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Shares rise, dollar softens as negative cash rate predicted

New Zealand shares climbed for a second day as investors continued buying dividend-paying stocks and as another bank forecast negative interest rates here within a year.

Tuesday, August 18th 2020, 7:21PM

by BusinessDesk

The S&P/NZX 50 Index rose 176.18 points, or 1.5 percent, to 11,849.13. Within the index, 41 stocks rose, five fell and four were unchanged. Turnover was $217.8 million.

Record-low interest rates have been fuelling a rotation out of cash and into the share market with investors seeing it as one of the few options for a return on capital.

“The Reserve Bank has driven interest rates down to remarkably low levels,” said Matthew Goodson, a director at Salt Funds Management.

“Savers are being forced out of term deposits, out of fixed interest investments and up the risk curve into equities.”

The RBNZ has said it is ready to contemplate negative rates if more easing is needed. ANZ Bank today joined ASB Bank in saying it expects the central bank to cut the official cash rate by 50 basis points to minus 0.25 percent in April.

The increasing likelihood of negative rates has taken the shine off the robust kiwi dollar which fell as low as 65.34 US cents—after trading at 65.66 cents at 1pm—when ANZ released its note.

At 5pm in Wellington, the kiwi was trading at 65.47 US cents, up from 65.30 cents the same time yesterday.

Summerset Group Holdings led the NZX 50 higher for a second day, rising 6.4 percent to $8.27 — a gain of 12.2 percent this week.

Goodson said property prices were being supported by falling interest rates as first-time buyers took on low-price mortgages. This was supportive for the retirement village operator which was seeing construction costs on its new developments fall by between 3 percent and 12 percent.

Mercury NZ rose 2.7 percent to $5.01, attracting investors as it increased its dividend for a 12th straight year despite the impact of low hydro storage and the covid-19 lockdown.

The country’s third-largest electricity retailer is forecasting an ordinary dividend of 17 cents for the current year, a 7.6 percent increase.

Fisher & Paykel Healthcare shares jumped 4.3 percent to $36.50 after the company hiked its earnings guidance due to accelerated demand for its hospital-care respiratory products.

The manufacturer added $130 million to its operator revenue for the 2021 financial year bringing it to approximately $1.61 billion. Its share price is up 64.9 percent this year.

“They have clearly benefitted massively from the sales of their respiratory humidification gear to hospitals for the treatment of covid,” Goodson said. However, the question for investors was whether the revenue uplift would be permanent.

Westpac Banking Corp has decided it won't pay a first-half dividend despite assuring investors that its balance sheet is strong. Its share price dropped 2.9 percent to $19.00, while those of Australia & New Zealand Banking Group fell 1 percent to $19.99.

Westpac also announced an impairment charge of A$826 million on top of the A$2.24 billion in covid-19-related charges the bank announced with its first-half results in May.

Outside of the top 50 index, PGG Wrightson fell 2.6 percent to $2.62 after it also canned paying a divided this year. The company delivered what it called a "resilient" performance for the financial year ended June given the impacts of the coronavirus pandemic. Its results were in line with expectations.

At the close of the day the trade-weighted index was at 70.75 at 5pm, down from 70.77 yesterday. The kiwi traded at 90.62 Australian cents from 90.99 cents, 69.16 yen from 69.61 yen, 55.05 euro cents from 55.06 cents, 49.84 British pence from 49.88 pence, and 4.5364 Chinese yuan from 4.5322 yuan.

(BusinessDesk)

Tags: Market Close

« Shares rise as negative interest rates loomInvestors hit pause on market rally. Find out why. »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 ▼2.45 2.65 2.79
Kainga Ora 4.43 2.93 3.07 3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.29 3.45 3.59
TSB Special 4.54 2.49 2.65 2.79
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.15 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.00 3.13 3.02

Last updated: 21 September 2020 10:48am

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