Mainfreight holds the line as bond yields jump

New Zealand's main share index was unchanged on Thursday as local bond yields hit new highs after US inflation data reached a 30-year high and sent market interest rates soaring.

Thursday, November 11th 2021, 7:32PM

by BusinessDesk

A majority of NZX-listed stocks fell with the high-interest rates eating into equity valuations, but a strong earnings result from Mainfreight kept the index fairly flat.

The S&P/NZX 50 Index rose 4 points, virtually 0%, to 13,026.91. Turnover was $138 million.

The US consumer price index shocked the market with another spike bringing the annual increase up to 6.2% – the highest level in roughly 30 years.

Bond traders responded by betting the US federal reserve will have to tighten monetary policy much sooner than it had planned and push market interest rates higher.

The yield on a 10-year NZ government bond jumped almost 10 basis points to 2.6% today, moving in lockstep with US yields.

Mainfreight beat analysts’ profit forecasts of $172m, reporting net profit after tax was up 78% ($80m) to $182m. This sent its shares up 2.8% to $93.50.

The logistics firm said air and ocean revenue had increased in all regions because of higher air and sea freight rates and an increase in freight tonnage because of market share gains and consumer demand.

This effect was particularly visible in the Americas division which had revenue jump 78% while profit before tax leapt more than 300% to US$34.83m.

Mainfreight said trading continued at these elevated levels after the half-year period ended and it was “optimistic these levels of activity and growth will continue” for the remainder of this financial year and into the next.

Shares in stock market operator NZX were unchanged at $1.76 after announcing it had bought $1.8b of retirement funds from ASB which will add approximately $4m of annual revenue each year.

Goodman Property Trust units climbed, 1.2% to $21.48, despite the higher interest rates after reporting a statutory profit of $570m and operating earnings before tax up 7.5% at $60.2 million.

Pushpay Holdings dropped another 0.6% to $1.60 with a research note from Forsyth Barr today saying analysts had cut “the majority of our forecast Catholic revenue from financial year 2022”.

“Despite the significant stock move on the day, we view the current price as balanced risk-reward given the re-set expectations and updates to forecasts and international peer comparisons,” analyst Jamie Foulkes said.

Pacific Edge had the index’s biggest decline, falling 2.15% to $1.37, followed by Investore Property which dropped 1.9% to $1.86.

Stocks sensitive to inflation also saw declines, the Warehouse Group fell 1.7% to $4.05 and My Food Bag hit a new low as it fell 1.7% to $1.18.

The NZ dollar fell to 70.66 US cents at 3pm in Wellington, down from 71.25 cents yesterday as higher interest rates underpinned a US dollar rally.

“The shockingly high inflation read for October has prompted investors to again price in two interest rates hikes in 2022, pushing back on last week's dovish Fed policy stance,” said currency exchange OFX in a note.

Tags: Market Close