New Zealand shares fell, paced by Fletcher Building, Kathmandu and Michael Hill International as the kiwi rose to a five-year high against the Australian dollar, weighing on companies with business across the Tasman.
The NZX 50 Index fell 22.408 points, or 0.5%, to 4576.796. Within the index, 28 stocks fell, eight rose and 14 were unchanged. Turnover was $104 million.
The kiwi dollar extended its gains against its Australian counterpart to the highest since November 2008, recently trading at 87.17 Australian cents, after Reserve Bank governor Graeme Wheeler said interest rates will need to rise next year as inflation pressures from housing and construction spill into the broader economy.
Fletcher, which gets about 43% of revenue in Australia, fell 2.8% to $8.27. Brokerage CLSA has cut Fletcher to 'underperform' because of slow progress with the rebuild of Christchurch and a more moderate Australian housing recovery, the Australian Financial Review reported.
Kathmandu, the outdoor equipment chain that counts Australia as its largest market, fell 2.6% to $2.68 and Brisbane-based jeweller Michael Hill fell 1.6% to $1.27.
The strong kiwi cross rate "will hurt, there's no doubt about it," said David Price, a broker at Forsyth Barr. In the upcoming earnings season, those companies with Australian exposure will be showing the effects of "a double whammy of an Australian economy that's struggling" and the currency headwinds.
Fonterra Shareholders' Fund declined 2.8% to $7.27 after the world's largest exporter of dairy products said earnings would miss its forecast by about 7.3% because of the drought in New Zealand and intense competition in Australia.
A2 Corp, which markets milk with a protein variant said to have health benefits, fell 1.5% to 67 cents, and Synlait Milk declined 0.7% to $2.78, having soared from its$2.20 IPO price since listing this week.
Guinness Peat Group climbed 7.8% to 55 cents and was the biggest gainer on the NZX 50 as 46.5 million shares changed hands.
Livestock Improvement Corp, the dairy genetics and bull semen company whose shares can only be traded by farmers, ended the day up 0.3% to $5.82 after posting a 3% drop in annual profit because its elite breeding bulls didn't increase in value as much as in the previous year.
Infratil fell 0.8% to $2.47 after its half-owned Z Energy released its prospectus for a $900 million IPO.
Among the best performers on the exchange this year, Xero slipped 0.2% to $17.90 and Ryman Healthcare fell 0.3% to $$7.08, having reached a record the previous day. Ebos Group was unchanged at $10.45, the record high it reached yesterday.
Telecom declined 0.4% to $2.345. New Zealand Oil & Gas was unchanged at 83 cents after the company said it was giving up its Kakapo permit off the South Taranaki after failing to find a partner to share the costs.