of the Index to yet another new record high.
Scott McClay, a corporate finance partner in Deloitte’s Christchurch office, says that despite the positive headline the result masks an underlying mixed bag of performances.
“All sectors, except property, contributed to the increased value of the Deloitte South Island Index,” he says.
“However, the movement was evenly split between increases and declines on an individual company basis.
“The jumbled performances affected businesses of all sizes in all sectors, with the positives outweighing the negatives.
“It is a continuation of the volatility of 2015 where Mainland companies demonstrated their ability to successfully negotiate challenges that arise.”
McClay says the Deloitte South Island Index’s 6.8 percent quarterly gain outperformed the benchmark indices with the S&P/NZX 50 Capital Index growing by 5.2 percent, the Dow Jones gaining 1.5 percent and the ASX All Ords falling by 3.6 percent during the quarter to 31 March 2016.
“Even with the mixed performances South Island listed firms continue to outperform the other major indices we track, which is a recurring trend since the inception of the Deloitte South Island Index,” McClay adds.
“This is helped by the eclectic combination of traditional, innovative and large mainstream companies on the Index.”
The Index’s top performers for the quarter, in terms of the dollar value of their market capitalisation, were Meridian Energy (up $589.5 million or 9.6 percent), EBOS Group (up $522.0 million or 25.1 percent) and Scales Corporation (up $92.2 million or 26.8 percent).
As McClay explains, the biggest declines in the dollar value of their market capitalisation for the quarter came from Ryman Healthcare (down $75.0 million or 1.8 percent), Heartland Bank (down $51.9 million or 8.3 percent) and Skellerup Holdings (down $44.3 million or 15.2 percent).
During the first quarter, six of the seven industry sectors in the Deloitte South Island Index posted positive movements in the quarter to 31 March 2016.
McClay says the best performing sector for the quarter was the Biotechnology sector, gaining 20.2 percent, just surpassing the Manufacturing & Distribution sector’s growth of 20.0 percent.
The Biotechnology sector’s result was led by Pacific Edge growing $56.5 million (28.9 percent) in market capitalisation, with the company announcing the launch of its third new product, Cxbladder Monitor.
Meanwhile,the Manufacturing & Distribution sector’s excellent performance was driven by EBOS Group‘s increase in market capitalisation.
In addition, the Energy & Mining, Retail, Primary, and Other sectors each gained value during the quarter to 31 March 2016 growing 9.6 percent, 4.7 percent, 3.4 percent and 0.03 percent respectively, while the Property sector declined 1.4 percent.