NZ shares jump on slow rate hikes

New Zealand shares rallied with global equity markets after the chair of the US Federal Reserve said he supported raising interest more slowly because of the Ukraine crisis.

Thursday, March 3rd 2022, 7:18PM

by BusinessDesk

The S&P/NZX 50 Index rose 122 points, or 1%, to 12,211.40. Turnover was $164 million.

Tina Teng, an analyst at CMC Markets, said share markets in the US had a “relief rally” overnight after the US central bank said it will take a careful approach to raising interest rates during the geopolitical unrest.

Chair Jerome Powell said the impact of the conflict was unknown and would require a “nimble” policy response. However, he said the central bank will still have to hike rates as inflation and employment are running high.

Brent crude prices broke above US$120 per barrel for the first time since 2012 overnight, and high fuel prices are likely to drive inflation even higher.

Greg Smith, head of retail at Devon Funds, said bond yields rallied massively on Jerome’s Powell’s comments, with the US 10-year bond hitting 1.9%.

“This continues to fit with the Devon investment team’s scenario that bond yields are only heading higher and will ultimately accelerate a rotation from growth to value-style investing,” said Greg Smith, Devon’s head of retail.

A broad cross section of NZ shares were higher today, but some that could be considered ‘value’ stocks were leading the market.

Tourism Holdings – which some investors expect to benefit significantly when international travel resumes – was up 3.5% at $2.67 and Ryman Healthcare rose 2.9% to $9.83.

Ryman has been hit hard due to its relatively high levels of debt and has lost 40% of its value since September last year; investors may now be starting to see it as cheap.

Auckland International Airport rose 3.1% to $7.32. It also trades at a significant discount to its pre-pandemic value despite having a near monopoly on international travel in NZ and a defensive property portfolio.

Media company NZME climbed 6.2% to $1.55, with other small cap stocks also making gains. Wellington Drive Technologies was up 4% at 18.5 cents, Radius Residential Care rose 3.8% to 41.5 cents, and My Food Bag recovered 2.1% to 98 cents.

New Zealand Oil & Gas continued its rally, up another 1.9% to 54 cents today, with Genesis Energy – which co-owns its Kupe oil field – up 2.5% at $2.87.

Air New Zealand dropped 1.6% to $1.505, with high oil prices likely to weigh further on anticipated losses this financial year and with a highly dilutive capital raise expected in the next month.

Higher commodity prices and investors' willingness to take on risk supported both the NZ and Australian dollars, which have been climbing for the past three days.

The NZ dollar was trading at 67.77 US cents at 3pm in Wellington, up from 67.65 cents yesterday and 66.89 ten days ago.

Tags: Market Close