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Last Article Uploaded: Thursday, October 21st, 8:47AM

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The Markets

Shares drift sideways as RBNZ bond buying ends

New Zealand shares shuffled sideways in a directionless trading session, while bond yields moved marginally higher as the Reserve Bank ended its buying programme.

Thursday, July 22nd 2021, 7:02PM

by BusinessDesk

The S&P/NZX 50 Index climbed 11.7 points, or 0.1%, to 12,720.84. Turnover was $273 million.

US share markets moved back towards their all-time highs overnight, with very low cash and bond yields still providing support for the stock market.

The local bond market was itself relatively unfazed as the RBNZ’s large-scale asset purchases ended not with a bang but a whimper.

A final $90m of government bonds was bought today, compared to last year when the central bank was a buying $1b a week as it printed money to fight the pandemic downturn.

“Traders will be pleased that the RBNZ’s bond buying programme has now finished, which will allow for more natural market conditions, liquidity, better price discovery and less volatility,” said BNZ’s Jason Wong.

The yield on a 10-year government bond moved up a few basis points, reaching 1.6% today, but still lower than almost 2% yields seen just last month.

Brad Gordon, an investment adviser at Hobson Wealth Partners, said equity investors would be pleased to see market rates stay low – even as bank economists call for interest rate hikes.

Stocks offering a dividend yield were remaining attractive to investors with interest rates still exceptionally low, he said.

Goodman Property Trust led the market higher climbing 2.3% to $2.45.

Electricity generators and retailers also made gains, Mercury NZ rose 2.2% to $6.84, Meridian Energy was up 0.4% at $5.35, and Contact Energy advanced 0.4% to $8.26.

The latter two firms today floated a proposal for a green hydrogen plant to be built to replace of the Tiwai Point aluminium smelter that currently buys one-seventh of all electricity produced in NZ.

Current smelter owner Rio Tinto has repeatedly threatened to leave the market during electricity price negotiations, so the two generators having a viable alternative will give them leverage when the current contract expires in 2024.

Gordon said the Meridian and Contact’s stock price gain today was unlikely to be linked to the hypothetical hydrogen plant and more due to the relative strength of the sector.

“Fundamentally the gen-tailers are very well positioned with a strong demand profile,” he told BusinessDesk.

Forsyth Barr analysts began equity research coverage of Serko, starting the stock with a neutral rating and a target price of $7.20. 

“We are attracted to Serko’s highly ambitious and credible management team, dominance in Australasia,” they wrote.

“But note the competitive market structure in the US, historic difficulty in capturing the small-medium-enterprise market in Europe and uncertainty around pricing power in Australasia”.

Despite the cautious tone from the analysts, Serko shares climbed 0.5% to $7.50 today.

Livestock Improvement Corp lifted full-year revenue and profit as farmers increasingly turn to high-value genetics, including sexed semen. Shares in the company climbed 11.6% to $1.35.

The kiwi dollar was trading at 69.58 US cents by 3pm in Wellington, up from 69.20 cents yesterday.

The trade-weighted index was at 73.97 at 3pm, from 73.69 yesterday. The kiwi traded at 94.66 Australian cents from 94.53 cents, 76.63 yen from 76.06 yen, 58.99 euro cents from 58.76 cents, 50.76 British pence from 50.80 pence, and 4.4994 Chinese yuan from 4.4831 yuan.

ABOUT THE AUTHOR

Tags: Market Close

« NZ shares climb while covid variant still looms largeNZ shares rise on 'covid-fear trade' »

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Last updated: 21 October 2021 9:00am

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