NZ's market zeros in on interest rates

New Zealand’s market faltered as bond yields rose globally and investors wait nervously to see how much the Reserve Bank of NZ (RBNZ) and Reserve Bank of Australia (RBA) will be hiking interest rates this week.

Monday, October 3rd 2022, 6:01PM

by BusinessDesk

The S&P/NZX 50 Index fell 106.3 points, or 1%, to 10,959.71. Turnover was $84.6 million.

“Not a great week unless you’re a bear,” ASB economist Chris Tennent-Brown wrote in a note this morning.

He said last week had been “dominated” by events in the UK with new chancellor Kwasi Kwarteng’s mini-budget the week earlier which sent global currency markets into a panic.

However, the “key event” this week is the Reserve Bank meeting on Wednesday, when the RBNZ is widely expected to deliver its fifth consecutive 50-basis-point official cash rate (OCR) hike on Oct 5.

The RBA is meeting for its October board meeting tomorrow, where it's expected that the bank will hike rates by a likely 25 basis points.

“Events since the August monetary policy statement (MPS) have been near enough in line with the RBNZ’s outlook to have the RBNZ stick to its least-regrets stance of moving swiftly,” Tennent-Brown said.

Peter McIntyre from Craig’s IP said a push-up in bond yields internationally had unsettled markets and NZ’s market was a key example of that today.

“Until that settles down, we're going to remain volatile,” he told BusinessDesk. “Markets are bracing themselves for further rate increases.”

“It's really an interest-rate story at the moment.”

McIntyre said there was a broad selloff of all stocks on NZ’s index today, with technology shares hit the hardest.

Among the biggest falls were cinema software provider Vista – down 6.7% to $1.53 – and cancer-diagnostic company Pacific Edge, which fell 6% to 47 cents.

Property stocks were also hard-hit. Kiwi Property fell 3.8% to 88 cents, with the property company telling the NZX on Friday evening that its sale of the Northlands Shopping Centre and 43 Langdons Road to Mackersy Northlands Limited Partnership was now unconditional.

Kiwi Property is one of NZ’s biggest retail real estate owners, with $3.6 billion in direct investment. It announced in August that it planned to sell the Northlands shopping centre for $160m.

Precinct Properties fell 3.9% to $1.25 after it announced it had committed to its $115m Wynyard build after engineering group Beca signed a 12-year lease for its northern ‘regional hub’.

Other property stocks that fell today were Summerset Group, which was down 3.7% to $10.38, Argosy Property which fell 2.1% to $1.175, and Vital Healthcare Property Trust which was down 4.7% to $2.43.

A2 Milk edged down slightly by 0.16% to $6.11 after announcing it had renewed its import and distribution arrangements with China State Farm Agribusiness Holding Shanghai Co (CSFA) for five years beginning Oct 1.

CSFA has been A2 Milk's strategic distribution partner in China since 2013 and is the exclusive import agent for A2 Milk's China-label products.

Primary care provider Third Age Health Services announced it had settled the acquisition of a majority share of EastMed Doctors in Saint Heliers, Auckland, for $1.9m, which had been fully funded through Third Age Health’s ANZ loan facility.

Chief executive Tony Wai said the acquisition marked a “significant milestone” for Third Age Health as it was an established large general practice that had a growing aged population.

Third Age Health was up 1.5% to $2 by early evening – but only moved $38 worth of shares.

Today, the NZ dollar was trading at 56.25 US cents at 3pm Wellington today, up from 57.33 US cents on Friday.

Tags: Market Close