Fletcher Building Limited is a huge New Zealand and Australian construction firm. It has a market capitalisation of $5,546,756,417. Over the past few months, Fletcher Building Ltd has seen an increase in share price with a low of $5.51 in early April to a high of $7.13 in late July. Early this month the share price was hovering just over $6. Now as at writing this, the share price is at $6.35. This is a 2.36% increase in share price on the NZX in just a single day for a multi-billion dollar company. If you consider the large market capitalisation of Fletcher Building Limited, you can clearly see the volatility of the construction market.
So why has [NZX:FBU] had such a dramatic share price increase in a single day?
This share price jump could be attributed to the new Chief Health and Safety Officer, Wendi Croft, appointed at the start of the week. Investors may have seen this as a positive change.
In New Zealand, the Health and Safety at Work Act passed in 2016 (HSW Act). This Act has the aim to reduce workplace injury and deaths by 25% by 2020. This is a positive ‘Corporate Social’ move, improving the brand image of Fletcher Building Ltd.
The problem with the property market
This recent move by Fletcher Building Limited to show their commitment to safe construction could have helped bump their share price up. However, this could be a hollow move considering the volatility of the property market in Australasia. There is a looming bubble predicted by many experts and this uncertainty in property flows onto Fletcher Building Limited as they are a construction company.
Here at Money Morning New Zealand we’ve analysed the New Zealand property market and looked at the risk of a crash frequently. We’ve argued that the decade and a half long boom in property prices has left the market ripe for a fall…and put many Kiwis’ nest eggs at risk. You can read more from us on the property market here.
So where could Fletcher shares go from here?
Judging from the high-risk property market in its current state, Fletcher Shares could remain just as jumpy. Just this year between February and April we’ve seen over a 30% decrease in the share price of Fletcher Building Ltd, a multi-billion dollar company. It’s fair to say that the next moves of Fletcher Building Ltd’s share price are highly unpredictable. Given the current state of the property market, it could be a rocky road ahead.
Editor, Money Morning New Zealand
Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.