NZ shares fall on interest rate risk

New Zealand shares generally fell Monday with inflation and high interest rates top of mind as investors braced for US inflation data and central bank meetings in NZ and Europe.

Monday, April 11th 2022, 6:49PM

by BusinessDesk

The S&P/NZX 50 Index fell 134 points, or 1.1%, to 11,932.03. Turnover was $142 million.

US stock market futures were lower today, ahead of consumer price data set to be released later this week.

The European Central Bank will meet on Thursday and could signal a rate hike in June, meanwhile the Canadian and NZ central banks may hike interest rates 50-basis-points this week.

The Reserve Bank of NZ has a monetary policy review this Wednesday which economists see as being a close call between a 25-point hike and a 50-point one.

BNZ’s head of research Stephen Toplis said he had “no idea exactly what the RBNZ will do” with the official cash rate.

“The debate amongst financial market participants is whether the RBNZ will hike the rate 25 or 50 basis points. There are very sound arguments for either approach,” he said.

Kiwibank economists said they expected a 25-point lift but warned there would be volatility in financial markets either way.

“If we're right, and the RBNZ delivers a lighter hand, we expect to see a slight pullback in wholesale interest rates and a short-lived drop in the Kiwi currency. If we're wrong, interest rates have a lot further to run, higher, and the Kiwi will be catapulted,” they wrote.

Market interest rates have been steadily climbing as the decision comes closer and the yield on a 2-year NZ government bond reached 3.2% today.

Forsyth Barr said today in a research note that much of the stock market’s performance over the past two decades – specifically among real asset stocks – had been due to low interest rates and would struggle over the next five years.

The analysts said Vector, Spark, and Port of Tauranga had the best outlooks, while Meridian Energy, Goodman Property Trust, and Property for Industry were the “least preferred” stocks.

Meridian Energy fell 2.3% to $4.88 but wasn’t responsible for the index’s decline. The largest stock on the NZX 50, Fisher & Paykel Healthcare, dropped 3.3% to $23.16 and A2 Milk fell 4.5% to $5.24.

Healthcare growth stock Pacific Edge also retreated, falling 3.1% to 93 cents per share today.

Air New Zealand shares mounted a comeback and climbed about its 81 theoretical ex-rights price and closed the day at 84.5 cents up 5.6%.

Air NZ rights were up 7% at 53.5 cents, with around $49m of value traded through both rights and shares today.

Napier Port fell 1.7% to $2.91 after It cut its annual earnings outlook due to covid-19 and supply chain disruptions weighing on first-half earnings.

The port operator said container volumes were down 16.6% in the six months ended March 31 from a year earlier, while bulk cargo fell 8.7%.

The NZ dollar was trading at 68.24 US cents at 3pm in Wellington, down from 68.84 cents yesterday.

BNZ said it expects any reaction to the Reserve Bank decision this week to be short-lived and the currency to end the second quarter of the year at roughly 69 US cents.

Tags: Market Close