NZX 50 posts weekly gain as Fed hike reassures investors

New Zealand’s S&P/NZX 50 index rose this week as investors were reassured by the Federal Reserve’s focus on taming inflation as it hiked its benchmark interest rate and signalled more were on the way.  

Software-as-a-service firms Vista Group International and Gentrack were two of the stronger performers for the week, while Serko lagged behind with a second weekly double-digit slide in a row.

The local bourse was weaker in Friday trading, with more robust domestic growth than anticipated firming up expectations for the Reserve Bank to lift the official cash rate without stamping out the recovery.

Heavyweights Fisher & Paykel Healthcare, Infratil and Spark New Zealand were the main drags in Friday trading, with the quarterly rebalancing of the S&P Global indices driving increased volumes on the day.

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The NZX 50 fell 17.45 points, or 0.1%, to 13,739.14, slowing its weekly gain to 1.2% as eight stocks notched up gains of 5% or more through the week.

Vista posted the biggest gain for the week, up 10% in its largest weekly increase since May, while Gentrack advanced 7.4%. Meridian Energy climbed 7.9% in its best week since May 2024.

Meanwhile, Serko sank 12% for the week, putting it at the bottom of the leaderboard, while Sanford dropped 4.9% and Summerset Group Holdings and Sky Network Television were each down 4%.

Investors spent much of the week fretting over whether the Fed would deliver a rate hike as elevated oil prices continued to threaten a second round of inflation. Markets then rallied after chair Kevin Warsh reaffirmed the central bank’s commitment to stamp out inflation. The Bank of England reiterated a focus on inflation in keeping its benchmark rate on hold, while the Bank of Japan raised its rate a quarter-point to 1.25% in a split decision.

“The Fed reaffirmed central bank credibility, which is increasingly important,” said Jeremy Sullivan, an investment adviser at Craigs Investment Partners. “It was good to see the institutions are still following the data.”

Those pressures were being felt around the world, with oil prices still elevated. Brent crude oil futures slipped 1.3% to US$103.42 a barrel at 5pm in Auckland.

Stronger domestic economic growth than anticipated in the June quarter was seen as giving New Zealand’s Reserve Bank greater scope to lift the official cash rate, which Sullivan said might have weighed on the local market’s Friday trading.

Australia’s S&P/ASX 200 index dipped 0.1% in late trading as Reserve Bank of Australia governor Michele Bullock told politicians that the board needed to decide whether its three hikes were enough to tame inflation. The kiwi dollar fell to 80.37 Australian cents from 80.58 cents yesterday.

Still, Statistics New Zealand’s partial inflation measures showed prices for some goods rose at a more modest pace in August, and economists noted potential downside for the September quarter consumers price index. The kiwi dollar traded at 57.30 US cents from 57.28 cents yesterday.

Heavy volumes

Within the NZX 50, 17 stocks fell on Friday, 28 gained and five were unchanged. The S&P/NZX 20 index fell 0.3% to 7,589.1, while the NZX 20 futures contract for December increased 0.1% to 7,657, with 1,380 lots traded for a value of $10.5 million.

Turnover on the main board was $600.9 million, with trading heavy as institutional investors tracking indices tweaked their portfolios to match the S&P Dow Jones quarterly rebalancing.

F&P Healthcare accounted for $80.5 million as it fell 0.5% to $44.15, while Auckland International Airport was unchanged at $8.42 on a turnover of $66.3 million and Meridian rose 2.6% to $5.61 on a value of $59.2 million. Infratil declined 2% to $14.02 on a turnover of $49.9 million and Contact slipped 1.5% to $8.67, with $40.9 million of stock traded.

The a2 Milk Co posted the biggest decline on the day, falling 3.9% to $8.04, while KMD Brands – which is due to report its annual result and reveal its strategic review next week – decreased 3.6% to $1.97.

Spark fell 3.4% to $1.97, following broad weakness in global telecommunications firms.

Air New Zealand posted the biggest gain on the day, up 5.3% at 40 cents, while Precinct Properties NZ climbed 5.3% to $1 as the government said it was eyeing removing building height limits in downtown Auckland.

Vital Healthcare Property Trust advanced 5.2% to $1.92 and Vista was up 5.1% at $2.91.

Mercury NZ rose 1.9% to $6.98 after reiterating guidance at today’s annual meeting, with chair Scott St John defending the energy market, and pointing to lines companies and the state-owned grid operator Transpower for driving up retail prices faster than the pace of broader inflation.

Goodman New Zealand was the most heavily traded stock on the day, with a volume of almost 20 million stapled securities changing hands as the property company increased 0.3% to $1.915.

Reporting by Paul McBeth. Image from Curious News.