NZ shares edge higher as interest rates ease

New Zealand shares edged higher as bond yields and swap rates eased with investors appearing to brush off the risk of inflation.

Wednesday, June 9th 2021, 8:10PM

by BusinessDesk

The S&P/NZX 50 Index rose 48.85 points, or 0.4%, to 12,566.50. Within the index, 15 stocks fell, 28 rose and seven were unchanged. Turnover was $395 million.

Financial markets around the world were fairly muted ahead of an important inflation indicator being released in the United States on Thursday night.

The consumer price index is expected to deliver a “monster of a result” with headline inflation at 4.7% and core inflation at 3.5%, said BNZ interest rate strategist Jason Wong.

Despite the risk of higher inflation pushing central banks to raise interest rates, both NZ’s bond yields and swap rates fell during the past 24 hours.

“If the market fears inflation might crack 5% it isn’t obvious by looking at the bond market,” Wong said in a note.

Lower interest rates are welcome on the yield focused NZX 50, which finished the day with a modest gain, led by Vista Group jumping 5.9% to $2.33 on very light volume.

The stocks making the biggest impression on the index today were Ryman Healthcare gaining 2.9% at $12.97, Auckland International Airport which rose 1.5% to $7.70, and Fisher & Paykel Healthcare up 0.7% at $29.35.

Shares in Mercury NZ fell 3.8% to $6.52 after it cut its earnings guidance from $520m to $460m due in part to dry weather in the Taupo catchment and an unplanned outage of its Kawerau geothermal power station.

The electricity generator said it expects the station to be out of service for “several months” and the remainder of the financial year.

Contact Energy climbed 0.7% to $8.26 after Forsyth Barr analysts increased their earnings forecast almost 5% to $543m.

“Contact is well positioned to benefit from existing high wholesale electricity prices. That said, we continue to expect wholesale electricity prices to trend backwards as new generation comes to market,” they said.

Meridian Energy finished the day unchanged at $5.40. Forsyth Barr analysts reiterated their ‘underperform’ rating of the stock, saying the likely sale of its Australian business would have little impact on valuation.

Me Today shares leapt 12% to 11.2 cents after it said it will hold a special meeting on June 25, where shareholders will be asked to approve the purchase of King Honey for $36m.

BNZ’s Wong said currency markets had been quiet and commodity sensitive currencies, such as the NZ dollar, had underperformed.

“Why that has occurred remains a mystery, with commodity prices still tracking higher,” he said.

The kiwi dollar was trading at 72.03 US cents at 3pm in Wellington, down from 72.24 cents yesterday.

The trade-weighted index was at 74.76 at 3pm, from 74.94 yesterday. The kiwi traded at 93.04 Australian cents from 93.20 cents, 78.82 yen from 79.03 yen, 59.13 euro cents from 59.28 cents, 50.86 British pence from 50.98 pence, and 4.6080 Chinese yuan from 4.6172 yuan.

Tags: Market Close