NZX 50 finishes month on a high

New Zealand shares climbed in a broad rally on high trading volumes as investors rebalanced portfolios on the last trading day of October.

Friday, October 29th 2021, 6:31PM

by BusinessDesk

The S&P/NZX 50 Index rose 128 points, or 1%, to 13,099.82. Turnover was $208.3 million.

Pushpay Holdings led the market higher, rising 3.8% to $1.90, followed by A2 Milk which rose 3.5% to $6.57 and Air NZ, up 3.1% at $1.67. All three stocks had more than a million shares traded.

Shares in Move Logistics jumped 7.4% to $1.74 after the transport company issued 13 million shares at an 8-cent premium to its asking price of $1.40.

The company is raising $40m in a three-part process, and an institutional entitlement offer was taken up by 93% of eligible institutional shareholders with the leftovers offered in the oversubscribed bookbuild.

Retail shareholders will now get to take up their entitlement at $1.40 in the final part of the capital raise.

Stock market operator NZX Limited climbed 1.2% to $1.73 after reporting its revenue was up 20% in the third quarter at $22.1m. Its year-to-date revenue is up 13% at $64.6m.

BNZ market strategist Nick Smyth said equity markets have been resilient to remarkable volatility in bond markets.

Today, the Reserve Bank of Australia declined to defend its 0.1% yield curve control target on a three-year government bond, allowing it to climb nearly eight times to above 0.7%

A yield curve control policy is when a central bank promises to buy enough bonds to prevent its interest rate from climbing above a set target.

Australia’s central bank allowing this target to be broken has prompted speculation that it will abandon or weaken the policy at its next meeting.

The RBA had previously suggested it would keep interest rates ultra-low until 2024, but inflation is throwing doubt on whether that will still be possible.

The volatility in Australia has spilt over into the domestic rates market, Smyth said, causing sharp increases in some market interest rates.

“The 2-year swap rate was 18bps higher in extremely illiquid market conditions, hitting its highest level since early-2017, at 2.35%,” he said.

The NZ 2-year swap rate, which is used as the benchmark, is up 92 basis points this month and is on track for its biggest monthly increase since June 1994.

New Zealand’s yield curve is now ultra-flat, with less than 50 basis points separating the yields on 2 and 10-year government bonds.

Smyth said the flatter curve was consistent with expectations that RBNZ will slow economic growth by tightening its monetary policy in the future.

While this will create a headwind for equity markets, it is supportive for the NZ dollar which briefly climbed above 72 US cents overnight having traded as low as 68.60 in the past month.

It traded at 71.80 US cents at 3pm in Wellington, up from 71.60 cents yesterday.

Tags: Market Close