NZ shares lower as RBA scraps rate targets

Westpac Bank led NZ shares lower for a second day after it reported weakening margins; meanwhile, the Reserve Bank of Australia scrapped its interest rate guidance.

Tuesday, November 2nd 2021, 6:47PM

by BusinessDesk

Late on Tuesday afternoon, Australia’s central bank abandoned its 0.1% target for bond yields and signalled it could hike cash rates sooner than 2024.

The concession from the RBA pushed the Australian dollar lower and saw the ASX 200 rally but came too late in the afternoon to have much impact on the NZ market.

The S&P/NZX 50 Index fell 37.81 points, or 0.3%, to 12,992.5. Turnover was $114 million.

The New Zealand dollar, which had been trading below 95.40 Australian cents for most of the day, spiked as high as 95.75 cents following the central bank’s update.

Australian bank Westpac led the NZX 50 lower again today, falling another 4.7% to $24.34 as investors continued to worry about its shrinking margins.

Jarden analysts trimmed more than a dollar from their target price today, to A$24.30, warning net interest margins were likely to fall further due to intense mortgage competition.

“The two big negative surprises in the results were margins and costs,” they said.

However, they said the bank does have some things going right including a “stronger-than-expected macro backdrop” and margin improvement in the medium-term.

Property stocks outperformed the index in October, falling just 0.6%, even as bond yields climbed.

Low-interest rates have been a positive for the sector as they ensure the cost of borrowing for investment is kept low.

Despite this, today Jarden analysts said the sector’s performance had been “disappointing through the lower interest rate cycle” and interest rates moving higher the analysts trimmed 3% to 5% from their target prices for stocks in the sector. Goodman Property Trust units fell 2.2% to $2.435, shares in Precinct Properties declined 1.8% to $1.62, and Argosy Property fell 0.7% to $1.54.

AFT Pharmaceuticals continued to rally after submitting its drug for FDA approval, it was up 4.6% at $4.60 today – now up more than 12% since the announcement.

Kathmandu Holdings had the biggest gain on NZX 50, climbing 1.3% to $1.58, with heavyweight Fisher & Paykel Holdings also up more than 1% at $31.40.

Jarden analysts said key themes for markets in the next month will be “a combination of rising interest rates and the probability of lockdown restrictions easing into December”.

They also said November could be a month with significant moves in the larger listed stocks, such as Mainfreight and F&P Healthcare, which have interim reports during the month.

Tags: Market Close