NZ equities and dollar follow GDP higher

An historic bounce in New Zealand’s gross domestic product buoyed investors' sentiment spurring equities and the kiwi dollar higher.

Thursday, December 17th 2020, 7:17PM

by BusinessDesk

The S&P/NZX 50 Index rose 59.78 points, or 0.5 percent, to 12,888.77. Within the index, 28 stocks fell, 17 rose and five were unchanged. Turnover was $160.4 million.

Data released by StatsNZ today showed gross domestic product expanded 14 percent in the September quarter, a stronger than expected rebound from the previous quarter which recorded an 11 percent contraction due to covid lockdowns, a smaller decline after a revision.

“Today’s GDP report confirmed what we have been saying for many months: successfully eliminating the spread of covid-19 has allowed the New Zealand economy to rapidly swing back into action once the restrictions were lifted,” said Michael Gordon, senior economist at Westpac.

The positive economic news led to a sharp rise in the NZ dollar, Gordon said. Today’s GDP numbers were enough to see the currency hold onto a break above 71 US cents, an achievement which had so far proved elusive.

The kiwi dollar was trading 71.26 US cents at 5pm in Wellington, up from 71.04 cents yesterday, although it touched a low of 70.52 cents shortly after the US Federal Reserve kept its policy unchanged earlier in the day.

The trade-weighted index was at 74.18 at 5pm, from 74.11 yesterday. The kiwi traded at 93.95 Australian cents from 94.04 cents, 73.65 yen from 73.55 yen, 58.35 euro cents from 58.40 cents, 52.68 British pence from 52.84 pence, and 4.6586 Chinese yuan from 4.6465 yuan.

The Fed's cautious outlook might have made investors nervous initially, but its commitment to continue bond-buying until the economy records substantial improvement seemed enough to reassure the market.

NZ’s benchmark equity index was led higher by Pushpay Holdings as the stock recovered from a sell down by two co-founders yesterday. The church management software company climbed 2.2 percent to $1.88.

Casino operator SkyCity Entertainment, stock exchange operator NZX and Auckland International Airport all had more than 2 percent gains, closing at $3.33, $1.94, and $8.06, respectively. However, it was Fisher & Paykel Healthcare’s 1.8 percent rise, at $33.15, that did the most to push the market's main index into positive territory.

The upwards momentum may be short-lived as one of the index’s biggest stocks, A2 Milk Company, was placed in a trading halt this morning while it works out whether it will have to revise its earnings guidance.

The milk marketing firm said it had become aware of information that “may require us to release an announcement to revise our previously issued guidance to the market”.

The shares closed at $14.12 on the NZX yesterday, having slumped from $21.51 at the end of July as investors grew wary of its outlook.

While the company didn’t say whether earnings would be revised up or down, investors took it to be bad news and aggressively sold off shares in the company’s key supplier Synlait Milk.

The dairy processor's shares fell 7.4 percent to $5 as traders found a place to price in their expectations of a downgrade while trading in A2 was unavailable.

Fuel retailer Z Energy fell 4.2 percent to $3.23 after getting into a dispute with Refining NZ over its processing agreement with the refinery.

The company has stopped paying fee floor payments saying it is unable to access the full capacity of the refinery, or be compensated for it. Meanwhile, Refining NZ has said its customers should be paying $70 million more than they have been. Refining NZ shares were unchanged at 57 cents.

Tags: Market Close