New Zealand’s S&P/NZX 50 index was dragged lower by blue chip companies such as Mainfreight, Auckland International Airport and Meridian Energy as the US Federal Reserve’s focus on inflation prompted investors to prepare for rate hikes later this year. Meanwhile, Statistics New Zealand’s March quarter gross domestic product figures showed the economy started the year in good health, before the Middle East conflict and subsequent oil shock disrupted growth around the world. Fletcher Building was among the day’s gainers – which outnumbered those on the
red side of the ledger – after Forsyth Barr and UBS analysts raised their price target on the materials firm and Jefferies resumed coverage calling it a ‘buy’. And Japanese-owned meat processor ANZCO has agreed to buy the Greenlea Group for $800 million, with the deal expected to be completed in August. Back to rates The NZX50 slipped 29.67 points, or 0.2%, to 13,363.31, with 19 stocks declining, 24 gaining and seven unchanged. The S&P/NZX 20 index futures contract for June rose 0.5% to 7,631,
with 20 lots traded for a value of $153,000, while the NZX20 fell 0.4% to 7,558.41. Turnover across the main board was $151.2 million, of which Auckland Airport accounted for $20.5m as it slipped 1% to $8.55. Markets across Asia were mixed as investors digested the hawkish tilt by the Federal Reserve under the new chairmanship of Kevin Warsh, with bond traders pricing in at least one hike later this year with the US central bank firmly focused on inflation. Australia’s S&P/ASX 200 fell 0.6%
in late trading, while Japan’s Nikkei 225 jumped 1.8% and Hong Kong’s Hang Seng dropped 1.8%. “We’re in a different part of the wheel at the moment that makes equity markets go round – interest rates,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “That’s been the driver of markets, which have been choppy in Asia.” Meridian was the biggest weight on the NZX50, falling 1.7% to $5.72, with the power companies broadly weaker as Mercury slipped 1.6% to $6.75 and Contact Energy
decreasing 1.2% to $9.54. Mainfreight fell 2.8% to $62, while Air New Zealand dipped 2.2% to 44 cents. Craigs’ McIntyre said it was a mixed bag on the local market, with a small number of heavyweight companies suppressing the benchmark index. SkyCity Entertainment Group snapped a three-day rally, falling 3.7% to 51.5 cents to post the steepest decline on the day. The casino operator was the most heavily traded stock on the day with a volume of 3.2 million shares. Meanwhile, Gentrack was at the
top of the leaderboard, rising 4.1% to $3.83, while Vulcan Steel gained 3.5% to $6.19 and Vista Group International advanced 3.1% to $2.35. Fletcher Building rose 1.6% to $3.27 after Forsyth Barr and UBS analysts upgraded their target price on the materials firm, while Jefferies resumed coverage with a ‘buy’ rating and a target price of $4. Alternative yields Commercial landlords were broadly stronger, shrugging off the lift in swap rates – which makes their reliable dividends less attractive to investors – with Property for
Industry gaining 1.7% to $2.42, Vital Healthcare Property Trust gaining 1.6% to $1.91, and Goodman New Zealand increasing 1.5% to $2.09. The kiwi dollar fell to 57.95 US cents at 5pm in Auckland from 58.26 cents yesterday, with the 4.45% yield on 10-year US treasuries just above their New Zealand equivalent at 4.44%. Stats NZ data out today showed New Zealand’s economy grew 0.8% in the first three months of the year, with an upward revision of an earlier period pushing the annual expansion slightly
above expectations. Bevan Graham, economist at Salt Funds Management, said services and manufacturing were standouts, with construction a key area of weakness. He said he didn’t expect the data and decline in oil prices on the Middle East ceasefire to sway the Reserve Bank’s thinking much. “The bank has signalled a July start to the rate hiking cycle and market pricing concurs,” Graham said in a note. “But uncertainty remains high. We still have September pencilled in for the first hike.” The NZX was unchanged
at $1.44 after the stock market operator accredited CMC Markets as a new market participant. CMC is Australia’s second-biggest retail broker. Separately, the Financial Markets Authority gave the NZX a clean bill of health in its annual review of the stock market operator’s obligations. Still, the lure of trade sales remains high for private companies, with meat processor Greenlea cutting a deal to sell to ANZCO for $800m, almost 15 times its operating earnings. ANZCO’s Tokyo-listed owner, Itoham Yonekyu Holdings, was up 0.4% in late
trading at ¥4,715. Rural services firm PGG Wrightson rose 1.9% to $2.12, while automation systems maker Scott Technology increased 0.4% to $2.66. Reporting by Paul McBeth.
NZX50, S&P/NZX 50, Federal Reserve, Kevin Warsh, inflation, rate hikes, Meridian Energy, GDP, Statistics New Zealand, ANZCO, Greenlea, Fletcher Building, CMC Markets, NZ dollar