Positive earnings lift NZ sharemarket

Strong local earnings reports boosted New Zealand's benchmark equity index on Friday, even as global markets wobbled.

Friday, May 20th 2022, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index rose 60 points, or 0.5%, to 11,267.39. Turnover was $138 million.

NZ had one of the few share markets moving higher on Friday as investors in other parts of the world continued to worry about the risk of a global recession.

“Stocks and risk sentiment haven’t managed any sort of bounce from yesterday’s rout, and seem to be waiting for fresh direction,” said ASB economist Mike Jones.

Locally, a set of strong earnings results gave markets a lift with some companies seemingly fending off difficult economic conditions.

Ryman Healthcare, one of the NZX 50’s largest stocks, jumped 7.8% to $9.85 after it reported an underlying annual profit up 13.6%.

The aged care provider has been sold off heavily as interest rates have risen, with investors worried about the company’s high level of debt. That metric has improved somewhat, with gearing easing to 42% from almost 45% last year.

Fellow retirement village operator, Oceania Healthcare climbed 1% to $1.04 after also reporting earnings growth and telling investors it was well-positioned for more.

Popular retail stock My Food Bag bounced 7.6% to 85 cents as the company navigated through the omicron outbreak and the climbing cost of doing business unscathed.

The meal-kit company met the performance targets it laid out when it listed last year and said it was looking for acquisition opportunities that could drive future growth.

Many investors had been concerned the company’s margins might be squeezed by inflation, or that it would lose ground to competitor Hello Fresh as consumers become more cost-conscious.

Leading the index higher was fleet management company Eroad, which soared 8% to $2.69 after simply announcing when it would report earnings.

The stock had fallen almost 40% after its founder and chief executive unexpectedly resigned, just as tech stocks were falling out of favour globally.

Today it recovered some of that ground after it said the acting CEO and acting financial officer would give an update on financial and operational performance on May 26. 

Infratil rose another 0.6% to $8.15 after Forsyth Barr analysts said Thursday’s earnings result ticked all the boxes, with strong earnings growth for its data centre business and Vodafone, and external investors interested in buying parts of some assets.

“With a difficult backdrop for NZ equities, we view Infratil as one of the better risk rewards,” said analysts Aaron Ibbotson and Matt Montgomerie.

Tech stocks, Vista Group and Serko had the worst performances of the day, falling 3.1% to $1.55 and 2.4% to $4.05, respectively.

The NZ dollar continued to climb after the government’s annual budget was released yesterday; it was trading at 63.79 US cents, up from 63.01 yesterday.

ANZ strategist Brian Martin said the kiwi was higher mostly due to a bounce in commodity prices and cryptocurrencies – essentially, risk assets – and a decline in US bond yields.

“Market sentiment is extremely fragile and convoluted at the moment – while there is acknowledgement that rate hikes are needed, that has naturally stoked fears of a hard landing and slower growth,” he said in a note.

Martin said the Reserve Bank’s monetary policy statement, set for release next Wednesday, could be key for the NZ dollar as it will prompt debate about whether the local economy will have to enter a recession to halt inflation.

Tags: Market Close

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