NZX50 falls for a 2nd day as bubbling crude prices stoke inflation fears

New Zealand’s S&P/NZX 50 index joined a broad decline across Asia as the conflict in the Middle East pushes up oil prices, raising concerns more expensive energy will feed inflation and prompt the Reserve Bank to move quickly to dispel any price increases.

Government bond yields on both sides of the Tasman followed US Treasuries higher, with Reserve Bank of Australia governor Michele Bullock telling the Australian Financial Review business summit that every policy meeting is a live one as the board considers the supply shock affecting energy markets.

Companies held for their reliable dividends, such as Auckland International Airport and Infratil, were among the major drags on the NZX50, as the prospect of higher rates eats into the relative attraction of those stocks held for their yield.

Meanwhile, Ryman Healthcare dropped after Forsyth Barr analysts cut their target price on the retirement village operator as they pared back their earnings expectations in mapping out what they saw as a credible return to outperformance for the company.

Good oil

The NZX50 fell 36.44 points, or 0.3%, to 13,620.21, with 27 stocks declining, 17 gaining and six unchanged. Turnover across the main board was $158.2 million, of which Fisher & Paykel Healthcare accounted for $26.5 million as the medical devices maker slipped 0.6% to $41.

New Zealand’s benchmark wasn’t hit as hard as some across Asia, with Australia’s S&P/ASX 200 index down 1.4% in late trading having borne the initial wave of fear after the Middle East conflict reasonably well with the wide representation of oil and gas explorers and gold miners across the Tasman.

RBA governor Bullock told the AFR business summit the potential supply shocks from rising oil prices could stoke inflation and said every board meeting was a live one, dashing expectations the central bank would wait until fresh quarterly prices figures before acting again.

Brent crude oil futures rose 2.2% to US$79.46 at 5.30pm in Auckland while gold futures were up 1.2% at US$5,375 an ounce as investors remained unnerved by the intensifying attacks in the Middle East. The kiwi dollar fell to 59.47 US cents from 59.86 cents yesterday.

The yield on New Zealand’s 10-year government bond rose 5 basis points to 4.4%, while Australia’s equivalent was up 8 basis points at 4.76%, following an international selloff in bonds.

Old reliable

Companies held for their reliable dividends were the biggest drags on New Zealand’s benchmark index, with Auckland Airport down 1.3% at $9.03 and Infratil declining 1.9% to $11.03, while Meridian Energy declined 0.5% to $5.61 and Mercury NZ decreased 0.5% to $6.45.

Ryman Healthcare dropped 4.2% to $2.30 after Forsyth Barr analysts cut their target price on the retirement village operator by 30 cents to $2.95 and kept their ‘neutral’ rating. The analysts pared back their earnings expectations for the firm, adopting predictions for higher debt levels on more intense development than previously thought and a modest reduction in new sales volumes.

“The risk-reward profile is improving, but the margin of error on execution remains modestly too narrow for us to adopt a more positive view at this stage,” Forsyth Barr analyst Will Twiss said in a note.

Vulcan Steel posted the steepest decline on the NZX50, falling 4.4% to $7.70.

Tourism Holdings led gainers on the NZX50, bouncing back from a sharp selloff on Monday as it gained 4.9% to $2.58 after director and one-time suitor Luke Trouchet stepped down from the board, effective immediately.

Napier Port Holdings also recovered from a weak Monday, rising 2.8% to $3.73.

Fletcher Building climbed 2.3% to $3.53 after Statistics New Zealand figures showed new building permits continued to creep higher in January. Separately, the AFR’s Street Talk column reported the building materials firm is increasingly seen as a potential takeover target.

Outside the benchmark index, Auckland hospitality operator Savor Group jumped 11% to 20 cents after saying it plans to start paying dividends in the March 2027 financial year.

Radius Residential Care dipped 1.3% to 38 cents after buying a 4.3 hectare site in Christchurch to develop a 100-bed care home to roll out its bespoke design for hospital-level and dementia care. A village will follow in subsequent stages.

Pacific Edge was the most heavily traded stock on the day with a volume of 5.8 million shares, ending the session unchanged at 20 cents. The company said its Dunedin lab signed a service agreement with Singapore General Hospital.

Reporting by Paul McBeth. Image from Curious News.