New Zealand’s S&P/NZX 50 index notched up its third weekly gain in a row, advancing 1.4% in a week that started with the bang of cooling US and China trade tensions, before slowing down as investors brace for a glut of domestic earnings and the government’s budget.
Finance minister Nicola Willis extended more money to the always controversial screen production grant, which is demand driven.
Shareholders weren’t impressed after Fletcher Building got rid of the trans-Tasman divide, incorporating its Australian businesses into operating divisions by products as chief executive Andrew Reding continues on with his strategic review of the business.
And utilities offering reliable dividends such as Contact Energy and Mercury NZ were broadly weaker as the Reserve Bank’s survey of inflation expectations has some analysts pondering whether interest rates will come down as quickly and as far as they’d previously thought.
The laggard of the pack
New Zealand’s NZX50 was one of the weaker performers on the day across Asia, falling 94.03 points, or 0.7% to 12,786.79, with 23 stocks declining, 19 rising, and eight unchanged. Turnover was relatively light at $96.6 million.
Across Asia, Australia’s S&P/ASX 200 index was up 0.5% in late trading, while Japan’s Nikkei 225 index slipped 0.1% and Hong Kong’s Hang Seng dropped 0.8%.
Energy companies were a drag on the broader index after the Reserve Bank’s survey of expectations showed a revival in people seeing faster price rises in the coming years.
“We still expect a 25-basis point OCR (official cash rate) cut later this month and a 2.75% OCR endpoint, but this is conditional on the expected mid-2025 lift in inflation proving to be transitory,” ASB Bank senior economist Mark Smith said in a note. “The risk is that concerns over inflation see the RBNZ pare back monetary policy easing.”
The kiwi dollar traded at 59.06 US cents at 5pm in Auckland from 58.73 cents at 7am and 58.93 cents yesterday.
The prospect of rates not coming down as fast or as far as previously thought has weighed on companies typically held for the reliable dividends, such as commercial landlords and utilities services.
Powering down
Energy companies were among the day’s decliners, with Contact falling 2.4% to $9.11, Vector declining 1.4% to $4.19 and Mercury NZ slipping 1.1% to $6.09.
Skellerup Holdings posted biggest decline on the day, falling 3.1% to $4.75.
Fletcher fell 2.6% to $3.37 after CEO Andrew Reding provided some hints on the board’s thinking in its strategic review, amalgamating its trans-Tasman businesses under light and heavy building materials product lines ahead of its investor day in June.
Oceania Healthcare declined 3% to 65 cents ahead of next week’s earnings result.
Keep the faith
Aaron Ibbotson and Benjamin Crozier, analysts at Forsyth Barr, rate the stock an ‘outperform’ with a price target of 90 cents.
“Oceania has failed to deliver operationally and financially for several years, and the market is losing faith in its care-focused business model,” they said in a note.
To regain confidence among investors, the company needs to make meaningful head-office cuts, reign in net debt, and have a plan to sell its flagship The Hellier village.
“We expect clear communications on all three issues,” they said.
Summerset Group Holdings fell 2.3% to $11.42, while Ryman Healthcare gained 2.9% to $2.45.
Warehouse Group posted the biggest gain on the NZX50, rising 7.1% to 90 cents.
Precinct Properties NZ was the most heavily traded stock, with a volume of 1.4 million. It was unchanged at $1.175.
Being AI slipped 0.7% to 13.9 cents. After trading closed, the company announced the closure of its remaining artificial intelligence initiative, Project Treehouse, and the resignations of its chief executive and chief transformation officer.
And finance minister Nicola Willis announced a $577 million boost to the screen production rebate scheme to better reflect the expected demand.
Reporting by Paul McBeth. Image from Curious News.
