Rising bond yields pull shares lower

New Zealand shares joined the general fall in global markets as investors priced in rising bond yields, that have been climbing on inflation expectations.

Friday, February 19th 2021, 6:24PM

by BusinessDesk

The S&P/NZX 50 Index fell 84.97 points, or 0.7%, to 12,548.63. Within the index, 27 stocks fell, 14 rose, and nine were unchanged. Turnover was $203.7 million.

“Global equity markets’ barnstorming run hit a small speedbump overnight, contributing to a slightly more cautious tone across broader financial markets,” Mike Jones, an ASB Bank economist said.

Equity investors have become cautious about high asset prices given the possibility bond yields will continue to rise as policymakers make a deliberate attempt to reflate their economies with fiscal stimulus.

“High yielding stocks aren’t going to go completely out of fashion any time soon but there may be some trepidation there,” said Greg Smith, head of research at Fat Prophets.

The yield on a ten-year NZ government bond has climbed above 1.5% having started the year at just 1%, while short-dated bonds have remained low.

Long-term investments and dividend-paying stocks were some of the weakest on the index today.

Electricity generator Meridian Energy fell 4% to $5.80, Trustpower declined 3.1% to $8.38, and Mercury NZ was down 2.4% at $6.40.

Ryman Healthcare had the day’s biggest decline, dropping 4.4% to $15.05. The retirement village operator benefits from a strong housing market, which has been fuelled by low-interest rates. Oceania Healthcare, however, rose 0.7% to $1.50.

Infrastructure assets were also weaker. Napier Port was down 2.3% at $3.38, while Port of Tauranga dropped 2% to $7.39 and Auckland International Airport slipped 2.2% to $6.75.

On the whole, most stocks were weaker as investors repriced the entire market. However, some of the market’s largest stocks bucked the trend.

A2 Milk had the day’s biggest gain — up 2% to $11.17 — although its share price remains depressed compared to 2020 levels, and Fisher & Paykel Healthcare also rose, climbing 1.7% to $32.95.

Earnings season found itself in a lull, with no big news today, after offering up “reasonably good” results, Smith said.

Moa Group today announced it had sold the original brewery and its assets as part of a shift to what it considers better-performing restaurant interests.

Smith said the $1.9m sale price was “nothing to crow about” and raised some questions, considering the effort that had gone into marketing the brand.

Off market, My Food Bag’s initial public offer opened today with shares available at $1.85.

Smith said while the offer price put the meal-kit company at the “top end of the valuation range”, investors seem attracted by the $16m dividend it has promised the market.

The kiwi dollar was trading at 72.11 US cents at 5pm in Wellington, up from 71.84 cents yesterday.

The trade-weighted index was at 74.69 at 5pm, from 74.40 yesterday. The kiwi was trading at 92.90 Australian cents from 92.68, 76.24 yen from 76.06 yen, 59.67 euro cents from 59.67 cents, 51.67 British pence from 51.87 pence, and 4.6663 Chinese yuan from 4.6340 yuan.

Tags: Market Close