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NZ shares routed as ANZ forecasts OCR to hit 3%

New Zealand shares fell sharply, and bond yields surged to multi-year highs after ANZ Bank predicted the Reserve Bank would hike the official cash rate all the way to 3%.

Wednesday, January 19th 2022, 6:47PM

by BusinessDesk

The S&P/NZX 50 Index fell 202 points, or 1.6%, to 12,612.31. Turnover was $116 million.

Local shares were already off to a weak start this morning as global interest rates continued to push higher, putting pressure on equity markets.

Key equity indices on Wall Street dropped overnight as US traders returned from a long weekend and were greeted by US 10-year bond yields at a two-year high.

“Technology stocks were weaker with the Nasdaq down nearly 2%, as investors remain cognisant of the valuation implications of rising interest rates for high priced growth stocks,” said Greg Smith, Devon Fund’s head of retail.

NZ's benchmark stock market index posted its first annual decline in a decade last year, largely due to rising interest rates.

Today, ANZ warned that interest rates could climb significantly higher than currently expected by the market.

Chief economist, Sharon Zollner said the bank had changed its official cash rate call and was now forecasting the Reserve Bank of NZ (RBNZ) would the benchmark rate to 3% by April 2023 from its current 0.75% level.

“Prolonged strong monetary and fiscal stimulus in response to what turned out to be a net negative supply shock has unleashed the inflation dragon,” she said.

“Central banks now have to do what’s needed to bring inflation down, painful as that might be.”

Some of that pain will be felt by the equity market which has seen prices soar during the pandemic era, coaxed along by stimulatory policy from the central bank.

“There’s undeniably been a boom; there’s correspondingly an undeniable risk of a burst as the extreme monetary stimulus unwinds,” she said.

Zollner said NZ 10-year bond yields will gravitate towards 3.5% – up from 2.6% today – as the year goes on.

The two- and five-year government bond yields, which are more affected by RBNZ decisions than the 10-year, shot up to their highest levels since 2017.

This sent stocks across the board falling, with just seven of the 50 companies in the benchmark index posting share price gains. Thirty of these stocks fell more than 1%.

Vista Group International led the fall, dropping 4% to $2.18, followed by stock market operator NZX which declined 3.3% to $1.76.

Other technology stocks fell as well: Pushpay Holdings was down 2.4% at $1.23, Rakon plunged 8.6% to $1.81 and Serko fell 1.5% to $6.01.

Plexure and ikeGPS both bucked the trend and climbed 2% to 51 cents and 3.8% to 82 cents, respectively.

NZ's biggest listed company, Fisher & Paykel Healthcare fell 3.2% to $30.40 with other large companies such as Ryman Healthcare, Contact Energy and Mainfreight each falling more than 2%.  

Casino operator, SkyCity Entertainment Group posted the biggest gain on the index as it rose 1.7% to $3.03.

The kiwi dollar dropped under the pressure of rising US interest rates and was trading at 67.74 US cents at 3pm in Wellington, down from 68.02 cents yesterday.

Tags: Market Close

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora ▲5.43 ▲4.57 ▲5.58 ▲5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
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Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
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TSB Special 4.79 ▼4.34 5.25 5.35
Unity 5.65 ▲4.80 ▲5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
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Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 16 May 2022 9:03am

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