NZ’s current account deficit narrows as overseas investments pay off
The NZX50 was marginally lower ahead of the Federal Reserve’s big reveal.
New Zealand’s current account deficit narrowed more than expected in the June quarter as Statistics New Zealand’s overestimation of cheap imports from the likes of Temu and Shein got a further surprise when Inland Revenue Department figures showed increased investment returns coming from the wider pool of international assets held by KiwiSaver funds.
Meanwhile, New Zealand’s S&P/NZX 50 index was marginally weaker in a mixed day across Asian markets ahead of the Federal Reserve’s big policy review, where traders have all but priced in an interest rate cut of at least 25 basis points.
The a2 Milk Co led the local market lower, snapping a two-day gain, while Auckland International Airport and stock market operator NZX declined after shedding rights to their upcoming dividend payments.
And retailers were mixed as KMD Brands and Briscoe Group advanced while Hallenstein Glasson Holdings declined amid very subdued household confidence in the latest Westpac McDermott Miller survey.
Unloved balance of payments
New Zealand’s June balance of payments showed the annual current account deficit narrowed to $16 billion, or 3.7% of gross domestic product, in the June period from $23.3 billion, or 5.5% of GDP, a year earlier, and coming in well below the 4.8% of GDP predicted by economists.
Recent terms of trade data had already indicated a more benign figure after Stats NZ discovered it had been overestimating the value of imports of cheap from the likes of online retailers Temu and Shein, but the investment income balance got a positive revision based on Inland Revenue figures to show more money was earned from the nation’s ballooning foreign investments in KiwiSaver schemes. That saw the March quarter deficit revised to 4.2% of GDP from an earlier reading of 5.7%.
“The credit ratings agencies should welcome news that the deficit is now less than half as wide as the peak seen in 2022, and not much wider than it was leading into the pandemic,” said Darren Gibbs, a senior economist at Westpac NZ. “The additional narrowing in the June quarter was mostly driven by the merchandise trade balance, reflecting the continued passthrough of export commodity prices that are much higher than those that prevailed a year ago.”
The balance of payments data are the precursor to June quarter GDP figures on Thursday, which are expected to show New Zealand's economy shrank during a lacklustre winter.
The kiwi dollar traded at 59.79 US cents at 5pm in Auckland from 59.61 cents yesterday, and was at 89.57 Australian cents from 89.50 cents.
The NZX50 decreased 6.51 points, or 0.1%, to 13,228.38, with 18 stocks declining, 29 gaining, and three unchanged. Turnover across the main board was $141.1 million, of which Fisher & Paykel Healthcare accounted for $14.2 million as it slipped 0.2% to $37.45.
Monetary matters
Stock markets across Asia were mixed, with Australia’s S&P/ASX 200 index down 0.7% in late trading, while Japan’s Nikkei 225 index dipped 0.1% and Hong Kong’s Hang Seng gained 1.4% ahead of the Federal Reserve’s policy review, which is widely expected to deliver a 25 basis point cut to the federal funds rate.
The a2 Milk Co led New Zealand’s benchmark index lower, falling 3.2% to $9.97, while Auckland airport was the biggest drag on the NZXZ50, ending a six-day run higher as it declined 1.5%, or 12 cents, to $7.78 as it shed rights to an upcoming 7 cent dividend. NZX fell 2.8%, or 4 cents, to $1.40 after giving up rights to a 3 cents per share dividend
Fonterra Shareholders’ Fund units decreased 0.1% to $7.23 after milk prices fell at the latest Global Dairy Trade auction, with the GDT price index down 0.8% and an average winning price of US$4,041 a tonne. Whole milk power prices slipped 0.8% to US$3,790 a tonne.
Synlait Milk rose 1.5% to 68 cents.
Retailers and consumer stocks were mixed after the Westpac McDermott Miller consumer confidence survey showed households remained relatively subdued in the September quarter.
Sky Network Television posted the biggest gain on the day, up 3.2% at $3.20, while KMD Brands rose 2.1% to 24 cents and Briscoe Group advanced 1.6% to $5.01. Hallenstein Glasson Holdings slipped 1.2% to $8.99, while outside the NZX50 Warehouse Group increased 0.6% to 79.5 cents and Michael Hill International fell 3.7% to 39 cents.
Channel Infrastructure was again the most heavily traded stock on the bourse, with a volume of almost 3 million shares changing hands, as it rose for a third day, up 1.6% at $2.49.
Outside the benchmark index, Seeka gained 0.2%, or 1 cent, to $4.33 after upgrading its earnings outlook again, adding $4 million to the forecast range for pre-tax profit to be between $39 million and $43 million. The kiwifruit grower also shed rights to a 15 cents per share dividend.
