NZ market looks to be in better heart

Investors stuck to the sidelines on Friday but look to be in better heart ahead of earnings season, with volumes showing some signs of life and the S&P/NZX 50 index adding 2% over the week.

Friday, August 5th 2022, 6:04PM

by BusinessDesk

“Activity-wise, we have seen a bit of a turnaround in sentiment over the last week, with bonds coming off their highs and markets all positive overseas,” said Bryon Burke, head of equities at Craigs Investment Partners.

“There’s quite a different feel to the market at the moment, and people have a little bit more confidence,” he said.

He added, however, that there's still a lot of money on the sidelines as investors wait for earnings. Finding sellers has been a challenge, he said.

He noted the US had a fairly positive reporting season.

“At this stage, the market is expecting the same sort of thing, where companies will meet analysts’ expectations.”

More than halfway into the second-quarter reporting period, S&P 500 company earnings are estimated to have increased 8.1% over the same quarter a year ago, compared with a 5.6% estimate at the start of July, according to IBES data from Refinitiv as of Tuesday, Reuters reported.

Regardless, domestic results will be “keenly watched” and “we could be in for a bit more of a rally”, he said. Investors will be particularly interested in companies' outlooks.

Jarden analysts said they expect outlook statements to contain a number of caveats and likely reference the ongoing covid disruption to supply chains and workforce availability and, as a result, inflationary pressures and higher interest rates.

The first big company to report is Contact Energy on Aug 15, and Jarden is tipping earnings before interest, taxes, depreciation, and amortisation of $537 million versus the market consensus of $520m.

Contact Energy added 0.4% to $7.68.

Covid shadow

On the covid front, Jarden said it expects the 2022 financial year to mark the end of underlying losses for Auckland International Airport as travel resumes.

Auckland Airport shed 0.3% to $7.73.

For Air New Zealand, which was unchanged at 68 cents, “while we expect top-line momentum to rebuild slowly, financial losses could still be a reality into FY23”, it said.

The S&P/NZX 50 index slipped 7 points, or 0.1%, to 11,728.47. Turnover on the main board was a quiet $100.5m.

Meanwhile, on the earnings front, T&G Global, the fruit marketer controlled by Germany's BayWa, said its net profit rose to $5.8m, or 2.4 cents per share, for the six months to June 30, versus $3.4m or 0.6 cents a share in the months to June 30, 2021. The stock, which is tightly held, fell 1.5% to $2.70.

NZ Automotive Investments was unchanged at 53 cents.

NZX’s market regulator has asked NZ Automotive Investments’ board of directors to provide an assessment as to whether their proposed replacements can be considered independent. NZX listing rules require a company to have at least two independent directors, which RegCo said was critical to protect shareholders. Failure to meet these requirements may lead to it suspending trading in NZAI shares.

A2 Milk was unchanged at $5.58, having gained this week on the hope that it might yet get approval to export infant formula to the US. The company is now 70 days behind Bubs Australia, which submitted its application nearly two weeks before A2 Milk and Fonterra in May.

Units in the Fonterra Shareholders Fund, meanwhile, shed 1% to $2.92.

Third Age Health Services continued to recover, adding 4.7% to $2.25, while Plexure Group was the biggest gainer, adding 12.5% to 40.5 cents.

My Food Bag showed some signs of life, adding 4% to 79 cents.

Exporter Fisher & Paykel Healthcare shed 1.0% to $20.75.

Infratil added 0.7% to $9.075. Investors have been cheered by news that its Longroad Energy investment has agreed to sell a 12% stake to German insurer Munich Re for US$300m.

Sanford posted the biggest decline on the top 50, falling 2.2% to $4.09 in relatively light trading, while Mainfreight slipped 1.9% to $78.50. Skellerup posted the day's biggest gain on the benchmark index, up 4.5% at $5.86.

The NZ dollar, meanwhile, was also largely steady, trading at 62.93 US cents at 5pm, down from 62.91 Thursday.

Tags: Market Close