NZ shares fall as Russia recognises separatist regions

New Zealand shares fell on Tuesday as Russia recognised two Ukrainian regions as independent states, which has been interpreted as creating an excuse for an invasion.

Tuesday, February 22nd 2022, 7:18PM

by BusinessDesk

The S&P/NZX 50 Index fell 41.7 points, or 0.3%, to 12,114.63. Turnover was $212 million.

In a televised speech, Russian President Vladimir Putin recognised two Ukrainian separatist regions – Donetsk and Luhansk – as sovereign states and ordered troops into the territory as "peacekeepers".

NZ’s foreign minister said she was concerned this was a "calculated act by President Putin to create a pretext for invasion”.

Jeffrey Halley, a senior market analyst at Oanda, said this quashed any positive sentiment that emerged from a proposed summit between himself and his US counterpart.

The fallout was modest with the US markets on holiday overnight, but the US dollar and bond futures both climbed as investors sought safe-haven assets.

“US index futures have tumbled with their European equivalents and Asia is unlikely to take the news well either,” Halley wrote in a note.

He said if a full-scale invasion of Ukraine by Russia were to happen, it would leave many central banks cautious about pulling the trigger on low-interest rates.

The Reserve Bank of New Zealand (RBNZ) is set to announce its monetary policy statement tomorrow, with the market expecting a 25-basis point hike but not ruling out a larger move.

Jarden economist John Carran said there was “little doubt” the central bank will increase the official cash rate when it meets on Wednesday.

However, he was not convinced the cash rate will rise as much as many anticipate as global supply chains were unclogging and the economy was cooling.

With the RBNZ statement tomorrow unlikely to contain surprises – bond yields backed off a little today – investors selling NZX-listed stocks likely had the risk of war in mind.

Mark Lister, head of private wealth research at Craigs Investment Partners, said US market futures had fallen sharply and the Nasdaq could hit a technical bear market within days.

The stock worst affected on the local exchange were those that tend to track with the tech-heavy Nasdaq index.

Pacific Edge led the market lower, falling 5.9% to 96 cents and hitting a one-year low. It was followed by tech company Eroad which dropped 3.9% to $3.93.

A2 Milk Company gave up a significant portion of yesterday’s rally, falling 3% to $6.12.

Move Logistics declined 4.5% to $1.40 as it said covid related restrictions on fuel deliveries had contributed to a $1.4m net loss for the half-year – down from a $2.6m profit of $2.6 million in the first half of 2021.

Shares in Heartland Group Holdings dropped 3.3% to $2.33 after it beat its half-year earnings expectations but left full-year guidance unchanged due to covid challenges.

Mercury NZ shares climbed 0.7% to $6.07. The electricity generator missed analyst forecast earnings after it paid $50m to exit a price hedging deal which was losing it money.

Jarden senior analyst Grant Swanepoel said while getting out of the contract had hurt half-year earnings, it would benefit earnings in 2023 and 2024.

He retained his ‘overweight’ rating and $6.67 target price for the stock.

The NZ dollar continued trading in a narrow range despite both Russian agitation and the looming Reserve Bank decision.

It was trading at 67.08 US cents at 3pm in Wellington, up from 66.99 cents yesterday – with the closed US markets likely muting the reaction to European news.

Tags: Market Close