A2 Milk (ASX:A2M) share price tumbles on NZ recession fears

The A2 Milk Company Ltd (ASX: A2M) share price fell 2.54% today after New Zealand’s GDP output for the December quarter fell by 1.0%.

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New Zealand $10 note being squeezed by an orange string to show recession

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The A2 Milk Company Ltd (ASX: A2M) share price fell 2.54% today after New Zealand’s GDP output for the December quarter fell by 1.0%, according to the New Zealand government. A Reuters poll of analysts had predicted our trans-Tasman neighbour’s economy would lift by 0.1% in the quarter.

New Zealand’s GDP for the year fell by 0.9%. The fall is leading many to worry a second technical recession is imminent. A technical recession is defined as 2 consecutive quarters of negative GDP growth. Many economists are tipping a second contraction this quarter, according to Bloomberg.

Unlike in rugby, the Australian economy is beating its antipodean counterpart. In Australia, GDP rose by 3.1% in the quarter but fell by 1.1% for the whole of 2020.

According to the New Zealand Herald, the lethargy of New Zealand’s vaccine rollout, impending threats of lockdown at minor COVID outbreaks, and the ongoing international border closure are all worrying investors.

A2 Milk share price takes a hit, and it’s not alone

The A2 Milk share price is down 2.54% today. At the time of writing, shares in the dairy producer are trading at $8.43. The company has been particularly hard hit by COVID restrictions — selling its infant baby formula to the lucrative daigou market is its proverbial cash cow.

Just yesterday, the company became embroiled in a bitter dispute with its ex-CEO, Jane Hrdlicka, over comments she made about her departure.

A2 Milk shares have lost 47.2% over the last 12 months.

While the A2 Milk share price did take a beating, it’s not the only Kiwi-based company that did. The 5 largest New Zealand companies by market capitalisation are all trading lower today. These companies are Xero Limited (ASX: XRO), Fisher & Paykel Healthcare Corp Ltd (ASX: FPH), Meridian Energy Ltd (ASX: MEZ), Auckland International Airport Limited (ASX: AIA), and A2 Milk.

For comparative purposes, the S&P ASX 200 Index is down 0.6%.

Xero, a business and accounting software company, is down 1.57%. It’s currently trading at $117.75. It is New Zealand’s largest company with a market cap of $17.3 billion. If an investor bought shares in the company 1 year ago, they would be sitting on a tidy 76.8% return on investment (ROI). However, the share price is down 25.5% from its 52-week high, which it achieved in January 2021.

The Fisher & Paykel share price is down 0.87%. Shares in the company are swapping hands for $28.62, presently. The share price is only 10.1% higher from this time last year, but 18% lower than its 52-week high.

Meridian Energy is trading 4.49% lower today, sitting at $5.11 at the time of writing. The ROI in Meridian from 12 months ago is 24.63%. Yet in January this year, shares in the company reached a 52-week record of $9.33. The share price has gone down 45.2% since then.

Finally, the Auckland Airport share price is 0.56% lower at $7.17. From one year ago (when COVID became a global pandemic), shares in the company have gained 43.4%. It is, however, still valued 15.3% lower than compared to the first trading day of 2020.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia owns shares of Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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