New Zealand’s S&P/NZX 50 index dropped from a record as the prospect of interest rate hikes pushed up government bond yields, sapping demand for property and utility stocks typically held for their reliable dividends.

Precinct Properties NZ led the NZX 50 lower after the commercial landlord lifted earnings in line with expectations and projected another year of unchanged dividends, while Summerset Group Holdings surged as it reported improving cash flow.

Stocks across Asia were mixed after Nvidia’s latest quarterly earnings defied expectations for yet another quarter and projected still more rapid growth to come.

And Heartland Group Holdings declined even as the Toi Foundation unanimously voted in favour of selling TSB Bank to the NZX-listed financial services firm.

Cooldown period

The NZX 50 fell 133.16 points, or 1%, to 13,880.05, with 31 stocks declining, 13 gaining and six unchanged. The S&P/NZX 20 index futures contract for September dropped 0.9% to 7,717, with 460 lots traded for a value of $3.6 million, while the NZX 20 sank 1.1% to 7,773.4.

Turnover across the main board was $176.5 million, of which Infratil accounted for $24 million as it fell 1.3% to $14.56. The infrastructure investor said its One New Zealand telecommunications business planned to spin out its mobile access network into a new entity co-owned by smaller rival 2degrees, which would do the same. The deal is subject to regulatory approval.

Spark New Zealand fell 2.3% to $2.15.

Stock markets across Asia were mixed despite the better-than-expected Nvidia result, which underpinned futures pointing to a 0.4% gain for the S&P 500 when Wall Street opened.

South Korea’s Kospi – seen as a proxy for the artificial intelligence trade – jumped 1.4%, while Japan’s Nikkei 225 slipped 0.1%, and Australia’s S&P/ASX 200 index fell 1.1% in late trading as economists predict the Reserve Bank of Australia will raise the target cash rate as soon as next month.

New Zealand’s Reserve Bank is expected to lift the official cash rate a quarter-point to 2.75% when the monetary policy committee reviews the benchmark next week.

“The RBNZ’s path has been well telegraphed, with wholesale rates market pricing in a near-100% probability of a move to 2.75% next week,” Kiwibank economists said in a note. “A 3% cash rate is fully priced by year-end. Hikes are thought to continue next year, with an implied cash rate of 3.65% to end 2027. We disagree.”

The Kiwibank team said it expected the benchmark rate to find a ceiling at 3.25%.

The yield on New Zealand’s 10-year government bonds climbed 4 basis points to 4.73% at 5pm in Auckland while its Australian equivalent was up 8 basis points at 5.09%.

Rising interest

Rate sensitive companies were among the hardest hit on the local board, with Precinct leading the NZX 50 lower as it dropped 4.3% to $1 after reporting a 7.6% lift in funds from operations and projecting an unchanged annual dividend of 6.75 cents per share in the current year.

Stride Property fell 2.6% to $1.12 while Meridian Energy slipped 2.7% to $5.35 and Auckland International Airport declined 1.5% to $8.57.

Ebos Group fell 4%, or 88 cents, to $21.17 after shedding rights to a 61.5 cents per share dividend. Across the Tasman, Sigma Healthcare sank 7% after its earnings missed expectations. Fisher & Paykel Healthcare declined 1% to $44.20.

Heartland slipped 1.2%, or 1.5 cents, to $1.275 after going ex-dividend on a 3.5 cents per share payment. Separately, it welcomed the announcement by Toi Foundation on the TSB deal progressing.

Summerset surged 9% to $8.58 after the retirement village operator more than trebled first-half cash flow from existing operations.

Tim O’Loan, a research analyst at Amova Asset Management, said the result largely met his expectations, with the company taking sensible steps to strengthen the balance sheet.

“The improvement in cash generation suggests that the portfolio is starting to mature and produce more cash than the market had been expecting,” O’Loan said in a note. “Management's willingness to slow the build rate and prioritise debt reduction is a positive for me, as it shows they're focused on maximising long term shareholder value rather than simply chasing growth.”

Ryman Healthcare climbed 2.4% to $2.13 and Oceania Healthcare advanced 1.3% to 81 cents.

Meanwhile, Genesis Energy gained 1.1% to $2.70 after the electricity generator-retailer lifted annual earnings 11%, while cautioning of a slower year ahead.

SkyCity Entertainment Group was the most heavily traded stock on the day with a volume of 6.9 million shares changing hands, ending the day unchanged at 67.5 cents.

Outside the benchmark index, Winton Land sank 13% to $1.12 after chief financial officer Jean McMahon resigned and Macquarie Asset Management-related director Jason Kemp stepped down as chair of the nominations and remuneration committee. Kemp said he shared the same concerns over majority shareholder and director Chris Meehan’s views on corporate governance as independent directors Steven Joyce and Guy Fergusson, who announced their departures yesterday.

Reporting by Paul McBeth.