RBNZ goes with the flow with 50bp hike

The Reserve Bank of New Zealand (RBNZ) decided not to rock the boat and followed market expectations with a 50 basis point lift to the official cash rate by this afternoon – noting however it considered a 75-bps lift.

Wednesday, October 5th 2022, 6:00PM

by BusinessDesk

There was speculation about how much the RBNZ would hike the rate today after the Reserve Bank of Australia (RBA) gave a 25bps lift to its target cash rate instead of the 50 bps that the market had assumed.

The Australian central bank reiterated in its statement that it would continue to lift rates “at pace” as inflation was currently too high.

The S&P/NZX 50 index rose 90 points or 0.8%, to 11,180.01. Turnover was $105.4 million.

Mark Lister, an investment director at Craigs Investment Partners, told BusinessDesk that NZ’s market had a strong performance today due to US and UK markets rallying overnight – but the talk around town had been the official cash rate.

He said while the 50 bps move was what people had been expecting, the fact the central bank had considered hiking higher meant the RBNZ was feeling nervous about the strength of the economy, including the ongoing tightness of the labour market and the weakness in the NZ dollar.

“All of those things will be making the Reserve Bank's job harder,” he said.

“We should probably prepare ourselves that the bank might have to go a little bit higher next year [in terms of raising rates] than they previously thought.”

This morning, a lack of demand in the global dairy trade (GDT) auction overnight led to a pull back in prices by 3.5%, with whole milk powder prices now down 25% from a peak in March.

Butter prices had the largest decline, down 7% to US$4,983 (NZ$8,688) a tonne, while whole milk powder fell 4% to US$3,573 a tonne.

A2 Milk was up 0.2% to $6.26, Synlait Milk fell 0.3% to $3.49 and Fonterra Shareholders’ Fund units rose 1.7% to $3.08.

Healthcare manufacturer Fisher & Paykel Healthcare had one of the biggest jumps on the index today, climbing almost 5% in the afternoon before ending the day up 4.4% at $19.52, with $13.3m worth of shares traded.

Tourism Holdings was up 1.1% to $2.75 after it told the NZX this morning that it bought the remaining 51% of UK-based Just Go, a motorhome rentals and sales business, after acquiring the first 49% back in 2015.

Chief executive Grant Webster said THL had purchased the 51% interest of Just Go from joint venture partners Nick and Sarah Roach for £5.3m (NZ$10.7m) in cash and shares.

The timing for the business was right, he said, particularly given the proposed merger with Apollo Tourism & Leisure which also has a UK business.

“The UK market has experienced a strong recovery following the pandemic and we believe that there are future growth opportunities,” he said.

Tourism Holdings also told the market late this afternoon that the Australian Foreign Investment Review Board (FIRB) had no objection to the proposed merger of THL and Apollo.

The merger now only needs the tick of approval from Apollo shareholders and Queensland’s supreme court.

Precinct Properties rose 2.4% to $1.30 after announcing that Eke Panuku Development Auckland had selected Precinct as its preferred development partner for the Downtown Car Park site on Customs Street West in the Auckland CBD.

The real estate investment company has also partnered with Ngāti Whātua Ōrākei – tangata whenua of central Auckland – as part of the proposal for the site, with the relationship encompassing cultural, design and commercial elements.

Restaurant Brands had one of the bigger falls on the index today and declining 5.6% to $7.41. Retailer KMD Brands fell 1% to $1.04.

The NZ dollar was trading at 57.48 US cents, up from 57.14 cents on Tuesday.

Tags: Market Close