Shares dip ahead of US Fed meeting

Investors sent the New Zealand sharemarket's headline index down on Wednesday as they awaited the outcome of the world’s most important central bank meeting in the United States overnight.

Wednesday, December 15th 2021, 6:25PM

by BusinessDesk

The S&P/NZX 50 Index fell 60 points, or 0.5%, to 12,869.41. Turnover was $141 million.

BNZ strategist Jason Wong said equity markets appeared to be more nervous about the Federal Open Market Committee update tomorrow than interest rate markets were.

Wall Street indices fell approximately 1% while rates were fairly unmoved.

The US Federal Reserve will publish updated economic forecasts, including its projections for interest rates. The committee has shifted its expected rate hikes forward at each of the past two meetings and many expect it to do so again.

“Since those last two updates, inflation has surged into another realm and there is a rising chance that we’re witnessing one of the worst policy blunders in modern history,” Wong said.

The value of equities and other investment assets have shot up in the past two years as central banks have crushed interest rates and printed money.

Many investors are concerned that prices will drop significantly as these policy settings are reversed and the bankers move to cool inflation.

“Higher-priced technology stocks could underperform as interest rates rise, and some potentially may also lose their shine should pandemic tailwinds fade with the reopening,” said Greg Smith from Devon Funds.

Vista Group and Pushpay Holdings were among the worst-performing NZ stocks – each dropping around 3% to $2.32 and $1.33 – after US tech companies fell overnight.

Kiwi Property Group led the market lower, falling 3.7% to $1.18, while Stride Property units were unchanged at $2.07 after completing its $20m retail offer and accepting an extra $3.9m.

Steel & Tube Holdings jumped 6.6% to $1.46 after hiking its earnings guidance for the second time in two months.

The company now expects earnings before interest and tax of up to $22m for the six months ending December 31 but won’t forecast the second half of the year due to covid-19 uncertainty.

Wellington Drive Technologies' share price climbed after it told investors to expect US$47m of revenue and earnings of NZ$3.9m for the 2021 financial year.

This was within its previous guidance range, but the share price still rallied 5.8% to 18.3 cents per share.

Wellington Drive said revenue is expected to grow approximately 25% to US$60m next year, with the additional profits to be reinvested into expanding the engineering and sales team.

Shares in Move Logistics climbed 1.8% to $1.66 today. The stock is down 11.2% in the past month but has leapt more than 60% in the past six.

Castle Point Funds Management today reported it had bought almost $4m worth of shares in the logistics company for several of its funds.

The boutique fund manager is known for making long-term, high conviction investments in value stocks.

Co-founder Stephen Bennie has previously said an investor should be able to write down their entire portfolio on a single piece of A4 paper.

Gentrack Group climbed 1.6% to $1.87 having replaced a $25m debt facility that expires in March next year with a new one from BNZ.

The NZ dollar fell again as traders waited for the Federal Reserve to meet. It was trading at 67.39 US cents at 3pm in Wellington, down from 67.48 cents yesterday.

Markets have been much less interested in domestic monetary policy and have been looking toward the US policy change to set the tone.

Tags: Market Close