NZ shares down on ‘staggering’ GDP number

New Zealand shares fell and bond yields were up, as investors reacted to GDP data which showed the economy grew 2.8% in the second quarter of the year.

Thursday, September 16th 2021, 7:16PM

by BusinessDesk

The S&P/NZX 50 Index dropped 52.98 points, or 0.4%, to 13,079.51. Turnover was $158 million.

Head of research at BNZ, Stephen Toplis said the number was “staggering” and showed there was more excess demand in the economy than previously thought.

This gives the Reserve Bank of New Zealand, which was already eyeing a rate hike, even more reason to hit the economic brakes in October.

“The last time we had this amount of excess demand was back in 2007. The cash rate rose to 8.25% then,” Toplis said.

Market interest rates certainly reacted as if a higher official cash rate was coming, the yield on a two-year government bond surged almost 80 basis points to 1.12% – its highest level since December 2019.

However, Toplis said the data didn’t mean the RBNZ would “slam on the brakes” as the June quarter data probably overstated the economic recovery, particularly with much of NZ back in lockdown.

“Given all this, we are loath to jump to the conclusion that the unexpectedly large increase definitively means the RBNZ will move to raise the cash rate by 50 basis points at its October meeting, as some are now suggesting”.

Still, higher bond yields took a little oxygen out of the local sharemarket which was already in consolidation mode after a dramatic jump during earnings season.

Some stocks that would usually welcome strong GDP data were leading the decline today.

Fast food operator Restaurant Brands NZ dropped 2.9% to $15.35 and construction products manufacturer Steel & Tube Holdings declined 2.8% to $1.05.

Logistics firm Mainfreight fell 2.7% to $92.52, while its smaller peers followed its lead. Move Logistics dropped 2.5% to $1.55 and Freightways was down 1.2% at $12.59.

Heartland Group had the day’s biggest gain, climbing 2.2% to $2.35, with the big banks also making small gains. ANZ Bank rose 0.4% to $28.70, and Westpac was up 0.5% at $26.74.

Vista Group International dropped 1.2% to $2.52, after the chief executive of its subsidiary Movio reported he had sold his stake, for $1.4m, to be reinvested in a family business.

Meridian Energy rose half a percent to $5.18 as it told the market national hydro storage increased from 103% to 126% of the historical average and retail sales volumes were 12.2% higher than August 2020.

The company also announced the chief executive of its Australian businesses, Jason Stein, will remain in the job until March 2022 or when the businesses are sold.

Meridian’s annual report said Stein would depart in December this year, which was also when shareholders were told to expect confirmation of a sale if there was to be one.  

Z Energy shares climbed 0.3% to $3.46 after the fuel retailer confirmed earnings guidance to be in a range of $270m to $310m, despite experiencing reduced demand for all fuels due to the pandemic.

The company’s share price is currently more closely linked to a takeover offer at $3.78 than it is to this year’s earnings. 

The kiwi dollar had been looking like it would dip below 71 US cents before the GDP number gave it a boost to as high as 71.34 – although the currency slowed and fell back to 71 cents throughout the day.

Tags: Market Close

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