Shares rise as investor try to pick inflation peak

New Zealand shares were up on Thursday, following a more positive mood globally as some investors predicted inflation was at its peak and would recede.

Thursday, April 14th 2022, 6:52PM

by BusinessDesk

The S&P/NZX 50 Index rose 16.5 points, or 0.1%, to 11,891.58. Turnover was $128 million.

BNZ interest rate strategist Nick Smyth said global interest rates had stabilised overnight on hopes inflation may be close to peaking.

US inflation data recently came in a little hotter than expected with headline inflation at 8.5%, but core inflation – which removes volatile food and energy prices – slowed.

This has some investors predicting inflation may begin to come under control, particularly with central banks beginning to tighten monetary policy.

Smyth said traders pared back expectations for where NZ’s official cash rate will ultimately land, repricing it below 4% and essentially predicting one less hike.

“Equity markets have rebounded overnight helped by the falls in bond yields. Tech stocks, which tend to be more sensitive to longer-term rates, have outperformed,” he said.

Devon Fund’s head of retail Greg Smith said the Reserve Bank of New Zealand tightening interest rates from low levels to combat inflation was not something investors “necessarily need to fear”.

Ryman Healthcare led the NZX 50 index higher as it rose 3.4% to $9.43. Morningstar analysts recently said in a note that the stock was undervalued by the market.

"The market has seemingly penalised narrow-moat Ryman for transient issues or industry-wide problems not shared by Ryman," the analysts wrote.

A2 Milk also had a strong gain, increasing 2% to $5.15 today as it recovered some of the sharp decline at the start of this week.

NZ King Salmon shares dropped another 27% to 50 cents as it continues to decline after announcing a deeply discounted capital raise.

The fish farmer needs $60 million to get it through a few years of losses while it moves its operations into cooler waters.

My Food Bag failed to hold above $1 per share and fell 8% to 92 cents today. Many of the founders who sold shares in the initial public offer will soon be eligible to sell their remaining stake – which is likely depressing the share price.

The NZ dollar fell from yesterday’s short-lived spike and was trading at 68.19 US cents at 3pm in Wellington, down from 68.85 cents yesterday.

“After a brief algorithm-driven spike higher to 69c after headlines of a 50-basis-point rate hike hit the screens, the NZ dollar has been under pressure since, reflecting the pullback in RBNZ rate expectations,” Smyth said.

Tags: Market Close