NZX 50 slides as latest Middle East flare-up boosts oil prices

New Zealand’s S&P/NZX 50 index joined a slide across Asia as a new bout of attacks on Saudi Arabian targets revived fears about Middle East tensions and pushed up oil prices, weighing on the likes of logistics group Mainfreight and Port of Tauranga.

Meanwhile, Statistics New Zealand’s headline inflation print was largely in line with expectations, although some of the components stoked expectations that the Reserve Bank would hike its official cash rate next week.

Lodestone Energy enjoyed a modest debut on the NZX in the first substantial initial public offering on the local stock exchange in almost five years.

And Michael Hill International rallied after posting strong sales in the first 16 weeks of the financial year.

Nervous again

The NZX 50 fell 14.45 points, or 0.1%, to 13,746.84, with 20 stocks declining, 27 gaining and three unchanged. The S&P/NZX 20 index slipped 0.1% to 7,513.93, while the futures contract was untraded.

Turnover across the main board was $113.6 million, of which Fisher & Paykel Healthcare accounted for $25.7 million, as the country’s biggest listed company dropped 1.1% to $48.88.

Stock markets across Asia were broadly weaker as renewed attacks on Saudi Arabia pushed up oil prices. Brent crude oil futures rose 1.7% to US$110.62 a barrel at 5pm in Auckland, while Japan’s Nikkei 225 fell 2% in late trading, while Hong Kong’s Hang Seng dropped 2.9% and Australia’s S&P/ASX 200 index declined 0.3%.

Local logistics group Mainfreight was among the bigger drags on the local bourse, falling 3% to $65.50, while Port of Tauranga declined 0.8% to $8.31 and Infratil decreased 1% to $12.27.

Lodestone rose 1.3% to $2.28 on debut, having raised $75 million in the first major IPO for the NZX in years, with the solar farm operator hitting the minimum target for its offering.

“It was good to see it get off to a positive start,” said Greg Smith, investment specialist at Generate Investment Management. “The proof will be in the pudding and its execution.”

The kiwi dollar traded at 56.89 US cents from 56.76 cents yesterday after Stats NZ figures showed the annual pace of inflation slowed to 3.7%, in what’s seen as a temporary easing before elevated energy prices drive it higher again.

Satish Ranchhod, a senior economist at Westpac NZ, said the headline print was in line with expectations, but the components created headaches for the Reserve Bank.

“We suspect that today’s result will leave the market continuing to price a strong chance of another OCR hike at next Wednesday’s policy review,” Ranchhod said in a note. “In that light, we think the RBNZ will regard this as the path of least resistance, and we now expect that they will deliver (previously we expected that they would pause and assess, before hiking at the December MPS).”

Interesting moves

Interest rate-sensitive stocks such as utilities and commercial landlords were generally weaker. Precinct Properties NZ fell 1.6% to 93 cents, Vector declined 1.3% to $4.50 and Goodman New Zealand decreased 1.1% to $1.865.

Still, two-year swap rates fell 2 basis points to 4.07%, and the yield on 10-year government bonds declined 5 basis points to 4.99%.

Oceania Healthcare was the most heavily traded stock on the day, with a volume of 6.3 million shares as the aged care operator slipped 1.5% to 65 cents.

Hallenstein Glasson Holdings posted the steepest decline on the NZX 50, falling 3.9% to $14.31 after the National Business Review reported the retailer’s Glasson chain had been accused of copying several international fashion designers.

Gentrack posted the biggest gain on the benchmark, up 4.2% at $4.43, while Scales Corp advanced 3.4% to $6.46 and Sanford rose 3.2% to $6.19.

Auckland International Airport increased 1.5% to $8.34 after the nation’s major gateway told shareholders that there was strong underlying demand for travel to New Zealand this summer, although the domestic market was more challenged. The airport operator affirmed earnings guidance, with flat passenger numbers.

Outside benchmark, Michael Hill increased 4.9% to 43 cents after the jewellery chain operator said sales rose 6.6% in the first 16 weeks of the financial year, with gains in Australia, Canada and New Zealand. The retailer maintained gross margin through the period as well.

Trade Window Holdings jumped 13% to 14.7 cents after the trade software developer said it secured dairy giant Lactalis as a customer, and later clarified the significance of the contract was of strategic value rather than monetary.

And Barramundi was unchanged at 44.4 cents after the company’s board said it was still negotiating with investment manager Fisher Funds on whether to renew its contract.

Reporting by Paul McBeth. Image from Curious News.