NZ shares bounce from sell-off

New Zealand's sharemarket had a slight bounce on Monday having fallen almost 10% in the first month of 2022 as inflation spooked global markets.

Monday, January 31st 2022, 6:08PM

by BusinessDesk

The S&P/NZX 50 Index rose 37 points, or 0.3%, to 11,889.40. Turnover was $127 million with a third of the country away for Auckland anniversary weekend.

While it was not as strong as in US markets on the weekend, NZ shares did bounce from a 15-month low today.

A strong rally in the last hour of trading saw the US S&P 500 index close 2.4% higher and actually finishing up 0.8% for the week.

Vista Group International led the local index higher, climbing 4.5% to $2.09 after having fallen as much as 17% this year.

Technology stocks have been particularly hard hit because when interest rates rise the present value of future cash flows declines.

Financial adviser Chris Lee said all investors, traders and analysts were trying to factor a higher opportunity cost into their valuation models.

Some NZX-listed software companies bounced today: Eroad was up 4.3% at $4.59, Rakon climbed 3.9% to $1.85, and the worst performer Serko recovered 1% to $5.30.

However, Pushpay Holdings fell another 2.7% to $1.08 and Trade Window declined 2.8% to $2.40. Pacific Edge fell 4.4% to $1.08 and is now down more than 18% year-to-date.

Shares in Spark New Zealand were unchanged at $4.33. The telecommunications firm completed its acquisition of infrastructure construction firm Connect 8 today.

New Talisman Gold Mines shares were also unchanged at a fifth of a cent after the company’s newly established board told shareholders it was able to begin planning a path forward.

The company has terminated its purchase agreement for the Broken Hills gold mine and said it had been dealing with “a number of regulatory queries” leftover from the previous board.

Allied Farmers shares jumped 11.4% to 88 cents after it increased its forecast net profit for the half year by $200,000 because it sold some inventory early.

The stock would have been sold in the second half of the financial year anyway, so full year net profit will be unchanged.

The NZ dollar fell to its lowest level since September 2020 and was trading at 65.46 US cents at 3pm in Wellington, down from 65.76 cents yesterday.

The sustained rise in global inflation pressures and expectations for an extended period of monetary policy tightening – even while global economic growth slows – have pushed investors away from risk correlated currencies and toward high yield haven assets.

Westpac’s head of NZ strategy, Imre Spizer said his team had upgraded its US dollar outlook after recent data surprises, which may bring forward US rate hikes to mid-2022 and boost the American currency.

“The New Zealand dollar should weaken as a result, with potential to reach 66 US cents during the months ahead,” he said in a note.

Tags: Market Close