Pacific Edge slumps on Medicare decision

Pacific Edge more than halved in value as the cancer diagnostics firm was again knocked back by its administrator to gain coverage under US Medicare.

That came as New Zealand’s stock market joined the regional rout as Asia followed Wall Street lower as a stronger jobs market in the US has crimped expectations for interest rates to go much lower this year.

The prospect of the US Federal Reserve only cutting its key rate once this year has rippled through global interest rate markets, with the yield on New Zealand’s 10-year government bond rising 6 basis points to 4.63%. The Smart Global Government Bond exchange traded fund issued 2.15 million new units on Friday, expanding its issued stock by almost 1%.

The S&P/NZX 50 index dropped 68.65 points, or 0.5%, to 12,827.33, its lowest close since Dec 19. The weakness was in all sectors, although some exporters benefited from the two-year low in the kiwi, which traded at 55.62 US cents at 5pm in Auckland from 55.94 cents on Friday.

Pacific Edge sank 55% to 6 cents when it resumed trading today, having sought a halt while it worked through the Novitas decision excluding its cancer diagnostic devices from coverage under the Obamacare expansion of Medicare and Medicaid.

Gentrack led the benchmark index lower, falling 5.3% to $11.80, with US tech companies among the hardest hit on Friday by the prospect of sticky interest rates. Serko was also down, falling 2.1% to $3.75 while Vista Group International dipped 0.6% to $3.16.

Local heavyweight companies were among those dragging down the benchmark index. Fisher & Paykel Healthcare dropped 1% to $37.55, Infratil declined 1.4% to $11.69 and Contact Energy slipped 1.6% to $9.35.

Some bright spots

Meridian Energy posted the day’s biggest gain on the benchmark, rising 1.3% to $5.95, while Vital Healthcare Property Trust advanced 1.1% to $1.87, Vector increased 1% to $4.07 and Auckland International Airport gained 1% to $8.45.

Among exporters to gain, fishing group Sanford rose 0.5% to $4.32 and Fonterra Shareholders’ Fund units were up 0.6% at $5.05.

Fletcher Building rose 0.7% to $2.80 after government figures showed residential building consents rose a seasonally adjusted 5.3% in November, which some saw as indicating it might have reached its trough.

Westpac New Zealand economist Satish Ranchhod said he expects the Reserve Bank will cut the official cash rate half a percentage point in February, with lower interest rates supporting a gradual recovery in the housing market and new development.

“However, it will take time for the full impact of lower borrowing costs to be felt,” he said in a note. “We don’t expect to see consent issuance turning materially higher until mid-2025, with a lift in construction activity to follow that.”

Property developer CDL Investment rose 3.3% to 78 cents, while Winton Land was unchanged at $1.93.

Reporting by Paul McBeth. Image from Curious News.