by Paul McBeth
Air New Zealand sank to its lowest level since the nation’s borders were closed in response to the 2020 covid-19 pandemic as Forsyth Barr analysts noted the dramatic rise in jet fuel prices amid the Middle East conflict.
The national carrier was one of the hardest hit stocks on a down week for the S&P/NZX 50 index, as markets were roiled by US President Donald Trump’s strike on Iran, with rising Brent crude prices reviving inflationary fears and pushing up bond yields amid growing prospects that central banks, including New Zealand’s Reserve Bank, will have to raise interest rates to quell increases in consumer prices.
Meanwhile, the NZX50 fell on Friday in a mixed day across Asia, with Fisher & Paykel Healthcare the biggest drag on the benchmark, as investors remained on edge over the Middle East conflict as US defence secretary Pete Hegseth signalled attacks would intensify, while the White House weighs options to address spiking energy prices.
And Comvita dipped after the honey products maker sidestepped speculation across the Tasman that Fraser and Neave had taken a stake in the company, saying it wasn’t aware of the billionaire-backed food and beverage firm doing so.
Sliding scale
The NZX50 fell 98.54 points, or 0.7%, to 13,519.35, with 31 stocks declining, 13 gaining and six unchanged. Turnover across the main board was $129.8 million, of which F&P Healthcare accounted for $15.2 million as the medical device maker fell 2.1% to $39.90.
Air New Zealand fell as low as 50.5 cents – its lowest since March 2020 on an adjusted basis – and ended the day down 6.4% at 51 cents, leading the benchmark lower on the biggest volume of the day, with 6 million shares changing hands.
Forsyth Barr analysts said crack spreads – the gap between the price of refined products and the raw crude used to make them – had widened with the Middle East conflict having a disproportionate impact on jet fuel, and that they understood Air NZ’s opportunistic jet fuel swaps had expired.
“Consequently, the alarming rise in the crack spread over the past two days could dramatically impact Air New Zealand's P&L,” Forsyth Barr head of research Andy Bowley said in a note, referring to the profit and loss statement. “We're reticent to extrapolate today's crack spread given the volatile nature of oil markets and the ultimate supply response, but to put the current situation into perspective, we estimate Air NZ is exposed to an additional daily fuel cost of circa $4 million-to–$5 million per day, and this for a business that is currently loss-making.”
That slump took Air NZ’s weekly decline to 8.1%, the steepest decline on the NZX50, which was down 1.5% across the week.
Tourism Holdings was another to feel the brunt of the Trump administration’s campaign, falling 6.6% in the week to close Friday at $2.54. A 1.6% gain on Friday helped ease that decline.
Interesting rates
Retirement village operators were weaker across the week as rising oil prices stoked fears that more expensive energy will feed into consumer price and force central banks to raise interest rates to quell any inflationary pressures.
The yield on New Zealand’s 10-year government bond rose 4 basis points to 4.49% on Friday, having started the week at 4.33%. The kiwi dollar traded at 59.11 US cents at 5pm in Auckland from 59.27 cents yesterday.
Ryman Healthcare fell 7.6% across the week to close at $2.30, while Summerset Group Holdings declined 3.1% to $10.33 and Oceania Healthcare dropped 4.8% to 79 cents.
Still, Brent crude prices eased during the Asian session on Friday as the White House said it’s weighing options to smooth the spike in energy prices, with futures down 1.1% at US$84.49 a barrel at 5pm in Auckland.
Westpac NZ economists played down the prospect of New Zealand’s Reserve Bank being forced to tighten monetary policy as a result of the oil price rises, due to the existing spare capacity in the economy.
“Indeed, given that starting point, it would be folly to entirely rule out scenarios that could lead to further policy easing,”
Westpac’s economists said in a note. “This might occur if the conflict led to a severe downward revision to the outlook for global growth and commodity prices, dampening New Zealand’s fledgling recovery and posing downside risks to the medium-term inflation outlook.”
Not all gloomy
Stock markets across Asia were mixed on Friday, with Australia’s S&P/ASX 200 down 1.1% in late trading, while Japan’s Nikkei 225 gained 0.4% and Hong Kong’s Hang Seng rose 1.8%.
Among decliners on the NZX on Friday, Oceania Healthcare dropped 3.1%, Westpac Banking Corp was down 2.9% at $48.50 and Sanford fell 2.6% to $7.64.
Kiwi Property Group declined 1.5% to 98 cents after saying it would keep full ownership of the Sylvia Park Lifestyle property in Auckland after the Mackersy LFR fund wasn’t going to raise the minimum capital needed in the agreed timeframe.
SkyCity Entertainment Group was unchanged at 82.5 cents after saying it’s received a notice of proceedings seeking to test the lawfulness of its online gaming operations.
Serko posted the biggest gain on the NZX50, up 3.2% at $1.91 and Gentrack advanced 2.5% to $8.15, joining a rally among tech stocks across the Tasman.
Outside the benchmark index, Comvita fell 2.9% to 67 cents after the honey products maker said it wasn’t aware of Fraser and Neave taking a stake in the firm after The Australian’s Dataroom column reported the Singaporean food and beverage company had taken a strategic shareholding.
Savor Group dropped 7% to 20 cents as managing director Lucien Law dropped below the 5% substantial shareholder threshold after selling 1.5 million shares at 19 cents apiece to Sky Network Television chair Philip Bowman, who now owns almost 13% of the Auckland hospitality venue operator.
Taiko Critical Minerals extended its strong debut on the NZX, climbing another 4.6% to 23 cents in its second trading day, with a volume of 1.8 million shares.
Paul is a staff writer for Good Returns based in Wellington.
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