NZ shares rally as retail data rebounds

Most New Zealand shares rose as local retail data showed the largest quarterly rise since 1995, with investors taking the rebounding sales as a sign of ongoing economic recovery.

Monday, November 23rd 2020, 6:28PM

by BusinessDesk

The S&P/NZX 50 Index added 58.93 points, or half a percent, to reach 12,501.74. Within the index, 33 stocks rose, 13 fell and four were unchanged. Turnover was $153.1 million.

Stats NZ data showed a $1.8 billion increase in total retail sales in the September quarter on the same period last year, some of which investors are hoping ends up on Kathmandu’s bottom line.

The outdoor clothing and goods retailer rose 3 percent to $1.37, equal to its highest level since the pandemic began, although it is still down 43 percent this year.

With few retailers listed on the exchange the gains were broad-based, two companies made larger gains than Kathmandu. Cancer screening company Pacific Edge rose 4.2 percent to 74 cents and Genesis Energy was up 3.8 percent to $3.27.

ASB senior economist Mark Smith said the record surge in retail volumes was considerably stronger than market expectations with a 28 percent climb from the prior quarter.

“Strong retail trade figures and the resurgent housing market suggest that the NZ economy is in little need of additional policy stimulus,” he said. “We expect 0.25 percent to be the low point in the official cash rate this cycle.”

The 10-year swap rate has risen from below 0.5 percent to above 0.8 percent this month as investors price in a higher official cash rate.

Brad Gordon, an investment adviser at Hobson Wealth Partners, said equity investors were also pricing in this new expectation which was putting pressure on yield stocks. Last week Meridian Energy and Contact Energy both fell 6 percent as investors swapped out into other yield investments.

Today, Ryman Healthcare posted the day’s biggest gain after last week reporting a weaker underlying profit, despite property valuations going up.

“Retirement stocks trade on the momentum of the housing market and I think that may just start to taper off a little bit,” Gordon said.

Some other property stocks were weaker today, Goodman Property Trust and Precinct Properties both declined 0.6 percent to $2.40 and $1.77, respectively.

Kiwi Property Group rose 0.8 percent to $1.285 after a valuation gain of $11.8 million on investment properties helped the firm to boost first half profit by 47.5 percent. But much like with Ryman, its underlying rental income declined 5.3 percent due to rent relief.

Other stocks making gains on the NZX today continued to be driven by covid vaccines being rapidly progressed through development stages.

Air New Zealand climbed 2.6 percent to $1.75, after already gaining 7 percent last week, and Z Energy rose 1.8 percent to $3.36 on the hope of selling more jet fuel when travel resumes.

The kiwi dollar was trading at 69.51 US cents at 5pm in Wellington, up from 69.18 cents on Friday, its highest level since June 2018.

ANZ economists said the main drivers for the currency was the covid vaccine, with New Zealand “better placed than others to bridge the gap” between now and when the virus is under control

“It’s logical that it should be one of the better performers, especially with the market switching off the idea of negative rates too. But it won’t be plain sailing, as too much NZ dollar strength would, of course dent recovery prospects,” said chief economist Sharon Zollner and strategist David Croy.

The trade-weighted index was at 73.44 at 5pm, from 73.20 on Friday. The kiwi traded at 95.00 Australian cents from 94.94 cents, 72.12 yen from 71.82 yen, 58.54 euro cents from 58.25 cents, 51.19 British pence from 52.16 pence, and 4.5618 Chinese yuan from 4.5500 yuan.

Tags: Market Close