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NZ shares shuffle sideways as investors rejig portfolios

New Zealand shares edged lower with investors trading highly priced stocks for those that haven’t had such strong gains as banks begin predicting interest rate rises in November.

Wednesday, July 7th 2021, 7:58PM

by BusinessDesk

The S&P/NZX 50 Index fell 11.13 points, or 0.1%, to 12,747.80. Turnover was $149 million.

Domestic logistics firm Freightways led the market lower as it fell 2.7% to $12.71. The stock hit a record yesterday having climbed more than 80% in the past 12 months.

Goodman Property Trust units fell 2.4% to $2.40 having peaked at a nine-month high during a sudden run up from $2.30 over the past week.

Fletcher Building, which recently hit a four-year high, dropped 2% to $7.26 today but has still more than doubled its share price in the past 12 months.

NZ’s benchmark index has been fluctuating around a level of 12,500 since March.

The sideways movements have been driven by investors selling superstar stocks – such as Fisher & Paykel – for better value companies that were hit harder by the pandemic, Castle Point Funds said in a note to clients today.

“As the world has started to normalise, so have the opinions on value of these companies and these previous laggards have performed strongly in the first six months of this year,” the fund manager said.

Some of the biggest gainers today included agribusiness Scales which rose 3% to $4.81, Napier Port Holdings up 2.7% at $3.46 and Auckland Airport which gained 2.4% to $7.55.

Infant formula marketing firm A2 Milk had the largest rally on the day, climbing 3.8% to $7.43.

Castle Point co-founder Stephen Bennie said A2 Milk had fallen so far from its heights that it may be beginning to attract some value investors who look for underpriced stocks.

“There is sometimes a handing over of the baton as value investors sell their winners to growth investors. Sometimes the baton is passed in a different direction as growth investors sell their losers to value investors,” he wrote in a note.

A handful of “early and unusually optimistic value investors” were likely buying the stock, he said, but most would still see it as overpriced.

Another factor cooling the previously red hot share market is the increasing likelihood the Reserve Bank of New Zealand will raise the official cash rate sooner than previously thought.

Most retail banks are now predicting the first rate hike in November and the market is pricing in a roughly 90% chance of an increase.

BNZ rates strategist, Jason Wong asked why the RBNZ will wait four meetings before acting if it is “so damn obvious that the current emergency policy settings are no longer appropriate”.

The New Zealand dollar has done somersaults over the past two days as markets reacted to positive data and possible rate hikes. The currency briefly tested 71 US cents before tumbling back below 70 cents.

The kiwi dollar was trading at 70.18 US cents by 3pm in Wellington, down from 70.70 cents yesterday.

The trade-weighted index was at 74.16 at 3pm, from 74.49 yesterday. The kiwi traded at 93.66 Australian cents from 93.63 cents, 77.50 yen from 78.35 yen, 59.36 euro cents from 59.59 cents, 50.84 British pence from 50.97 pence, and 4.5427 Chinese yuan from 4.5672 yuan.

Tags: Market Close

« Auckland Airport took off yesterday, but landed todayPacific Edge gains while market flatlines »

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AIA 4.55 2.55 2.95 3.29
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HSBC Premier LVR > 80% - - - -
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Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.75 3.34 3.34 4.14
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Last updated: 29 July 2021 9:04am

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