NZ market quiet as all eyes on Reserve Bank decision

Heartland Group helped pull the market higher today, with most eyes still on the Reserve Bank of New Zealand (RBNZ) as it decides whether to hike the official cash rate by 50 or 75 basis points on Wednesday.

Monday, November 21st 2022, 6:05PM

by BusinessDesk

Kiwibank economists Jarrod Kerr, Jeremy Couchman and Mary Jo Vergara wrote in a report this morning that the RBNZ’s decision would be a “coin toss”.

“There will be some reaction to the RBNZ’s announcement either way,” they wrote.

“If we’re right, and the RBNZ hikes by 75bps, short-end rates will push a little higher.

“If we’re wrong, rates will fall.”

Banks' margins tend to rise as interest rates rise, which could explain the 4% lift in Heartland's share price to $1.84 at close.

The S&P/NZX 50 Index rose 59.79 points, or 0.5%, to 11,440.40. Turnover on the main board was $119.7m.

Brad Gordon, an investment adviser at Hobson Wealth, said NZ’s market had been quiet today as the biggest news of the week was going to be the RBNZ’s rate hike.

“It's going to be interesting to see what RBNZ’s justification is,” he said.

“I suspect they will go to 75 basis points – part of the reason is that they don't have another review until February, and they'll want to kitchen sink it a wee bit.”

Ryman Healthcare fell again and was down 2.4% to $7.44 today. The share price drop followed the aged care provider’s half-year results showing net profit was down by 31% to $194m.

Oceania Healthcare was up 1.3% to 81 cents, with the company releasing its half-year results this Wednesday.

Gordon said Oceania had huge demand and investors would be looking at how the aged-care provider is looking after costs and attracting nurses.

“Different things going on, different challenges,” he told BusinessDesk.

Medicinal cannabis stocks all fell today for no obvious reason. Cannasouth was down 5% to 28.5 cents, Rua Bioscience had the biggest fall of 6% to 23.5 cents and Greenfern Industries edged down 6.7% to 8.4 cents.

Comvita said its Singles' Day sales were in line both with its forecasts and the record-breaking performance the honey products producer achieved last year.

The company said Comvita products were number one, two and three in the honey category and had again delivered strong market share growth during the high-profile event.

Comvita was up 0.9% to $3.23 today.

Outgoing chair of A2 Milk chair David Hearn said that A2 hasn’t ruled out manufacturing in China.

He told BusinessDesk after the company's annual meeting last week that a decision hadn’t been made but there was “no doubt” that one of A2’s considerations was production capacity of some sort in China.

A2 rose 0.6% to $6.54 today.

NZX board member and a champion for the country's capital markets Nigel Babbage, died in Christchurch yesterday.

Babbage was only 59 and had been a board member since 2017. He was chief executive of Christchurch-based Mohua Investments and had served on the foreign exchange committee of the Federal Reserve Bank of New York.

NZX shares edged up 0.8% to $1.23 by the end of the day.

Today, the NZ dollar traded at 61.45 US cents at 3pm in Wellington, up slightly from 61.40 cents on Friday.

In a financial note today, Kiwbank's financial traders said this will be the RBNZ’s last meeting until late February, so they expected the central bank to deliver not just a 75bps hike but a “fairly hawkish statement” as well.

“This outcome would be erring on the side of caution, as it's not time to take the foot off the pedal in the fight against inflation yet,” the note said.

The 75bps hike would be “supportive” for the NZ dollar, while a 50 bps hike could lead to some “downside disappointment” for the kiwi.

Tags: Market Close