Sharemarket doesn't like NZ's omicron outbreak

New Zealand shares and the kiwi dollar fell on Monday as investors eye up whether the spreading omicron outbreak will prompt the US Federal Reserve to signal faster and steeper interest rate hikes on Thursday.

Monday, January 24th 2022, 6:59PM

by BusinessDesk

The S&P/NZX 50 Index dropped 156.94 points, or 1.3%, to 12,191.06 today, and is down almost 6.5% so far this year in what’s been a slow start for equity markets as the prospect of rising interest rates saps the relative allure of shares. Turner was $112.2 million, with Wellington traders out for the region’s anniversary holiday.

Craigs Investment Partners investment adviser Peter McIntyre said the Fed’s upcoming meeting is leaving investors nervous about how high rates will rise in the coming 12 months.

“The market is concerned if there's going to be more than four interest rate increases from the Federal Reserve,” McIntyre.

That interest rate outlook is also weighing on risk-sensitive currencies such as the kiwi dollar, which fell to 67.12 US cents at 3pm in Wellington from 67.34 cents last week, and trading near a 15-month low. The trade-weighted index fell to 71.82 from 72.06.

Westpac economists said in a note that the kiwi breaking through a key technical level of 67.35 US cents might see it fall even further, and are targeting 66 cents.

“Admittedly, this will be a bumpy week for the NZ dollar, given the heightened event risk from Australia and NZ inflation data, the Fed decision, and US GDP data,” they said.

Eroad led the NZX50 lower, falling 7.7% to $4.56 in relatively light trading. The telematics company today released quarterly sales figures showing contracted unit growth of 53.3% in the December period, due largely to its acquisition of rival, Coretex.

McIntyre said the update was “mixed” with the uptake in North America still a concern for investors.

The tech company was one of a number to fall. Online travel software developer Serko dropped 6% to $5.50, cancer diagnostics firm Pacific Edge declined 3.3% to $1.18, and cinema software firm Vista Group International decreased 2.3% to $2.17.

“The technology sector has also been beaten up in the US over the last week or so, and it’s no surprise to see similar tech stocks on the NZX weaker today,” he said.

Grant Davies, an investment adviser at Hamilton Hindin Greene, said the community outbreak of the omicron variant and shift to red in the covid traffic light system is “a reason for investors to be pessimistic”.

Aviation and tourism companies have been among the hardest hit by the covid pandemic as they grappled with the loss of international visitors.

Air NZ fell 3.1% to $1.415 and Auckland International Airport dropped 2.9% to $7.20. Rental campervan operator Tourism Holdings recovered earlier losses in the day to end the trading session unchanged at $2.75.

Fisher & Paykel Healthcare posted the day’s biggest gain on the NZX50, rising 3.4% to $30.36. The breathing respirator maker has been one of the beneficiaries of the covid pandemic and has also enjoyed a more recent tailwind of a weaker kiwi dollar.

“The one stock that's doing quite well today is Fisher & Paykel Healthcare, who I guess play the other side with their respiratory sales,” Davies said.

“Although the impact of New Zealand's outbreak on them is probably relatively small, I think it's probably more sentiment-driven there.”

Ebos Group rose 0.9% to $38.50 after saying it accepted $66m of oversubscriptions in its $105m offering to retail shareholders at a discounted price of $34.50.

“So many people are keen to put more funds into it given the issue price performance and overall company performance over the last, well, many years. It's understandable that people would be keen to invest more in the company.”

Tags: Market Close