‘Sanity’ returns to market

The New Zealand share market and dollar both posted modest gains as investors came to terms with the possibility US central bankers may begin to tighten monetary policy.

Tuesday, June 22nd 2021, 6:16PM

by BusinessDesk

The S&P/NZX 50 Index rose 23.31 points, or 0.2%, to 12,522.67. The majority of stocks rose and turnover was $189.4 million.

BNZ’s Jason Wong said a “modicum of sanity” had returned after investors had strong reactions to the US Federal Reserve’s suggestion it may raise interest rates and taper bond purchases sooner than expected – albeit still at least 18 months away.

The local equity market was one of the least affected during last week’s reaction, with the biggest moves seen in interest rates and currencies.

The kiwi dollar made a small recovery today, climbing back to 69.77 US cents by 3pm in Wellington from 69.52 cents yesterday.

Currency trading firm OFX said the market had overreacted to the Fed's forward guidance and investors were reevaluating last week’s moves.

“While we still maintain underlying fundamentals support the NZ dollar and last week's move was overdone, there is likely to be a period of uncertainty as markets remain on edge,” it said in a note.

The trade-weighted index was at 73.46 at 3pm, from 73.26 yesterday. The kiwi traded at 92.75 Australian cents from 92.68 cents, 76.96 yen from 76.56 yen, 58.60 euro cents from 58.61 cents, 50.16 British pence from 50.33 pence, and 4.5077 Chinese yuan from 4.4869 yuan.

On the NZX, Arvida Group led the market higher as it climbed 4.1% to $2.04. The retirement village operator has been in the media lately for its plan to provide in-home care services for older people.

Other retirement stocks also rose: Oceania Healthcare was up 1.4% at $1.47, Summerset Holdings gained 0.7% to $13.34, while Ryman Healthcare added 0.4% to $13.05.

Mercury NZ climbed 0.6% to $6.44 as investors evaluated its future as the country’s largest electricity retailer, once it has absorbed Trustpower’s customers.

Jarden analysts described the $400 million purchase of Trustpower’s retail business as “a deal where both parties are happy”.

Mercury investors seemed the happier of the two, however, with Trustpower shares dropping 4.3% to $7.62 today.

Analysts were muted about the future of the new generation-only business, saying earnings would be less volatile but growth would be more challenging.

Mercury also faces a test in executing on its big plans. The firm is already building a wind farm and integrating Tilt Renewables’ assets, plus will now have to merge another retail business that includes broadband and mobile services.

Cancer diagnostics firm Pacific Edge had a small correction today, falling 1.6% to $1.22, after a healthy bounce yesterday.

Jarden analysts said the news Kaiser Permanente was rolling out another Cxbladder product was positive and gave them more confidence in their forecast but didn’t change it.

“The fact Kaiser has decided to implement an additional product shortly after monitor provides some assurance that monitor is so far providing positive outcomes,” they wrote.

Tags: Market Close