Rate-sensitive Ryman, property stocks shrug off elevated inflation

New Zealand’s S&P/NZX 50 index rallied late in the day to end the session in the green as interest rate-sensitive companies such as Ryman Healthcare, Kiwi Property Group and Property for Industry shrugged off an elevated headline inflation reading, with the Reserve Bank’s core measure easing in the March quarter.

The kiwi dollar and swap rates rose after the Statistics New Zealand figures showed consumer prices rose more than economists predicted in the first three months of the year, while the NZ Institute of Economic Research’s quarterly business survey showed a slump in firms’ confidence.

Stocks across Asia were broadly stronger, with South Korea’s Kospi hitting a new record as artificial intelligence-linked tech stocks rallied, while NZX-listed Infratil climbed after saying its CDC datacentres arm has won an investment grade credit rating from Moody’s Ratings.  

Meanwhile, the Kalshi prediction market is still pricing better-than-even odds of prime minister Christopher Luxon leaving office this year after he won a confidence vote on his leadership in an effort to quell discontent in his caucus over the National party’s polling that’s driven speculation of a challenge in recent weeks.

Late gains

The NZX50 rose 16.89 points, or 0.1%, to 12,932.33, with 24 stocks gaining, 18 declining, seven stocks unchanged, and KMD Brands in a trading halt. Turnover across the main board was $139.9 million, of which F&P Healthcare accounted for $16.7 million as it advanced 0.4% to $37.92.

The local market cooled through much of the day after Stats NZ figures showed consumer prices rose at an annual 3.1% pace in the March quarter, faster than economists had predicted, and stoking expectations the Reserve Bank will have to raise the 2.25% official cash rate earlier than expected.

“Our market struggled to stay above the 13,000 mark and that inflation reading today added more pressure on the NZX50,” said Peter McIntyre, an investment adviser at Craigs Investment Partners.

The kiwi dollar rose to 59.06 US cents at 5pm in Auckland from 58.78 cents yesterday, while two-year swap rates increased 7 basis points to 3.43%.

The inflation figures captured the start of the energy shock coming from the Middle East conflict, but with more price pressure expected later in the year. The Reserve Bank’s estimate of core inflation eased in the quarter.

Mark Smith, a senior economist at ASB Bank, said the real test will be whether core inflation stays below 3%.

“We remain wary of the risk of high headline inflation filtering through into core inflation and inflation expectations,” Smith said in a note.

ASB brought forward its OCR forecast for a 25 basis point hike in July, steadily raising the rate to 3.25% by the end of the year, while Kiwibank raised some mortgage and term deposit rates before the releases.

Meanwhile, the NZIER’s quarterly survey of business opinion showed a slump in firms’ confidence in the March quarter, with companies facing increased cost pressures and a growing number expecting they’ll raise prices in the coming three months.

Stocks across Asia were broadly stronger, with Australia a laggard as the S&P/ASX 200 index dipped 0.2%, while Japan’s Nikkei 225 climbed 1.2% and South Korea’s Kospi jumped 2.4%.

Craigs’ McIntyre said peace talks between the US and Iran remain the major unknown for investors, although corporate earnings season will dull some of the noise coming from the White House. Brent crude oil futures slipped 0.7% to US$94.82 a barrel at 5pm.

Relative rates

Locally, rate-sensitive stocks shrugged off the inflation reading, with retirement village operator Ryman leading the benchmark index higher, gaining 4% to $2.09 on a volume of 1.5 million shares, while Kiwi Property rose 2.2% to 91.5 cents, PFI advanced 2.2% to $2.31, and Vital Healthcare Property Trust climbed 2.2% to $1.89. Precinct Properties NZ was the most heavily traded top 50 stock with a volume of 2.1 million shares as it gained 1.5% to $1.015.

Index heavyweight Infratil increased 0.2% to $12.33 after Moody’s put a Baa2 rating on CDC.

Among other gainers, Mainfreight rose 3.7% to $59.20, Hallenstein Glasson Holdings climbed 2.4% to $10 and Oceania Healthcare increased 1.4% to 72 cents.

Tourism Holdings posted the steepest decline on the NZX, falling 3.7% to $2.10, while ANZ Group Holdings slipped 3.1% to $45.02, and SkyCity Entertainment Group dropped 2.2% to 66 cents.

Summerset Group Holdings shed 2% to $7.99 after reiterating its close monitoring of its building programme at its annual meeting, noting the ongoing impact of the Middle East conflict.

KMD Brands halted trading of its shares for a shortfall bookbuild after retail investors took up 52% of their entitlements, raising $11 million for the retailer. Briscoe Group fell 0.7% to $4.38.

Outside the benchmark index, Radius Residential Care was unchanged at 40.5 cents on an unusually big volume of 3.2 million, the most for the day.

Black Pearl Group climbed 3.2% to 97 cents, extending its rally for a fourth day, after the tech company said annual recurring revenue more than doubled in the March quarter from a year earlier.

And prime minister Christopher Luxon won his confidence vote in the National party’s caucus meeting today as he sought quash speculation that his grip on the leadership was shaky. The Kalshi prediction market recently priced a 55% chance of Luxon leaving office this year, with an election in November, in a thinly traded contract.

Reporting by Paul McBeth. Image from Curious News.