Market ‘perfectly priced’ for placeholder monetary review

New Zealand shares and the kiwi dollar rose as the Reserve Bank of NZ left all monetary policy settings unchanged and hinted it could hold there well into 2022.

Wednesday, April 14th 2021, 5:56PM

by BusinessDesk

Kiwi Bank chief economist Jarrod Kerr said interest rate markets are perfectly priced for the central bank’s predictable ‘least regrets’ approach.

“Today’s ‘review’ was nothing more than a stepping-stone ahead of the full May statement,” he said in a note.

Even so, currency traders reacted positively to the RBNZ’s short statement, pushing the kiwi dollar up from 70.50 US cents to 70.87 cents, at 5pm in Wellington.

The yield on a 10-year government bond was at 1.7%, similar to where it has been throughout the past month. The two-year yield was also little changed at 0.26%.

Interest rates have lifted from the depths of last year as the economic outlook has improved but are still well below levels that would have serious impact on valuations in the equity market, Kerr said. KiwiBank today raised a key retail deposit rate, for 120 day deposits, by 0.55% to 1%.

The S&P/NZX 50 Index rose 94.96 points, or 0.8%, to 12,751.38. Within the index, 35 stocks rose, 12 fell and three were unchanged. Turnover was $174.3 million.

Strong gains for renewable electricity stocks – often bought for their yield – were responsible for much of the day’s gain.

Meridian Energy jumped 4.5% to $6.05 and Contact climbed 3.3% to $7.61 as investors continued to play tug-of-war with a clean energy ETF.

The exchange traded fund is getting a make-over on Monday, which will result in Meridian and Contact becoming a much smaller part of the index.

Retirement village operator Arvida Group climbed 3.5% to $1.76 after being given a ‘buy’ recommendation from brokerage firm Forsyth Barr. This is its highest price since mid-February.

Vista Group International climbed 4% to $2.37 and Synlait Milk was up 3.8% at $3.55, although light trading volume was driving the swings.

Agriculture group Scales Corp had the day’s biggest decline, falling 1.5% to $4.56.

Shares in My Food Bag continued to shuffle 13% below the listing price. Today it fell 2.4% to $1.60. The meal-kit company has announced it will announce its first full-year result on May 21, providing the first opportunity for investors who lost money taking part in the IPO to judge its actual performance.

In currency markets, the trade-weighted index was at 74.29 at 5pm, from 73.74 yesterday. The kiwi traded at 92.45 Australian cents from 92.23 cents, 77.24 yen from 76.90 yen, 59.26 euro cents from 58.94 cents, 51.45 British pence from 51.02 pence, and 4.6330 Chinese yuan from 4.5889 yuan.

Tags: Market Close