NZX 50 gains for a 2nd day as Fed hike settles bond markets

New Zealand’s S&P/NZX 50 index rose for a second day as the Federal Reserve’s interest rate hike reassured bond traders that central banks are taking inflation pressures seriously.

Heavyweight companies including Meridian Energy, Auckland International Airport and Infratil underpinned the NZX 50’s gain ahead of quarterly rebalancing on Friday, which will see software firm Gentrack leave the ASX 300 index.

Meanwhile, the kiwi dollar rallied from a two-month low against the greenback after Statistics New Zealand figures showed the economy grew at a faster pace than expected in the June quarter.

And outside the benchmark, NZ King Salmon Investments rallied after upgrading its earnings outlook while the partial takeover bid for Bremworth passed muster with the independent adviser’s report, securing a positive recommendation from the departing directors.

Doubling up

The NZX 50 rose 133.87 points, or 1%, to 13,756.59, with 40 stocks gaining, seven declining and three unchanged. The S&P/NZX 20 index advanced 0.8% to 7,611.8, while the NZX 20 futures contracts were untraded.

Turnover across the main board was $156.6 million, of which Auckland Airport accounted for $20.3 million as the nation’s major gateway rose 2.2% to $8.42.

New Zealand’s bourse was one of the stronger performers across Asia as investors took heart from the Fed’s rate hike and ongoing focus on bringing the pace of inflation down to its 2% target. Australia’s S&P/ASX 200 index and Japan’s Nikkei 225 were both up 0.3% in late trading, while Hong Kong’s Hang Seng dipped 0.7%. The yield on New Zealand’s 10-year government bond fell 2 basis points to 5%.

“The market’s relieved to some extent that they’ve actually moved – bond yields were trying to do the work for the Federal Reserve,” said Peter McIntyre, an investment adviser at Craigs Investment Partners. “That’s eased the bond markets somewhat.”

Blue-chip companies underpinned gains on the NZX 50 in heavy trading ahead of quarterly rebalancing, with Meridian gaining 2.2% to $5.47, Fisher & Paykel Healthcare advancing 0.5% to $44.39, and Mercury NZ increasing 2.5% to $6.85.

Infratil rose for a second day, up 1.4% at $14.30, after Forsyth Barr analysts reaffirmed their ‘outperform’ rating and $20 target price on the infrastructure investor after the firm raised its forecast for earnings before interest, tax, depreciation and amortisation on customer demand for its CDC data centre business.

“While rising long bond rates are a headwind to valuation for Infratil’s long-duration assets, we view current valuation as attractive with CDC’s implied valuation particularly undemanding given its ebitda is contracted to more than double in the next few years and further contract wins are very likely,” Forsyth Barr analyst Ben Crozier said in a note.

Contact Energy rose 0.9% to $8.80 after the power company’s monthly operating update showed South Island hydro storage at 166% of historical levels.

A new season

Gentrack posted the biggest gain on the NZX 50, up 3.6% at $4.30 before the software company drops out of the ASX 300 index after trading closes on Friday. Meanwhile, Oceania Healthcare gained 3.6% to 73 cents and Vital Healthcare Property Trust increased 2.8% to $1.825.

Sky Network Television posted the biggest decline on the day, down 2.3% at $3.46, while a2 Milk Co fell 2.1%, or 18 cents, to $8.38 after the milk marketing firm shed rights to an upcoming dividend of 9.5 cents per share.

Among other companies going ex-dividend, Tourism Holdings rose 0.4%, or 1 cent, to $2.75 ahead of its 7.5 cents per share dividend and Port of Tauranga advanced 0.5%, or 4 cents, to $7.91 as it shed rights to a 12.5 cents per share payment.

Seeka fell 3.4%, or 18 cents, to $5.20 after going ex-dividend on an upcoming payment of 20 cents per share.

The kiwi dollar clawed back earlier losses to trade at 57.28 US cents at 5pm in Auckland from 57.44 cents yesterday after Stats NZ figures showed gross domestic product grew 0.2% in the June quarter, with a recovering construction sector buoying expansion.

Freightways, often seen as a barometer of activity, rose 0.5% to $12.28, while Fletcher Building nudged up 0.3% to $3.68.

Spark New Zealand was the most heavily traded stock with a volume of 5 million shares, rising 1.5% to $2.04.

Outside the benchmark index, NZ King Salmon jumped 6.5% to 24.5 cents after the fish farmer said earnings would likely be between $36 million and $39 million in the September financial year, up from an earlier forecast of $30 million-to-$34 million with fewer fish dying than expected.

Bremworth slipped 0.7% to 69.5 cents after the carpetmaker’s independent directors recommended shareholders accept a partial takeover by David Ferrier at 90 cents for up to 44% of the company’s stock, with the offer falling within independent adviser Clarien’s fair value range of 87 cents-to-$1.07.

Reporting by Paul McBeth. Image from Curious News.