NZX 50 rallies as Infratil upgrades earnings outlook; Fed looms

New Zealand’s S&P/NZX 50 index snapped a four-day slide as Infratil raised its earnings outlook on swelling computing demand driving its gains for its CDC Data Centres and Kao Data units and its Longroad Energy business in the US.

Stocks across Asia were broadly stronger ahead of the Federal Reserve’s policy review, which is expected to deliver an interest rate hike, while oil prices stayed at their elevated levels.

Briscoe Group advanced after the retailer’s board declared a bigger interim dividend than predicted, with a more modest first-half profit decline than feared.

Retailers were mixed more generally after Westpac’s latest quarterly consumer confidence survey showed households were less pessimistic in the June quarter, while the National party said it would campaign on a policy of splitting up the Foodstuffs supermarket cooperatives to help bring down grocery prices.

Picks and shovels

The NZX 50 rose 138.5 points, or 1%, to 13,622.72, with 26 stocks gaining, 19 declining and five unchanged. The S&P/NZX 20 index climbed 1.1% to 7,549.31, with the NZX 20 futures contract untraded.

Turnover across the main board was $175.8 million, with Fisher & Paykel Healthcare accounting for $31.4 million as the country’s biggest listed company rose 1.9% to $44.19.

Infratil snapped a four-day slide, climbing 3.6% to $14.10 after the infrastructure investor raised its earnings forecast by $20 million to a range of $1.32 billion-to-$1.42 billion for the March year. Infratil said growing computing demand was driving its Australasian CDC and UK Kao Data businesses, while the artificial intelligence-fuelled demand for electricity supported the firm’s Longroad business.

“Infratil’s increasingly become an AI infrastructure play, with the key growth driver of data centres that now make up over half of their assets’ value,” said Greg Smith, investment specialist at Generate Investment Management. “Infratil remains one of the cleanest ways for Kiwi investors to get exposure to AI infrastructure.”

New Zealand’s stock market was one of the stronger performers across Asia in a broadly positive day across the region, with investors preparing for the Fed’s upcoming rate review that’s expected to deliver a hike. Brent crude oil futures slipped 0.7% to US$108 a barrel at 5pm in Auckland, while the yield on New Zealand’s 10-year government bond fell 3 basis points to 5.02% and the kiwi dollar traded at 57.44 US cents from 57.56 cents yesterday.

Australia’s S&P/ASX 200 index and Japan’s Nikkei 225 were both up 0.2% in late trading, while Hong Kong’s Hang Seng was marginally higher.

Generate’s Smith said a rate hike by the Fed was widely anticipated, with investors keeping an eye on what guidance – if any – chair Kevin Warsh provides.

Among other gainers on the NZX 50, Briscoe rose 3.5% to $4.40 after the retailer reported a 5.9% dip in first-half profit to $27.6 million and declared an interim dividend of 10 cents per share, more than Forsyth Barr analysts predicted.

Not that bad

Retailers were mixed more generally after the Westpac-McDermott Miller consumer confidence index rose 9 points to 89.5, still below the level separating optimists from pessimists.

Hallenstein Glasson Holdings rose 1.3% to $12.46, while KMD Brands decreased 0.3% to $1.945, while outside the benchmark Warehouse Group dropped 3.1% to 62 cents and Michael Hill International slid 2.3% to 42 cents.

Separately, National party finance spokeswoman Nicola Willis said the governing party would campaign on a policy of structurally separating the Foodstuffs supermarket cooperatives into separate Pak’nSave and New World/Four Square arms in a bid to boost competition in the grocery sector.

Contact Energy gained 2.5% to $8.72 after the electricity generator-retailer’s chair Rob McDonald warned politicians against separating the gentailers and urged greater focus on natural monopolies such as lines companies that continue to drive up retail prices in his last at the helm of the board.

Serko posted the sharpest decline on the day, falling 5.5% to $1.20, while Kiwi Property Group slipped 2.8% to 87 cents and Stride Property decreased 2.4% to $1.04.

Auckland International Airport dipped 0.4%, or 3 cents, to $8.24 after shedding rights to an upcoming dividend payment of 6.75 cents per share.

Goodman New Zealand was the most heavily traded stock on the day on a volume of 4.4 million shares, as it declined 1.3% to $1.91.

Outside the benchmark index, Seeka rose 1.9% to $5.38 after the kiwifruit grower raised its earnings guidance by $2 million to a range of $41 million-to-$45 million.

Used car firm 2 Cheap Cars climbed 7.6% to 85.5 cents after chief executive David Sena raised his takeover offer by 10 cents to 90 cents as he seeks to buy the remaining 24% he doesn’t already own.

And Statistics New Zealand figures showed the country’s annual current account deficit narrowed to $14.6 billion, or 3.2% of gross domestic product, in the June quarter from $15.8 billion, or 3.6% of GDP, a year earlier.

Darren Gibbs, a senior economist at Westpac NZ, said revisions to the series narrowed the size of the deficit due to increased returns on investment abroad.

“Further widening of the deficit can be expected in coming quarters as the full impact of higher costs for imported energy and related products feeds into these figures,” Gibbs said in a note. “Even so, the credit ratings agencies should remain comfortable with a deficit that is now only about a third as wide as the peak seen in 2022, and not much wider than it was leading into the pandemic.”

Reporting by Paul McBeth. Image from Curious News.