Serko bounces from low with inflation data 'not too hot'

New Zealand shares moved marginally higher as US inflation data matched expectations and Serko bounced back from a harsh sell-off.

Thursday, January 13th 2022, 7:01PM

by BusinessDesk

The S&P/NZX 50 Index rose 22.5 points, or 0.2%, to 12,8276.99. Turnover was very light, with just $84.9 million traded.

Travel booking software company Serko bounced 4.8% to $6.18 as it recovered from a sustained slide, which saw its share price drop more than 10% in recent days.

Tourism Holdings had the day’s biggest decline, falling 3.9% to $2.75. The stock has recently fallen 10% and is trading near a three-month low.

Energy stocks almost all rallied, despite a note from Forsyth Barr that warned electricity generators were unlikely to make share price gains in 2022.

Meridian Energy climbed 2.4% to $4.77, Contact Energy was up 1.3% at $7.90, and Vector - an energy network operator - rose 1.3% to $4.05.

“From a stock perspective, we expect interest rates and regulatory/political pressures to continue to provide headwinds for the sector and we maintain our negative view,” said analyst Andrew Harvey-Green.

Genesis Energy bucked the trend, falling 0.9% to $2.90, and announced it would report its half year earnings on February 28.

All of the investor attention right now is on the US, where the Federal Reserve is watching inflation heat up and evaluating how long they can keep interest rates at current ultra-low levels.

The US consumer price index data released overnight showed the highest inflation rate seen in 40 years with prices up 7% in 2021.

This number had been expected by the market and Wall Street indices climbed with investors relieved it wasn’t even higher.

Oanda analyst Edward Moya said there was concern that a hotter inflation report would have cemented four rate hikes in the US this year – as well as other policy tightening.

ANZ Bank’s research team is even more hawkish on the US outlook. They expect a 25-basis point hike in March followed by another four over the course of the year.

The US dollar declined on the consumer prices release, again as traders were braced for an even higher number. This saw the NZ dollar climb almost 1% from 67.88 US cents to 68.54 cents.

Bitcoin also recovered a couple of percentage points after a difficult month which saw its units plunge in value to US$10,000 (NZ$14,579), with some beginning to predict it could be the beginning of the end for the crypto-currency.

Bitcoin has previously been seen as a hedge against inflation. Moya said this was not an accurate view in the US but was true for some emerging market countries.

The Warehouse Group slid another 1.9% to $3.61 after Forsyth Barr slashed its target price following its trading update, which reported climbing costs were eating into profit margins.

Forsyth Barr’s head of research, Andy Bowley, lowered his 12-month target price from $4.35 to $3.85 but retained an outperform rating as the share price had fallen further still.

“We acknowledge the short-term risks presented by inflationary pressures and further covid-related costs,” he said.

But he said since the stock was trading at a price to earnings ratio of just 12x and at an approximately 20% discount to other NZ retailers, it still had an attractive risk and reward profile.

Tags: Market Close