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The Markets

Stock investors wait on monetary policy decisions

The New Zealand sharemarket dipped nearly half a percent on the eve of the Reserve Bank of NZ’s latest interest rates move, and Infratil continues to set the pace among individual stocks.

Tuesday, May 23rd 2023, 6:49PM

by BusinessDesk

The S&P/NZX 50 Index had a soft afternoon and fell 48.8 points or 0.41% to 11,944.2 as it waited for the Reserve Bank monetary policy statement, with an expected 25 basis points increase in the Official Cash Rate to 5.5%.

There were 69 gainers and 58 decliners over the whole market on volume of 26.63 million shares worth $119.84m.

Jeremy Sullivan, investment advisor with Hamilton Hindin Greene, said the market was eagerly anticipating the Reserve Bank announcement, as well as a conclusion to the negotiations on the United States debt ceiling.

“Most of the index movement downwards was driven by two stocks – Fisher and Paykel Healthcare and Mercury Energy. But Infratil continues to be a shining light on the market following its latest result, a near 12% rise in earnings.”

Market leader Fisher and Paykel Healthcare was down 64c or 2.43% to $25.66 as the NZ dollar continued to strengthen against the US greenback following the budget and likelihood of higher interest rates.

The NZ dollar was trading at US62.75c, up from US61c last week, and reached an intraday high of US63.03c.

Sullivan said 95% of Fisher and Paykel’s earnings come from overseas, a lot of it in the US, and a stronger NZ dollar is not good for exporters.

Energy news

Mercury, whose supply is mainly North Island-based, declined 11c to $6.40 after Transpower warned about rolling power cuts during the winter.

National grid operator Transpower said it is working closely with the electricity sector to manage potentially tight supply during cold snaps this winter, and consumers may be asked to cut back on power use at peak times.

Most other energy stocks were also down: Contact declined 4c to $8.02; Genesis was down 3c to $2.71; Manawa decreased 5c to $4.73; while Meridian was up 3c to $5.44.

Utilities investor Infratil increased 17.5c or 1.85% to $9.63 after falling nearly 3% the day before, and is now trading at all-time highs since listing in 1994. Its share price peak was $9.745, achieved on May 19. One broker has lifted its target price to $11.30.

Sullivan said investors had now digested Infratil’s update and the stock had done incredibly well. “Infratil has a nice diverse portfolio and there’s further upside with the US-based Longroad Energy which is expected to have a material uplift with its renewables.”

Mainfreight was down 50c to $71; Freightways declined 13c to $9.29; Skellerup Holdings shed 10c or 2.06% to $4.75; Restaurant Brands decreased 10c to $6.90; and Hallenstein Glasson fell 20c or 3.21% to $6.03.

Gentrack retreated 19c or 4.43% to $4.10; KMD Brands declined 3c or 2.63% to $1.11; and Smartpay Holdings was down 3c or 1.9% to $1.55.

Eroad rose 5c or 9.43% to 58c; Oceania Healthcare added 3c or 3.95% to 79c; Pacific Edge increased 1.5c or 3.26% to 47.5c; Sky TV gained 5c or 2% to $2.55; Task Group collected 2.5c or 5.38% to 49c; and Savor improved 1.5c or 4.23% to 37c.

Turners Automotive was down 1c to $3.79 after reporting group revenue rising 13% to $390m and a record NPBT result of $45.5m, up 6% on FY22.

Turners said record earnings in the Auto Retail, profit up 28%, and Insurance divisions offset Finance headwinds, with “compression of net interest margin.” The company continues to achieve strong results in challenging conditions, but the interest rate cycle may impact the timing of its targeted $50m net profit in the 2025 financial year. Tower, down 1c to 60c, has purchased $100m of reinsurance cover for a fourth catastrophe event up to $889m.

Tower already has similar cover for a third catastrophe event, and told the market it has sufficient reinstatement cover for Cyclone Gabrielle insurance claims.

Me Today, up 0.002c or 25% to 1c, told the market that the yield from its mānuka honey harvest was down 50% to 61 tonnes and quality dropped with the value being much less than expected, resulting in a $2.1m writedown.

Orders worth $1.6m for its BEE+ product have now been shipped and the second half sales will be higher than the first six months of the financial year, and the operating loss will be lower, Me Today said.

NZ Oil & Gas was up a further 0.005c to 38.5c. It has risen from 36c on Friday since announcing the eighth well in the Indonesian Mahato PB field is producing 800 barrels of oil a day. Its subsidiary Cue Energy has a 12.5% stake in the Mahato production sharing contract. The PB field is producing a total of 6,300 barrels a day, a 33% increase since the start of the 2023 financial year.

Tags: Market Close

« Investors worry about interest rates – NZX50 droopsInvestors lift shares after a less hawkish Reserve Bank outlook »

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