Mother of all reversals on NZX today

New Zealand shares bounced dramatically from Thursday’s selloff as investors speculated the worst economic sanctions had been taken off the table and markets had been oversold.

Friday, February 25th 2022, 6:39PM

by BusinessDesk

The S&P/NZX 50 Index rose 190 points, or 1.6%, to 11,923.38. Turnover was $185 million.

Only yesterday, Putin’s invasion triggered the biggest decline on the index since the covid crash in March 2020. Today, it recovered almost half of that decline.

Stephen Innes, a managing partner at SPI Asset Management, said the “complete turnaround” in markets may have been due to a softer set of sanctions imposed on Russia.

The United States and Europe could have shut Russia out of the global banking system and blocked their energy exports but have not done so, he said.

Oanda analyst, Jeffrey Halley, said the bounce was “the mother of all reversals”, driven by Western nations demonstrating they were unwilling to wear the economic pain of the worst sanctions.

“Timing is everything, and the Russian offensive has occurred in a time of already high inflation and commodity shortages globally, and the West has blinked immediately,” he said.

Oil and gas prices shot higher yesterday, with spot Brent crude oil hitting US$105 (NZ$156) for the first time since 2014. Market-based inflation expectations were also higher, following the spike in oil prices.

ASB chief economist Nick Tuffley said the conflict in the two commodity-producing nations was not going to help cool global inflation which is already inflamed.

A note sent to Forsyth Barr’s institutional clients said the economic impact of conflicts were generally over-hyped by financial markets, and it may be a buying opportunity.

This is particularly true of many local stocks which are not directly exposed to Europe, oil prices, or commodities.

Vista Group International led the index higher – jumping 8.2% to $1.99 – followed by Ryman Healthcare up 6% at $9.53, and Eroad up 5.7% at $3.88.

The NZ Refining Company held up well amid the selling yesterday but still bounced 4.2% to $1 today.

Forsyth Barr analysts today reiterated their $1.20 target price saying the transition to an import terminal makes the company much lower risk than when it was a refinery.

New Zealand Oil & Gas was one of the very few to climb yesterday and added another 0.9% to reach 54 cents today. Z Energy was up 0.3% at $3.64, having only fallen half a percent.

However, it wasn’t a rebound for all companies. Air NZ fell another 1.3% to $1.51 – as most brokers reiterated their calls to sell the stock – while Auckland International Airport bounced 3.5% to $7.12.

Shares in Plexure Group tumbled 6.9% to 34 cents after the company pulled its revenue guidance, despite underlying improvement in recurring revenue from software.

The NZ dollar was trading at 66.94 US cents at 3pm in Wellington, down from 67.52 cents yesterday but still above its lows of 66.80.

Tags: Market Close